We also differentiate our acquisition strategy based on whether the land is in a masterplan community, or part of a larger development. For land which is not part of a larger development or masterplan, we generally enter into a purchase agreement with the land owner and deliver a deposit, which becomes nonrefundable upon the expiration of a specified due diligence period. The closing is generally tied to the date on which we have obtained development entitlements for the land. For land which is part of a larger development being developed by a master developer, we generally enter into a purchase agreement with the master developer and pay a deposit that becomes nonrefundable upon expiration of the due diligence period. The closing in master developments is generally tied to the issuance of final land development entitlements and completion of certain infrastructure and other improvements by the master developer. In master developments we may acquire all of the land at the closing or we may acquire the land in "phases". In master developments we may be required to (a) pay to the master developer a share of our net profit in excess of a specified margin (b) pay to the master developer marketing fees and/or (b)(c) grant the master developer the right to repurchase the land if we fail to develop the land in accordance with applicable development requirements or wish to sell the land in bulk. Our acquisition-developmentacquisition and development financing is generally obtained using one or more of the following: (i) proceeds from the sale of Senior Notes,debt securities, (ii) through unsecured lines of credit; (iii) secured acquisition-developmentacquisition and development loans; (iv) equity obtained from joint venture partners and/or (v)(iv) land bank arrangements with providers who take title to the land at closing subject to agreements which obligate us to perform all development activities with respect to the land and provide us with an option to purchase the land.

Construction, Marketing and Sales Process

We typically develop communities in phases based upon projected sales. We seek to control the timing of construction of subsequent phases in the same community based on sales demand in prior phases and the number of qualified potential homebuyers that exist on our priority buyer list.phases. Our construction process is driven by sales contracts that generallyoften precede the start of the construction of homes.homes, however, depending on the price point, product, and buyer demand we also engage in some speculative building. The determination that a potential home buyer is qualified to obtain the financing necessary to complete the purchase is an integral part of our process. Once qualified, our designers, which are often at on-site design centers, with designers dedicated to a specific community, work with the buyer to tailor the home to meet the buyer’s needs.

In connection with the sale and marketing of our homes, we make extensive use of advertising and other promotional activities, including through our website, (www.NWHM.com), social-media, brochures, direct mail and other community-specific collateral materials.  We expend great effort and cost in designing and merchandising our model homes, which play an important role in our marketing. Interior merchandising varies among the models and is carefully selected to reflect the lifestyles of prospective buyers. With the onset of the COVID-19 pandemic and a general shift in consumer behaviors, we have focused on transforming our customer experience online through innovative digital options through our website www.NWHM.com, including (i) shifting to a remote selling environment through the use of our online sales concierges; and (ii) providing virtual options for online home tours, design center selections and new home demonstrations.  The information contained in, or that can be accessed through,  our website is not incorporated by reference and is not a part of this annual report on Form 10-K.

We primarily sell our homes through our own sales representatives and at times, through the use of outside brokers. It is also fairly common that a third party broker representing a homebuyer receives co-broker commissions in connection with a sale. One of our wholly owned subsidiaries holds the corporate broker's licenses in California and Arizona. Our in-house sales force works from sales offices located in model homes or sales centers close to, or within each community. Sales representatives assist potential buyers by providing them with floor plan, price and community amenity information, construction timetables, and tours of model homes.

Generally, we build model homes at each project and have them professionally decorated and landscaped to display design features and options available for purchase in the design center. We believe that model homes play a significant role in helping homebuyers understand the efficiencies and value provided by each floor plan type. Structural changes in design from the model homes, other than those predetermined, are not generally permitted, but homebuyers may select various other optional construction and design amenities. Our on-site design centers are an integral part of this process. The specific options selected for each community are based upon the price of the home and anticipated buyer preferences. Options include structural (room configurations or pre-determined additional square footage), electrical, plumbing and finish options (flooring, cabinets, fixtures). In certain communities, we also offer turn-key landscape options. Each design center is managed by our own designers dedicated to the specific community.

We typically sell homes using sales contracts that include cash deposits by the purchasers. Most homebuyers utilize long-term mortgage financing to purchase a home, and mortgage lenders will usually make loans only to qualified borrowers. Before entering into sales contracts, we pre-qualify many of our customers through a third party preferred mortgage provider.provider, which provider varies depending on the market. However, purchasers can generally cancel sales contracts if they are unable to sell their existing homes, if they fail to qualify for financing, or under certain other circumstances. For our communities, the cancellation rate of buyers who contracted to buy a home but did not close escrow as a percentage of overall orders was 9%, 12%11%, and 10% duringfor the years ended December 31, 2017, 20162020, 2019 and 2015,2018, respectively. Cancellation rates are subject to a variety of factors, including those beyond our control, such as adverse economic or housing market conditions and increases in mortgage interest rates.

We pay particular attention to the product design process and carefully consider quality and choice of materials in order to attempt to eliminate building deficiencies. The quality and workmanship of the subcontractors and trade partners we employ are monitored using our personnel and third-party consultants. We make regular inspections and evaluations of our subcontractors and trade partners to seek to ensure that our standards are met.

We maintainutilize a third party quality control provider and maintain customer service staff whose role includes providing a positive experience for each customer throughout the pre-sale, sale, building, delivery and post-delivery periods. These employees are also responsible for providing after-sales customer service, including the coordination of warranty requests. Our quality and service initiatives include taking homebuyers on a comprehensive tour of their home during construction and prior to delivery. In addition, we generally use a third party, Eliant, to survey our homebuyersconduct homebuyer surveys in order to improve our performance and evaluate our standards of quality and customer satisfaction.

Insurance and Warranty Program

We provide a limited one-year warranty to our homeowners covering workmanship and materials. In addition, we generally provide a more limited warranty, which generally ranges from a minimum of two years up to the period covered by the applicable statute of repose, that covers certain defined construction defects. The limited warranty covering construction defects is transferable to subsequent buyers and provides for the resolution of unresolved construction-related disputes through binding arbitration. Additionally, we have dedicated customer service staff that work with our homebuyers and coordinate with subcontractors and trade partners, as necessary, during the warranty period. We maintain reserves to cover the resolution of our potential liabilities associated with known and anticipated warranty and construction defect related claims and litigation. While our subcontractors who perform our homebuilding work generally provide us with an indemnity for claims relating to their workmanship and materials, we also purchase general liability insurance that covers development and construction activity at each of our communities. Our subcontractors are usually covered by these programs through an owner-controlled insurance program, or "OCIP." Consultants such as engineers and architects are generally not covered by the OCIP but are required to maintain their own insurance. In general, we maintain insurance, subject to deductibles and self-insured amounts,retentions, to protect us against various risks associated with our activities, including, among others, general liability, "all-risk" property, construction defects, workers’ compensation, automobile, and employee fidelity. Our warranty and litigation reserves includeare presented on a gross basis before coverage from insurance, and expected recoveries from insurance carriers are presented as a receivable, the net result of which is equivalent to our expected costs associated with the deductibles and self-insured amounts.amounts for warranty and construction defect claims.  For a further discussion of the risks associated with our warranty and insurance program, please see the risk factor under the heading "Risks Related to Our BusinessLaws and Regulations - We are subject to construction defect, warranty, and warrantypersonal injury claims arising in the ordinary course of business that can be significant.significant and could adversely affect our financial position and results of operations."

Seasonality and Cycles

We have experienced seasonal variations in our quarterly operating results and capital requirements in each of our California and Arizona homebuilding reportable segments.segments as well as our fee building reportable segment. We typically take orders for more homes in the first half of the fiscal year than in the second half, which creates additional working capital requirements in the second and third quarters to build our inventories to satisfy the deliveries in the second half of the year. OurHistorically, our revenues and cash flows (exclusive of the amount and timing of land purchases)purchases and land sales, if applicable) from homebuilding operations are generally higher in the second half of the calendar year, particularly in the fourth quarter. We expect this seasonal pattern to continue over the long-term, although it may be affected by volatility in the homebuilding industry.industry and the opening, timing of closeout of communities, and other market factors.  For example, we experienced high demand during the fourth quarter of 2020, which we attribute to current market factors including low interest rates, a continued undersupply of homes, and consumers’ increased focus on the importance of home amid the COVID-19 pandemic.  Accordingly, as a result of the ongoing uncertainties and evolution of COVID-19, our traditional seasonal pattern was significantly impacted during 2020.  The homebuilding industry is cyclical. We continue to make substantial investments in land, which is likely to utilize a significant portion of our cash resources, so long as we believe such investments will yield results that meet our investment criteria.

Labor and Raw Materials

Typically, all the raw materials and most of the components used in our business are readily available in the United States. Most are standard items carried by major suppliers. However, our industry experiences shortages in both raw materials and labor from time to time which is particularly acute in the markets in which we build in California and Arizona. In particular, in part due to the impacts of COVID-19 and also due to increasing demand, we have seen an increase in the costs and/or a decrease in the available supply of certain building materials, particularly with respect to lumber, and in certain cases supply chain disruptions causing delays. Increases in the cost of building materials and subcontracted labor may reduce gross margins from home sales to the extent that market conditions prevent the recovery of increased costs through higher home sales prices. From time to time and to varying degrees, we may experience shortages in the availability of building materials and/or labor in each of our markets. These shortages and delays may result in delays in the delivery of homes under construction, reduced gross margins from home sales, or both. We continue to monitor the supply markets to achieve favorable prices.

Joint Ventures

Joint ventures were initially a significant part of our operations by assisting in leveraging our entity-level capital and establishingcapital. Over the last year, joint ventures have become a homebuilding and land development platform focused on high-growth, land-constrained markets.much less meaningful component of our business. We own interestsa minority interest in our unconsolidated joint ventures, that generally range from 5% to 35%. We also earn management fees from such joint ventures.

The homebuilding industry is fragmented and highly competitive. We compete with numerous other residential construction companies, including large national and regional firms, for customers, land, financing, raw materials, skilled labor, and employees. A number of our primary competitors are significantly larger, have a longer operating history and may have greater resources or lower cost of capital than us. We compete for customers primarily on the basis of home design and location, price, customer satisfaction, construction quality, reputation, and the availability of mortgage financing. We also compete for sales with individual resales of existing homes and with available rental housing. As part of our strategy to expandIn the past several years, we have expanded our product offerings to include more affordably-priced homes to reach a deeper pool of qualified buyers and in connection with growing our overall community count, our average sales price of homes in backlog has declined from $2.4 million at December 31, 2016 to $1.1 million at December 31, 2017.count. We anticipate that we will continue to build more affordably-priced homes. We believe there is more competition among homebuilding companies in more affordable product offerings than in the luxury and move-up segments, however, we also believe this is a prudent strategy as there is a larger population of qualified buyers in more affordable price points.  Our homes are competitively priced, but are not designed to be the lowest priced option in the market as we seek to attract consumers drawn to premium product and experience. For risks associated with the competition we face, please see the risk factor under the heading "Risks Related to Our Business - We may not be able to compete effectively against competitors in the homebuilding industry".

Government Regulation and Environmental Matters

We are subject to numerous local, state, and federal statutes, ordinances, rules, and regulations concerning zoning, development, building design, construction, and similar matters, including local regulations that impose restrictive zoning and density requirements. In a number of our markets, there has been an increase in state and local legislation authorizing the acquisition of land as dedicated open space, mainly by governmental, quasi-public, and nonprofit entities. We may also be subject to periodic delays or may be precluded entirely from developing in certain communities due to building moratoriums or "slow-growth" or "no-growth" initiatives that could be implemented. Local governments also have broad discretion regarding the imposition of development fees and exactions for communities in their jurisdiction. Communities for which we have received land use and development entitlements or approvals may still require a variety of other governmental approvals and permits during the development process. In addition, we are subject to various licensing, registration, and filing requirements in connection with the construction, advertisement, and sale of homes in our communities, including requirements imposed by Federal Housing Administration (FHA)-insured or Veterans Affairs (VA) for homes that will be sold with FHA or VA loans. The impact of these laws, regulations, and requirements has been to increase our overall costs, and they have delayed, and in the future may delay, the opening of communities, or have caused, and in the future may cause, us to conclude that development of particular communities would not be economically feasible, even if any or all necessary governmental approvals were obtained. A building moratorium can have the effect of precluding us entirely from building on one or more areas in which we operate.

We can also be impacted by unforeseen health, safety and welfare issues, regulated by local and state agencies. For example, as a result of the COVID-19 pandemic, local and state regulators implemented many restrictions, including social distancing, to prevent the spread of the virus. While most "stay at home" orders in the markets in which we operate have deemed homebuilding an essential business, any change to this designation could materially and adversely impact our operations if we were unable to sell and/or construct homes for any period of time.

In order to secure certain approvals in some areas, we may be required to provide affordable housing at below market rental or sales prices. The impact of these requirements on us depends on how the various state and local governments in the areas in which we engage, or intend to engage, in development implement their programs for affordable housing. To date, these restrictions have not had a material impact on us.

We are also subject to a variety of local, state and federal statutes, ordinances, rules and regulations concerning the environment. The particular environmental laws which apply to any given homebuilding site vary according to multiple factors, including the site’s location, its environmental conditions and the present and former uses of the site, as well as adjoining properties. In addition, in those cases where an endangered or threatened species is involved, environmental rules and regulations can result in the restriction or elimination of development in identified environmentally sensitive areas. In some instances, we may be required to investigate and clean up hazardous or toxic substances or petroleum product releases, and may be held liable to a governmental entity or to third parties for related damages, including for bodily injury, and for investigation and clean-up costs incurred by such parties in connection with the contamination. A mitigation system may be installed during the construction of a home if a cleanup does not remove all contaminants of concern or to address a naturally occurring condition such as methane. Some buyers may not want to purchase a home with a mitigation system. Legislation related to climate change and energy efficiency can impose stricter building standards, which may increase our cost to build. From time to time, the EPA and similar federal or state agencies review homebuilders’ compliance with environmental laws and may levy fines and penalties for failure to strictly comply with applicable environmental laws or impose additional requirements for future compliance as a result of past failures. Environmental regulations can also have an adverse impact on the availability and price of certain raw materials such as lumber. Environmental laws and regulations and their enforcement may result in delays, may cause us to incur substantial compliance and other costs, and could prohibit or severely restrict homebuilding activity in environmentally sensitive regions or areas. We manage compliance with environmental laws at the division level with assistance and oversight from our corporate office. As part of the land acquisition due diligence process, we utilize environmental assessments to identify environmental conditions that may exist on potential acquisition properties. Presently, environmental assessments or our compliance with environmental laws and regulations have not had a material adverse effect on our operations, although they may do so in the future.

We use and our business relies upon general contractors' licenses and corporate real estate broker's licenses in order to build and sell homes. Failure to comply with laws regulating these licenses could result in loss of licensing and a restriction of our business activities in the applicable jurisdiction.

For a further discussion of the impact of govern regulations on our business, including the impact of environmental regulations, please see the risk factors included under the heading "Risks Related to Laws and Regulations."

Risks Related to Our Business

Our business has experienced material disruption as a result of the COVID-19 outbreak and could be materially and adversely disrupted by another pandemic, epidemic or outbreak of infectious disease, or similar public health threat, or fear of such an event, in the United States or elsewhere, and the measures implemented to address such an event by government agencies and authorities.

A pandemic, epidemic or similar serious public health issue, such as the outbreak of COVID-19, and the measures taken by international, federal, state and local governments, and other authorities to address it, could significantly disrupt our business for an extended period.  Further, a significant outbreak of contagious diseases, such as COVID-19, could result in a widespread health crisis that could adversely affect the global economy and financial markets, resulting in an economic downturn.  As a result, consumer confidence may wane and demand for our homes may decline having a material adverse impact on our consolidated financial statements.

On March 11, 2020, the World Health Organization characterized the outbreak of COVID-19 a global pandemic and recommended containment and mitigation measures. On March 13, 2020, the United States declared a national emergency concerning the outbreak, and most states and municipalities similarly declared public health emergencies including the states in which we operate, California and Arizona. Along with these declarations, California and Arizona have enacted, at various times, ”stay-at-home”, “shelter-in-place” and other restrictive orders to contain and combat the outbreak and spread of COVID-19 that substantially restricted daily activities for individuals and many businesses to curtail or cease normal operations.   

When under a “stay-at-home” or similar order, our model homes and design studios were closed to the public and operated on an appointment-only basis, as permitted, following recommended distancing and other health and safety protocols when meeting in person with a customer.  Associates at our corporate and divisional offices moved to a work-from-home model for nearly all employees.  Construction activities at our job sites within most of the jurisdictions in which we operate were permitted to continue, however, careful protocols were set in place to protect our employees and trade partners that impact operational efficiency.  The restrictions also reduce the availability, capacity and efficiency of municipal and private services necessary to our operations which has previously and may in the future delay the delivery of our homes at certain communities.   

While COVID-19 infection rates improved starting in early summer of 2020 and state and local governments began relaxing the public health restrictions, we took gradual steps to resume nearly all of our operations (with enhanced safety measures). However, throughout the second half of the year and continuing into 2021, the markets in which we operate experienced several spikes in COVID-19 cases which caused us to reintroduce more restrictive protocols from time to time throughout 2020 and continuing into 2021. The United States continues to struggle with rolling outbreaks of the virus. Accordingly, there is no assurance to what level of activity our operations may continue to operate and we cannot predict the magnitude of either the near-term or long-term effects that the pandemic will have on our business.

Our business can be negatively impacted as a result of a number of additional factors influenced by the COVID-19 pandemic, including as a result of an unwillingness of customers to visit model homes or employees to return to work due to fears about illness, school closures or other concerns; disruptions to the supply chain for building materials; disruptions in the mortgage financing markets; illness of key executives; inefficiencies due to safety protocols and social distancing, as well as due to the need to change protocols frequently due to the surges and reductions in COVID-19 cases; and costs incurred to disinfect contaminated employee work spaces, model homes or construction work sites. 

We are uncertain of the potential full magnitude or duration of the business and economic impacts from the unprecedented public health effort to contain and combat the spread of COVID-19, which could include, among other things, significant volatility in financial markets and a sharp decrease in the value of equity securities, including our common stock. In addition, we can provide no assurance as to whether the COVID-19 public health effort will be intensified to such an extent that we will no longer be designated an essential business or that we will not be able to conduct any business operations in certain of our served markets or at all for an indefinite period.

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Our business could also be negatively impacted over the medium-to-longer term if the disruptions related to COVID-19 decrease consumer confidence generally or with respect to purchasing a home; cause civil or political unrest, similar to what arose during the Summer of 2020 related to efforts to institute law enforcement and other social and political reforms and which may also affect our business in the short and/or medium-to-longer term; negatively impact mortgage availability or the federal government’s mortgage loan-related programs; or precipitate a prolonged economic downturn and/or an extended rise in unemployment or tempering of wage growth, any of which could lower demand for our products as occurred during the latter part of the 2020 first quarter and earlier months of the 2020 second quarter; impair our ability to sell and build homes in a typical manner, or at all, generate revenues and cash flows, and/or access capital or lending markets (or significantly increase the costs of doing so), as may be necessary to sustain our business; increase our use of sales incentives and concessions which could adversely affect our margins; increase the costs or decrease the supply of building materials or the availability of subcontractors and other talent, including as a result of infections or medically necessary or recommended self-quarantining, or governmental mandates to direct production activities to support public health efforts; and/or result in our recognizing charges in current and future periods, which may be material, for inventory impairments or land option contract abandonments, or both, related to our current inventory assets. Specifically, if conditions in the overall housing market or in a specific market worsen in the future beyond our current expectations, if future changes in our business strategy significantly affect any key assumptions used in our projections of future cash flows, or if there are material changes in any of the other items we consider in assessing recoverability, we may recognize charges in future periods for inventory impairments related to our current inventory assets. For example, during the 2020 first quarter, we decided to terminate our option contract for a luxury condominium project in Scottsdale, Arizona in large part due to significant economic uncertainty related to COVID-19 and recorded an abandonment charge of $14.0 million related to the capitalized costs that had accumulated to the portion of the project that was abandoned.  Circumstances related to the COVID-19 pandemic and associated economic relief measures were considered in our 2020 second quarter decision to exit our joint venture in Folsom, California which resulted in a $20.0 million other-than-temporary impairment charge for the period.  Any sustained or prolonged reductions in future earnings periods may change our conclusions on whether we are more likely than not to realize portions of our deferred tax assets.

Should the adverse impacts described above (or others that are currently unknown) occur, whether individually or collectively, we would expect to experience, among other things, decreases in our net orders, homes delivered, average selling prices, revenues and profitability, as we did in the 2020 second quarter, and such impacts could be material to our financial statements in 2021 and beyond. In addition, should the COVID-19 public health effort intensify to such an extent that we cannot operate in most or all of our served markets, we could generate few or no orders and deliver few, if any, homes during the applicable period, which could be prolonged. Along with a potential increase in cancellations of home purchase contracts, if there are prolonged government restrictions on our business and our customers, and/or an extended economic recession, we could be unable to produce revenues and cash flows sufficient to conduct our business; meet the terms of our covenants and other requirements under our unsecured Credit Facility or our Senior Notes.  Such a circumstance could, among other things, exhaust our available liquidity (and ability to access liquidity sources) and/or trigger an acceleration to pay a significant portion or all of our then-outstanding debt obligations, which we may be unable to do.

In addition to the risks described above, the COVID-19 pandemic may also have the effect of heightening other risks disclosed in the “Risk Factors” sections of this Annual Report on Form 10-K, including, but not limited to, risks related to deterioration in homebuilding and general economic conditions, our geographic concentration, competition, availability of mortgage financing, inventory risks and impairments, supply and/or labor shortages, access to capital markets (including the debt and secondary mortgage markets), compliance with the terms of our indebtedness, potential downgrades of credit ratings, and our leverage.

Our geographic concentration couldmay materially and adversely affect us if the homebuilding industrydemand for housing or the availability of land parcels in our current markets declines.

Our current business involves the design, construction and sale of innovative single-family detached and attached homes in planned communities in major metropolitan areas in coastal Southern California, metro Sacramento, the San Francisco Bay area metro Sacramento and the greater Phoenix area. Because our operations are concentrated in these areas, a prolonged economic downturn affecting one or more of these areas, or affecting any sector of employment on which the residents of such area are dependent, or significant volatility in home prices and affordability could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations, and a disproportionately greater impact on us than other homebuilders with more diversified operations. During the downturn from 20082007 to 2011, land values, the demand for new homes and home prices declined substantially in California. Accordingly,During the second half of fiscal 2018, demand for new homes, particularly in California, slowed which we believe stemmed from affordability concerns due to higher absolute home prices and higher interest rates. Buyer demand and order activity improved somewhat during 2019, which activity was unexpectedly halted in early 2020 in connection with the onset of COVID-19.  While demand has since resurged, there is no assurance that order activity will continue to improve. As a homebuilder, we are often subject to market forces beyond our control. In general, housing demand is impacted by the affordability of housing. Many homebuyers need to sell their existing homes in order to purchase a new home from us, and a weakness in the home resale market could adversely affect that ability. If land values decrease or demand for new homes and home prices decline in California or Arizona, our sales, results of operations, financial condition and business couldwould be negatively impacted by a decline in the economy, one or more significant job sectors or the homebuilding industry in the Western U.S. regions in which our operations are concentrated.impacted.

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In addition, our ability to acquire land parcels for new single-family homes may be adversely affected by changes in the general availability of land parcels, the willingness of land sellers to sell land parcels at reasonable prices, competition for available land parcels, availability of financing to acquire land parcels, zoning and other market conditions. TheOur future growth depends upon our ability to successfully identify and acquire attractive land parcels for development of our single-family homes at reasonable prices and with terms that meet our underwriting criteria. We currently depend primarily on the California markets and availability of land parcels in our California markets at reasonable prices is limited. IfWhen the supply of land parcels appropriate for development of single-family homes is limited because of these factors, or for any other reason, our ability to grow is significantly limited. To the extent that we are unable to purchase land parcels timely or enter into new contracts for the purchase of land parcels at reasonable prices, our home sales revenue and results of operations would be adversely impacted.

Mortgage financing, interest rate increases, changes in federal lending programs or other regulations, and tax law changes could belower demand for or impact homebuyers’ ability to purchase our homes, which could materially and adversely affect us.

A substantial percentage of purchasers of our homes finance their acquisitions with mortgage financing. Mortgage interest rates have remained low compared to most historical periods for the last several years, which has made the homes we sell more affordable. Mortgage rates have continuously fallen in fiscal years 2019 and 2020 due in part to Federal Reserve interest rate reductions, decelerating economic growth and other factors. However, we cannot predict whether interest rates will continue to fall or remain low or rise. Increases in interest rates increase the costs of owning a home and could adversely affect the purchasing power of consumers and lower demand for the homes we sell, which could result in a decrease in our revenues and earnings and adversely affect our financial condition.

The availability of mortgage financing is significantly limited,influenced by governmental entities such as the FHA, VA, and Government National Mortgage Association and government-sponsored enterprises known as Fannie Mae and Freddie Mac. If these or other lenders’ borrowing standards are tightened and/or the federal government were to reduce or eliminate these mortgage loan programs (including due to any failure of lawmakers to agree on a budget or appropriation legislation to fund relevant programs or operations), it would likely make it more difficult for our customers to obtain acceptable financing, which would, in turn, adversely affect our business, financial condition and results of operations. In particular, FHA and VA may continue to impose stricter loan qualification standards, raise minimum down payment requirements, impose higher mortgage insurance premiums and other costs, or limit the number of mortgages it insures. FHA and VA also limit the number of FHA or VA loans within any one community and require completion of entire buildings in which our units are located prior to allowing project approval application to be submitted, which can delay our ability to deliver completed homes in a timely manner and negatively impacting our results.  Rising interest rates, decreased availability of mortgage financing or of certain mortgage programs, higher down payment requirements, increased monthly mortgage costs, and tightened credit requirements and underwriting standards, may lead to reduced demand for our homes.

Mortgage interest expense and real estate taxes represent significant costs of homeownership. Therefore, when there are changes in federal or state income tax laws that we buildeliminate or substantially limit the income tax deductions relating to these expenses, or other increases in local real estate taxes or assessments, the after-tax costs of owning a new home can increase significantly. For example, the Tax Cuts and sellJobs Act, which was enacted in December 2017, includes provisions that impose significant limitations with respect to these income tax deductions including limitations to the annual deduction for real estate property taxes and state and local income taxes as well as a limitation on the deduction for mortgage interest. We believe changes such as these adversely impact the demand for and sales prices of homes in certain markets, including parts of California, and therefore could decline.

adversely affect our business, financial condition and results of operations.

The homebuilding industry is cyclical and affected by changes in general economic, real estate and other business conditions that could reduce the demand for new homes and, as a result, adversely impact our results of operations, financial condition and cash flows.

The residential homebuilding industry is cyclical and is highly sensitive to changes in general economic, political, real estate and other business conditions such as levels of employment, consumer confidence and income, availability of mortgage financing for homebuyers, interest rate levels, demographic trends, homebuyer preferences for specific designs or locations, real estate taxes, inflation, and supply of and demand for new and existing homes.homes, federal government actions, economic stimulus policies, tax policies and economic conditions outside the U.S. The foregoing conditions, among others, are complex and interrelated. Periods of prolonged economic downturn, high unemployment levels, increases in the rate of inflation and uncertainty in the U.S. economy, have historically contributed to decreased demand for housing, declining sales prices and increasing pricing pressure. In the event that one or more of such economic and business conditions occur, we could experience declines in the market value of our inventory and demand for our homes, which could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations. Federal government actions

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Inventory risks are substantial for the homebuilding business. If the value of the land we purchase declines, we have, and new legislation relatedmay continue, to economic stimulus, taxation, spending levelsincur impairments on the carrying values of the real estate inventories we own, some of which could be significant and borrowing limits, along with the related political debates, conflicts and compromises associated with such actions, may negatively impact the financial markets and consumer confidence. Such events could hurt the U.S. economy and the housing market and, in turn, could adversely affect the operating results of our business. Adverse economic conditions outside the U.S., such as Asiabusiness or Canada, may also adversely affect the demandfinancial results.

Inventory risks are substantial for our homes to the extent such conditions impact the amount of potential homebuyers from such regionshomebuilding business. There are risks inherent in our markets.

    In addition, an important segment of our customer base consists of firstcontrolling, owning and second "move-up" buyers, who often purchase homes contingent upon the sale of their existing homes. During recessionary periods, these buyers may face difficulties selling their homes, which may in turn adversely affect our sales. Moreover, during such periods,developing land as housing inventories are illiquid assets and if housing demand declines, we may needown land or homesites we acquired at costs we will not be able to reduce our sales pricesrecover fully, or on which we cannot build and offer greater incentives to buyers to compete for sales that may result in reduced margins.

Our long-term growth depends upon our ability to successfully identify and acquire desirablesell homes profitably. This is particularly true when entitled land parcels for residential buildout for reasonable prices.

Our future growth depends upon our ability to successfully identify and acquire attractive land parcels for development of our single-family homes at reasonable prices and with terms that meet our underwriting criteria. Our ability to acquire land parcels for new single-family homes may be adversely affected by changesbecomes scarce, as it has recently, especially in the general availability of land parcels, the willingness of land sellers to sell land parcels at reasonable prices, competition for available land parcels, availability of financing to acquire land parcels, zoning and other market conditions. We currently depend primarily on the California markets and availability of land parcels in that market at reasonable prices is limited. If the supply of land parcels appropriate for development of single-family homes is limited because of these factors, or for any other reason, our ability to grow could be significantly limited, and the number of homes thatwhich we build, and the cost of purchasing such land is relatively high. Factors such as changes in regulatory requirements and applicable laws (including in relation to building regulations, taxation and planning), political conditions, the condition of financial markets, both local and national economic conditions, the financial condition of customers, potentially adverse tax consequences, and interest and inflation rate fluctuations subject the market value of our land to uncertainty. As a result, we may have to sell could decline. Additionally,homes or land for lower than anticipated profit margins or we may have to record inventory impairment charges or sell land at a loss. During 2020, we recognized $19.0 million in homebuilding inventory impairments and $22.3 other than temporary impairments related to unconsolidated joint ventures For more information on impairments, please see Notes 4 and 6 to the accompanying Consolidated Financial Statements.  We utilize option structures to purchase land in our abilitywholly owned business which reduces our exposure to begin new projects couldsuch fluctuations, but we may still be impactedrequired to take significant write-offs of deposits and pre-acquisition costs if we elect not to purchase land parcels under option contracts. To the extent that we are unableexercise our options to purchase land. In addition, inventory carrying costs can be significant and can result in losses in a poorly performing project or market. We regularly review the value of our land parcels timelyholdings and continue to review our holdings on a periodic basis for indicators of impairment. Indicators of impairment include a decrease in demand for housing due to soft market conditions, competitive pricing pressures which reduce the average sales price of homes, which includes sales incentives for home buyers, sales absorption rates below management expectations, a decrease in the value of the underlying land and a decrease in projected cash flows for a particular project. Material impairment charges, abandonment charges or enter into new contracts for the purchaseother write-downs of land parcels at reasonable prices,assets could adversely affect our home sales revenuefinancial condition and results of operationsoperations.

Our ability to execute on our business strategies and initiatives is uncertain, and we may be unable to achieve our goals.

We may undertake various strategic initiatives as part of our business, such as our pivot to offer more affordable-priced homes or our potential entry into new markets. We previously focused on second move up and luxury buyers. We have invested significant efforts to align our community offerings and designs to these buyers despite our experience in catering to a different buyer profile. We can provide no assurance (i) that our strategies, and any related initiatives or actions, will be successful or that they will generate growth, earnings or returns at any particular level or within any particular time frame; (ii) that in the future we will achieve positive operational or financial results or results in any particular metric or measure equal to or better than those attained in the past; or (iii) that we will perform in any period as well as other homebuilders. The failure of any one or more of our present strategies, or any related initiatives or actions, or the failure of any adjustments that we may pursue or implement, would likely have an adverse effect on our ability to increase the value and profitability of our business; on our ability to operate our business in the ordinary course; on our overall liquidity; and on our consolidated financial statements, and the effect, in each case, could be adversely impacted.

Labor and raw materialmaterial. 

Supply shortages and price fluctuationsother risks related to the demand for skilled labor and building materials could increase costs, delay or increase the cost of home construction, whichdeliveries and could materially and adversely affect us.

our financial condition and results of operations.

The residential construction industry experiences serious labor and raw material shortages from time to time, including shortages in qualified tradespeople, and supplies of insulation, drywall, cement, steel and lumber. These labor and raw material shortages can be more severe during periods of strong demand for housing or during periods where the regions in which we operate experience natural disasters that have a significant impact on existing residential and commercial structures. We and other homebuilders have encountered increases in costs of labor in materials, which is particularly acute in the markets in which we build in California and Arizona. In particular, in part due to the impacts of COVID-19 and also due to increasing demand, we have seen an increase in the costs and/or a decrease in the available supply of building materials, particularly with respect to lumber, and in certain cases supply chain disruptions causing delays. The cost of labor and raw materials may also increase during periods of shortage or high inflation. DuringPricing for labor and materials can also be affected by changes in energy prices, and various other national, regional and local economic and political factors. For example, government-imposed tariffs and trade regulations on imported building supplies have, and in the downturn in 2008 to 2011, a large number of qualified trade partners went out of business or otherwise exited the market into new fields. A reduction in available trade partners exacerbates labor shortages as demand for new housing increases. Shortages and price increases could cause delays in and increase our costs of home construction, which we may not be able to recover by raising home prices due to market demand and because the price for each home is typically set months prior to its delivery pursuant to the agreement of sale with the home buyer, which in turnfuture could have, a material adverse effect on our business, prospects, financial condition and results of operations.

Our business and results of operations dependsignificant impacts on the availability and skill of subcontractors at reasonable rates.

Substantially all ofcost to construct our construction work is done by third-party subcontractors with us acting as the general contractor. Accordingly, the timing and quality of our construction depend on the availability and skill of our subcontractors.homes. We do not have long-term contractual commitments with any subcontractors, and there can be no assurance that skilled subcontractors will continue to be available at reasonable rates and in the areas in which we conduct our operations. Certain of the subcontractors engaged by us are represented by labor unions or are subject to collective bargaining arrangements that require the payment of prevailing wages that are higher than normally expected on a residential construction site. A strike or other work stoppage involving any of our subcontractors could also make it difficult for us to retain subcontractors for our construction work. In addition, union activity could result in higher costs to retain our subcontractors. Access to qualified labor at reasonable rates may also be affected by other circumstances beyond changes in trends in labor force migration and changes in immigration laws, policies and trends. In particular, changes in federal and state immigration laws and policies, or in the enforcement of current laws and policies, may have the effect of increasing our labor costs. In addition, the enactment of federal, state or local statutes, ordinances, rules or regulations requiring the payment of prevailing wages on private residential developments would materially increase our costs of development and construction.  AccessShortages and price increases could cause delays in and increase our costs of home construction, which we may not be able to qualifiedrecover by raising home prices due to market demand which puts downward pressure on our gross margins. As a result, shortages or increased costs of labor at reasonable rates may also be affected by other circumstances beyond our control, including: (i) shortages of qualified tradespeople, such as carpenters, roofers, drywallers, electricians and plumbers; (ii) high inflation; (iii) changes in laws relating to employment and union organizing activity; (iv) changes in trends in labor force migration; and (v) increases in contractor, subcontractor and professional services costs. The inability to contract with skilled contractors and subcontractors at reasonable rates on a timely basis could materially and adversely affect our business prospects, liquidity, financial condition and results of operations. The inability to contract with skilled subcontractors at reasonable costs on a timely basisraw materials could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

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In addition, despite our quality control efforts, we may discover that our subcontractors were engaging in improper construction practices or installing defective materials in our homes. When we discover these issues, we, generally through our subcontractors, repair the homes in accordance with our new home warranty and as required by law. Reserves are established based on market practices, our historical experiences and our judgment

Table of the qualitative risks associated with the types of homes built. However, the cost of satisfying our warranty and other legal obligations in these instances may be significantly higher than our reserves, and we may be unable to recover the cost of repair from such subcontractors. Regardless of the steps we take, we can in some instances be subject to fines, litigation, or other penalties, and our reputation and our financial condition may be adversely affected.Contents

We could be responsible for employment-related liabilities with respect to our contractors’ employees.

Although contractors are independent of the homebuilders that contract with them under normal management practices and the terms of trade contracts and subcontracts within the homebuilding industry, on October 14, 2017, California’s governor signed into law Assembly Bill 1701, which would require general contractors to assume and be liable for unpaid wage, fringe or other benefit payments or contributions that subcontractors owe their employees. Assembly Bill 1701 imposes such liability under California Labor Code Section 218.7 for private works contracts entered on or after January 1, 2018. We are, and may become in the future, subject to similar measures and legislation, such as California Labor Code Section 2810.3, that requires us to share liability with our contractors for the payment of wages and the failure to secure valid workers’ compensation insurance coverage. While the Company ordinarily negotiates with its subcontractors to obtain broad indemnification rights, there is no guarantee that it will be able to recover from its subcontractors for actions brought against the Company by its subcontractors’ employees or unions representing such employees and such liability could have a material and adverse effect on our financial performance.  Even if we are successful in obtaining indemnification from our subcontractors, we may sustain additional administrative costs as a result of such legislation which could materially and adversely affect our financial performance. In addition, despite the fact that our subcontractors are independent from us, if regulatory agencies reclassify the employees of contractors as employees of homebuilders, homebuilders using contractors could be responsible for wage and hour labor laws, workers’ compensation and other employment-related liabilities of their contractors. Governmental rulings that make us responsible for labor practices by our subcontractors could create substantial exposures for us in situations that are not within our control.

If the market value of our land or housing inventory decreases, our results of operations could be adversely affected due to the illiquid nature of real estate investments and by impairments.

The market value of our land and housing inventories depends on market conditions. We acquire land for expansion into new markets and for replacement of land inventory and expansion within our current markets. There is an inherent risk that the value of the land owned or controlled by us may decline after purchase. The risks inherent in purchasing and developing land parcels increase as consumer demand for housing decreases. As a result, we may buy and develop land parcels on which homes cannot be profitably built and sold. The valuation of property is inherently subjective and based on the individual characteristics of each property. When market conditions drive land values down, land we have purchased or option agreements we have previously entered into may become less desirable because we may not be able to build and sell homes profitably, at which time we may elect to sell the land or, in the case of options contracts, to forego pre-acquisition costs and forfeit deposits and terminate the agreements. Factors such as changes in regulatory requirements and applicable laws (including in relation to building regulations, taxation and planning), political conditions, the condition of financial markets, both local and national economic conditions, the financial condition of customers, potentially adverse tax consequences, and interest and inflation rate fluctuations subject the market value of land owned, controlled or optioned by us to uncertainty. Moreover, all valuations are made on the basis of assumptions that may not prove to reflect economic or demographic reality. If housing demand decreases below what we anticipated when we acquired our inventory, our results of operations and financial conditions may be adversely affected and we may not be able to recover our costs when we sell and build houses. Land parcels, building lots and housing inventories are illiquid assets, and we may not be able to dispose of them efficiently or at all if we or the housing market and general economy are in financial distress. In addition, inventory carrying costs can be significant and can result in losses in a poorly performing project or market. We regularly review the value of our land holdings and continue to review our holdings on a periodic basis. Material impairments in the value of our inventory may be required, and we may in the future sell land or homes at significantly lower margins or at a loss, if we are able to sell them at all, which could adversely affect our results of operations and financial condition.

We may not be able to compete effectively against competitors in the homebuilding industry.

We operate in a very competitive environment which is characterized by competition from a number of other homebuilders in each market in which we operate. Additionally, there are relatively low barriers to entry into our business. We compete with numerous large national and regional homebuilding companies and with smaller local homebuilders and land developers for, among other things, home buyers, desirable land parcels, financing, raw materials and skilled management and labor resources. Our competitors may independently develop land and construct homes that are superior or substantially similar to our products. As part of our strategy to expandOver the past several years, we have expanded our product offerings to include more affordably-priced homes to reach a deeper pool of qualified buyers and in connection with growinggrow our overall community count, our average sales price of homes in backlog has declined to $1.1 million at December 31, 2017 from $2.4 million at December 31, 2016. We anticipate that we will continue to build more affordably-priced homes.count. We believe there is more competition among homebuilding companies in more affordable product offerings than in the luxury and move-up segments. Increased competition could hurt our business, as it could prevent us from acquiring attractive land parcels on which to build homes or make such acquisitions more expensive, hinder our market share expansion and cause us to increase our selling incentives or reduce our prices. In past housing cycles,

an oversupply of homes available for sale and heavy discounting of home prices by some of our competitors have adversely affected demand for homes in the market as a whole and could do so again in the future. We also compete with the resale, or "previously owned," home market. If we are unable to compete effectively in our markets, our business could decline disproportionately to our competitors, and our results of operations and financial condition could be adversely affected.

We may be at a competitive disadvantage with regard to certain of our large national and regional homebuilding competitors whose operations are more geographically diversified than ours, as these competitors may be better able to withstand any future regional downturn in the housing market. We compete directly with a number of large national and regional homebuilders that mayThese competitors also generally have longer operating histories and greater financial and operational resources than we do.do, including a lower cost of capital. Many of these competitors also have longstanding relationships with subcontractors, local governments and suppliers in the markets in which we operate or in which we may operate in the future. This may give our competitors an advantage in securing materials and labor at lower prices, marketing their products and allowing their homes to be delivered to customers more quickly and at more favorable prices. This competition could reduce our market share and limit our ability to expand our business as we have planned.

We also compete with the resale, or "previously owned," home market. If we are unable to developcompete effectively in our markets, our business could decline disproportionately to our competitors, and our results of operations and financial condition could be adversely affected.

Inefficient or ineffective allocation of capital, including from efforts to invest in future growth or expansion of our operations or acquisitions of businesses, could adversely affect our operations and/or stockholder value if expected benefits are not realized.

As competition for suitable land increases, the cost of acquiring both finished and undeveloped lots and the cost of developing owned land could rise, and the availability of suitable land at acceptable prices may decline, which could adversely impact our financial results. The availability of suitable land assets could also affect the success of our land acquisition strategy and ultimately our long-term strategic goals by impacting our ability to increase the number of actively selling communities, grow our revenues and margins and achieve or maintain profitability. As a part of our business strategy, we may consider growth or expansion of our operations in our current markets or in other areas of the country. Any such growth or expansion would be accompanied by risks such as difficulties in assimilating the operations and personnel of acquired companies or businesses, and potential loss of key employees of the acquired business, diversion of our management team, and risks associated with entering into markets in which we have limited or no direct experience. We cannot guarantee that any expansion into a new market will be successfully executed, and our failure to do so could harm our current business. Furthermore, we may engage in other capital actions such as repurchasing our common stock or within expected timeframes,Senior Notes from time to time to reduce our indebtedness. While our goal is to allocate capital to maximize our overall long-term returns, if we do not properly allocate our capital, we may fail to produce optimal financial results and we may experience a reduction in stockholder value, including increased volatility in our stock price.

Delays in opening communities or reductions in sales absorption levels may force us to incur additional community-level costs and our results of operations could be adversely affected.

Before a community generates any revenue, time and material expenditures are required to acquire land, obtain development approvals and construct significant portions of project infrastructure, amenities, model homes and sales facilities. It can take several years from the time we acquire control of a property to the time we make our first home sale on the site. Our ability to process a significant number of transactions (which include, among other things, evaluating the site purchase, designing the layout of the development, sourcing materials and subcontractors and managing contractual commitments) efficiently and accurately is important to our success. ErrorsChanges in law or regulation, including changes to FHA or other lending program guidelines for project approvals, local discretionary approvals, natural disasters, availability of subcontractors, errors by employees, failure to comply with regulatory requirements and conduct of business rules, failings or inadequacies in internal control processes, equipment failures natural disasters or the failure of external systems, including those of our suppliers or counterparties, could result in delays and operational issues that could adversely affect our business, financial condition and operating results and our relationships with our customers. Delays in the development of communities also expose us to the risk of changes in market conditions for homes. We also incur certain overhead costs associated with our communities, such as indirect construction costs, property taxes, marketing expenses and costs associated with the upkeep and maintenance of our model and sales complexes, and interest costs. If communities are not opened within expected timeframes or our sales absorption pace decreases and the time required to close out our communities is extended, we incur additional overhead costs, interest and other carrying costs. A decline in our ability to develop and market our communities successfully within expected timeframes and to generate positive cash flow from these operations in a timely manner could have a material adverse effect on our business and results of operations and on our ability to service our debt and to meet our working capital requirements.

Increases in our cancellation rate could have a negative impact on our home sales revenue, homebuilding margins and homebuilding margins.cash flows.

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In connection

Our backlog reflects the number and value of homes for which we have entered into a sales contract with a customer but have not yet delivered the home. Although these sales contracts typically require a cash deposit and do not make the sale contingent on the sale of the customer's existing home, in some cases a home we collectcustomer may cancel the contract and receive a deposit from the homebuyer that is a small percentagecomplete or partial refund of the total purchase price. In California, upondeposit as a home order cancellation, the homebuyer’s escrow deposit is generally returned to the homebuyer (other than with respect to certain design-related deposits, which we generally retain).result of local laws or as a matter of our business practices.  Home order cancellations can result from a number of factors, including declines or slow appreciation in the market value of homes, increases in the supply of homes available to be purchased, increased competition, higher mortgage interest rates, and changes in homebuyers' financial condition or personal circumstances. In addition, as part of our strategy, we intend to increasehave increased the number of homes we build at more affordable price points. Our cancellation rate may increase as we sell to a more diverse credit quality of buyers. Home orderSignificant cancellations negatively impacthave had, and could have, a material adverse effect on our financial and operating results due tobusiness as a negative impact on the numberresult of homes closed, net new home orders, homelost sales revenue and resultsthe accumulation of operations, as well as the number of homes in backlog.

unsold housing inventory.

A large proportion of our fee building revenue ishas been from one customer.

customer, and that customer relationship is ending.

The Company’s fee building revenues have historically been concentrated with a small number of customers.  We have several fee building agreements with Irvine Pacific, LP who accounted for 15%, 14%, and 23% of our billings to this customer are dependent upon such customer’stotal consolidated revenues for the years ended December 31, 2020, 2019, and 2018, respectively.  In August 2020, Irvine Pacific made a decision to proceedbegin building homes using their own general contractor’s license, effectively terminating the Company’s fee building arrangement with Irvine Pacific moving forward. Although we are transitioning construction management responsibilities to Irvine Pacific and are not expected to be engaged for new fee building contracts with them going forward, we are currently in the process of finishing certain existing homes under construction and the agreements can be canceled at any time. We cannot predict whether these agreements will continuegenerating revenues in connection therewith, which we expect to complete in the first quarter of 2021.  The Company is actively seeking and entering into new fee building opportunities with other land developers with the objective of at least partially offsetting the expected reduction in Irvine Pacific business in future oryears, such as our new fee building relationship with FivePoint. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Fee Building." However, there is no guarantee that we will be able to offset the current paceloss of construction,the Irvine Pacific business with new opportunities and the loss of these billings could negatively impact our business and our results of operations. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Fee Building" and Note 1 "Revenue Recognition - Fee Building" to the accompanying notes to consolidated financial statements included in this annual report on Form 10-K for further discussion of this revenue concentration.

We are subject to construction defect and warranty claims arising in the ordinary course of business that can be significant.

As a homebuilder, we are subject to construction defect, product liability and home warranty claims, arising in the ordinary course of business or otherwise. While we maintain general liability insurance and generally seek to require our subcontractors and design professionals to indemnify us for some portion of the liabilities arising from their work, there can be no assurance that these insurance rights and indemnities will be collectible or adequate to cover any or all construction defect and warranty claims for which we may be liable. Some claims may not be covered by insurance or may exceed applicable coverage limits. We may not be able to renew our insurance coverage or renew it at reasonable rates and may incur significant costs or expenses (including repair costs and litigation expenses) surrounding possible construction defects, product liability claims, soil subsidence or building related claims.  Some claims may arise out of uninsurable events or circumstances not covered by insurance or that are not subject to effective indemnification agreements with our trade partners.

With respect to certain general liability exposures, including construction defects and related claims and product liability claims, interpretation of underlying current and future trends, assessment of claims and the related liability and reserve estimation process require us to exercise significant judgment due to the complex nature of these exposures, with each exposure often exhibiting unique circumstances. Furthermore, once claims are asserted against us for construction defects, it is difficult to determine the extent to which the assertion of these claims will expand. Plaintiffs may seek to consolidate multiple parties in one lawsuit or seek class action status in some of these legal proceedings with potential class sizes that vary from case to case. Consolidated and class action lawsuits can be costly to defend and, if we were to lose any consolidated or certified class action suit, it could result in substantial liability.

We also expend significant resources to repair items in homes we have sold to fulfill the warranties we issued to our homebuyers. Additionally, we are subject to construction defect claims can be costly to defend and resolve in the legal system. Warranty and construction defect matters can also result in negative publicity in the media and on the internet, which can damage our reputation and adversely affect our ability to sell homes.

In addition, we conduct most of our business in California, one of the most highly regulated and litigious jurisdictions in the United States, which imposes a ten year, strict liability tail on many construction liability claims. As a result, our potential losses and expenses due to litigation, new laws and regulations may be greater than those of our competitors who have smaller California operations as a percentage of the total enterprise.

Adverse weather, andincluding wildfires, geological conditions, and natural resource shortages may increase costs, cause project delays and reduce consumer demand for housing, all of which could materially and adversely affect us.

As a homebuilder and land developer, we are subject to the risks associated with numerous weather-related and geologic events, many of which are beyond our control. These weather-related and geologic events include but are not limited to droughts, floods, wildfires, landslides, soil subsidence and earthquakes. California, in particular, has experienced significant wildfire activity over the past several years. The markets in which we operate have also experienced power and resource shortages, including mandatory periods without electrical power, changes to water availability (including drought conditions) and significant increases in utility and resource costs. Shortages of natural resources, particularly water and power, may make it more difficult to obtain regulatory approval of new developments and can also increase the risk of wildfires, which may both reduce demand for housing and damage our inventory currently under construction. We can also experience significant delays due to utility company constraints which may be outside our control. For example, in January 2019, in response to potential liabilities arising from a series of catastrophic wildfires in Northern California, PG&E Corporation, a major gas and electric utility company servicing various geographic markets, including Northern California, initiated voluntary bankruptcy proceedings, which resulted in service disruptions and constraints or delays in providing such utilities in the markets in which PG&E Corporation currently operates. The occurrence of any of these events could damage our land parcels and projects, cause delays in the completion of our projects, cause us to incur additional costs, reduce consumer demand for housing and cause shortages and price increases in labor or raw materials, any of which could harm our sales and profitability. Our California markets are in areas which have historically experienced significant earthquake activity and seasonal wildfires. In addition to directly damaging our land or projects, earthquakes, floods, landslides, wildfires or other geologic events could damage roads and highways providing access to those projects, thereby adversely affecting our ability to market homes in those areas and possibly increasing the costs of completion.

There are some risks of loss for which we may be unable to purchase insurance coverage. For example, losses associated with landslides, earthquakes and other geologic events may not be insurable, and other losses, such as those arising from terrorism, may not be economically insurable. A sizeable uninsured loss could materially and adversely affect our business, prospects, liquidity, financial condition and results of operations.

Power, water and other natural resource shortages or price increases could have an adverse impact on operations.

The markets in which we operate have experienced power and resource shortages, including mandatory periods without electrical power, changes to water availability (including drought conditions) and significant increases in utility and resource costs. These conditions may cause us to incur additional costs and we may not be able to complete construction on a timely basis if they were to continue for an extended period of time. Shortages of natural resources, particularly water and power, may make it more difficult to obtain regulatory approval of new developments. We may incur additional costs and may not be able to complete construction on a timely basis if such power shortages and utility rate increases continue. Furthermore, water restrictions, drought conditions, power shortages and rate increases may adversely affect the regional economies in which

we operate, which may reduce demand for housing. Our operations may be adversely impacted if further restrictions, drought conditions, rate increases and/or power shortages occur.

Because of the seasonal nature of our business, our quarterly operating results fluctuate.

As discussed under "Management’s Discussion and Analysis of Financial Condition-Seasonality" we have experienced seasonal fluctuations in our

Our quarterly operating results and capital requirements that can have a material impact on our results and our consolidated financial statements.fluctuate with the seasons. We typically experience the highest new home order activity in springlate winter and summer,spring, although this activity also highly depends on the number of active selling communities, timing of new community openings and other market factors.  Since itFor example, we experienced high demand during the fourth quarter of 2020, which we attribute to current market factors including low interest rates, a continued undersupply of homes, and consumers’ increased focus on the importance of home amid the COVID-19 pandemic. Construction of one of our traditional homes typically takesproceeds after signing the agreement of sale with our customer and can require five to ten months or more to construct a new home, we deliver more homes in the second half of the year as spring and summer home orders convert to home deliveries.complete. Because of this seasonality, home starts, construction costs and related cash outflows have historically been highest in the second and third quarters, and the majority of cash receipts from home deliveries occur during the second half of the year. We expect this seasonal pattern to continue overyear, particularly in the long-term, although itfourth quarter. Because of these factors, our quarterly operating results may be affecteduneven and may be marked by volatilitylower revenues and earnings in the homebuilding industry.

some quarters than in others. Seasonality also requires us to finance construction activities in advance of the receipt of sales proceeds. In many cases, we may not be able to recapture increased costs by raising prices because prices are established upon signing the purchase contract. Accordingly, there is a risk that we will invest significant amounts of capital in the acquisition and development of land and construction of homes that we do not sell at anticipated pricing levels or within anticipated time frames. If, due to market conditions, construction delays or other causes, we do not complete sales of our homes at anticipated pricing levels or within anticipated time frames, our financial performance and financial conditions could be materially and adversely affected.

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We may be unable to obtain suitable bonding for the development of our housing projects.

We are often required to provide bonds to governmental authorities and others to ensure the completion of our projects. As a resultOur ability to obtain surety bonds primarily depends upon our credit rating, financial condition, past performance and other factors, including the capacity of the surety market conditions,and the underwriting practices of surety providers have been reluctantbond issuers. The ability to obtain surety bonds also can be impacted by the willingness of insurance companies to issue newperformance bonds for construction and some providers are requesting credit enhancements (such as cash deposits or letters of credit) in order to maintain existing bonds or to issue new bonds.development activities. If we are unable to obtain surety bonds when required, bonds in the future for our projects, or if we are required to provide credit enhancements with respect to our current or future bonds, our business, prospects, liquidity, financial condition and results of operations and cash flows could be materially and adversely affected.

Inflation could adversely affect our business and financial results.

Inflation could adversely affect us by increasing the costs of land, raw materials and labor needed to operate our business, which in turn requiresleads us to increase our home selling price in an effort to maintain satisfactory housing gross margins. Inflation typically also accompanies higher interestsinterest rates, which could adversely impact potential customers’ ability to obtain financing on favorable terms, thereby further decreasing demand. If we are unable to raise the prices of our homes to at least partially offset the increasing costs of our operations, our margins could decrease. Furthermore, if we need to lower the price of our homes to meet demand, the value of our land inventory may decrease. Depressed land values may cause us to abandon and forfeit deposits on land option contracts and other similar contracts if we cannot satisfactorily renegotiate the purchase price of the subject land. We may record charges against our earnings for inventory impairments if the value of our owned inventory, including land we decide to sell, is reduced, or for land option contract abandonments if we choose not to exercise land option contracts or other similar contracts, and these charges may be substantial. Inflation may also raise our costs of capital and decrease our purchasing power, making it more difficult to maintain sufficient funds to operate our business.

A major health and safety incident relating to our business could be costly in terms of potential liabilities and reputational damage.

Building sites are inherently dangerous, and operating in the homebuilding industry poses certain inherent health and safety risks to those working at such sites. Due to health and safety regulatory requirements and the number of projects we work on, health and safety performance is critical to the success of all areas of our business. Any failure in health and safety performance may result in penalties for non-compliancenoncompliance with relevant regulatory requirements or litigation, and a failure that results in a major or significant health and safety incident is likely to be costly in terms of potential liabilities incurred as a result. Such a failure could generate significant negative publicity and have a corresponding impact on our reputation, our relationships with relevant regulatory agencies, governmental authorities and local communities, and our ability to win new business, which in turn could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

business.

Negative publicity or poor relations with the residents of our communities could negatively impact sales, which could cause our revenues or results of operations to decline.

Unfavorable media related to our industry, company, brands,brand, marketing, personnel, operations, business performance, or prospects may affect our stock price and the performance of our business, regardless of its accuracy or inaccuracy. OurThe harm may be immediate without affording us an opportunity for redress or correction, and our success in maintaining extending and expanding our brand image depends on our ability to adapt to a rapidly changing media environment. Adverse publicity or negative commentary on social media outlets, such as blogs, websites or newsletters, could hurt operating results, as consumers might avoid or protest brands that receive bad press or negative reviews. Negative publicity may result in a decrease in our operating results.

In addition, residents of communities we develop may look to us to resolve issues or disputes that may arise in connection with the operation or development of their communities. Efforts made by us to resolve these issues or disputes could be deemed unsatisfactory by the affected residents, and subsequent actions by these residents could adversely affect sales or our reputation.

An information systems interruption or breach in security could adversely affect us.

Privacy, security, and compliance concerns have continued to increase as technology has evolved.  We rely on accounting, financial and operational management information systems to conduct our operations. Many of these resources are provided to us or are maintained on our behalf by third-party service providers pursuant to agreements that specify certain security and service level standards. Our ability to conduct our business may be materially and adversely impaired if our computer resources are compromised, degraded, damaged or fail, whether due to a virus or other harmful circumstance, intentional penetration or disruption of our information technology resources by a third-party, natural disaster, hardware or software corruption or failure or error (including a failure of security controls incorporated into or applied to such hardware or software), telecommunications system failure, service provider error or failure, intentional or unintentional personnel actions (including the failure to follow our security protocols), or lost connectivity to its networked resources. Furthermore, as part of our normal business activities, we collect and store certain confidential information, including information about employees, homebuyers, customers, vendors and suppliers. This information is entitled to protection under a number of regulatory regimes. We may share some of this information with vendors who assist us with certain aspects of our business. Our failure to maintain the security of the data which we are required to protect, including via the penetration of our network security and the misappropriation of confidential and personal information, could result in business disruption, damage to our reputation, financial obligations to third parties, fines, penalties, regulatory proceedings and private litigation with potentially large costs, and also result in deterioration in customers confidence in us and other competitive disadvantages, and thus could have a material adverse impact on our financial condition and results of operations.

We may incur a variety of costs to engage in future growth or expansion of our operations or acquisitions of businesses, and the anticipated benefits may never be realized.

As a part of our business strategy, we may consider growth or expansion of our operations in our current markets or in other areas of the country. Any such growth or expansion would be accompanied by risks such as:

difficulties in assimilating the operations and personnel of acquired companies or businesses;

potential loss of key employees of the acquired companies or business;

diversion of our management’s attention from ongoing business concerns;

our potential inability to maximize our financial and strategic position through the successful expansion or acquisition;

impairment of existing relationships with employees, contractors, suppliers and customers as a result of the integration of new management personnel and cost-saving initiatives; and

risks associated with entering markets in which we have limited or no direct experience.

The magnitude, timing and nature of any future acquisition or expansion will depend on a number of factors, including our ability to identify suitable additional markets or acquisition candidates as well as capital resources. We cannot guarantee that any expansion into a new market will be successfully executed, and our failure to do so could harm our current business.

A reduction in our sales absorption levels may force us to incur and absorb additional community-level costs.

We incur certain overhead costs associated with our communities, such as indirect construction costs, property taxes, marketing expenses and costs associated with the upkeep and maintenance of our model and sales complexes. If our sales

absorptions pace decreases and the time required to close out our communities is extended, we would likely incur additional overhead costs, which would negatively impact our financial results. Additionally, we incur various land development improvement costs for a community prior to the commencement of home construction. Such costs include infrastructure, utilities, property taxes, interest and other related expenses. Reduction in home absorption rates increases the associated holding costs and extends our time to recover such costs. Declines in the homebuilding market may also require us to evaluate the recoverability of costs relating to land acquired more recently.

Future terrorist attacks against the United States or increased domestic or international instability could have an adverse effect on our operations.

Future terrorist attacks against the United States or any foreign country or increased domestic or international instability could cause consumer unease, which could significantly reduce the number of new contracts signed, and/or increase the number of cancellations of existing contracts, which could adversely affect our business.

Risks Related to Laws and Regulations

Mortgage financing, interest rate increases or changes

We are subject to construction defect, warranty, personal injury and other claims arising in federal lending programs or other regulationsthe ordinary course of business that can be significant and could lower demand for or impact homebuyers’ ability to purchase our homes, which could materially and adversely affect us.

A substantial percentage of purchasers of our homes finance their acquisitions with mortgage financing. Rising interest rates, decreased availability of mortgage financing or of certain mortgage programs, higher down payment requirements, increased monthly mortgage costs, tightened credit requirements and underwriting standards, and an increase in indemnity claims for mortgages may lead to reduced demand for our homes and mortgage loans. Deterioration in credit quality among subprime and other nonconforming loans has caused most lenders to eliminate subprime mortgages and most other loan products that do not conform to Federal National Mortgage Association, or Fannie Mae, Federal Home Loan Mortgage Corporation, or Freddie Mac, Federal Housing Administration, or FHA, or Veterans Administration, or the VA, standards. In addition, as a result of the turbulence in the credit markets and mortgage finance industry during the last downturn, in July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law. This legislation provides for a number of new requirements relating to residential mortgages and mortgage lending practices that reduce the availability of loans to borrowers or increase the costs to borrowers to obtain such loans. Fewer loan products and tighter loan qualifications, in turn, make it more difficult for a borrower to finance the purchase of a new home or the purchase of an existing home from a potential "move-up" buyer who wishes to purchase one of our homes. The foregoing may also hinder our ability to realize our backlog because our home purchase contracts provide customers with a financing contingency. Financing contingencies allow customers to cancel their home purchase contracts in the event that they cannot arrange for adequate financing. As a result, rising interest rates, stricter underwriting standards, and a reduction of loan products, among other similar factors, can decrease our home sales. Any of these factors could have a material adverse effect on our business, prospects, liquidity, financial conditionposition and results of operations.

The federal government has

As a homebuilder, we are subject to construction defect, product liability home warranty, personal injury and other homebuilding-related claims, arising in the ordinary course of business or otherwise. We expend significant resources to repair items in homes we have sold to fulfill the warranties we issued to our homebuyers. We maintain reserves to cover the resolution of our potential liabilities associated with known and anticipated warranty and construction defect related claims and litigation, but the estimation process requires us to exercise significant judgment due to the complex nature of these exposures, with each exposure often exhibiting unique circumstances and there are no assurances that such reserves will be sufficient to cover liabilities associated with warranty, product liability, and construction defect liability.  We also taken on a significant roletypically act as the general contractor for the homes we build in supporting mortgage lending through its conservatorship of Fannie Maeour fee building business, including our unconsolidated joint ventures. In connection with these agreements, we indemnify the customer for liabilities arising from our work.  While we maintain general liability insurance and Freddie Mac, both of which purchase home mortgagesgenerally seek to require our subcontractors and mortgage-backed securities originated by mortgage lenders, and its insurance of mortgages originated by lenders through the FHA and the VA. The availability and affordability of mortgage loans, including interest ratesdesign professionals to indemnify us for such loans, could be adversely affected by a curtailment or cessationsome portion of the federal government’s mortgage-related programsliabilities arising from their work, there can be no assurance that these insurance rights and indemnities will be collectible or policies. The FHAadequate to cover any or all indemnity, construction defect and warranty claims for which we may continuebe liable. Some claims may not be covered by insurance or may exceed applicable coverage limits. Furthermore, most insurance policies have some level of a self-insured retention that we are required to impose stricter loan qualification standards, raise minimum down payment requirements, impose higher mortgagesatisfy in order to access the underlying insurance premiumswhich levels can be significant. Any such claims or self-insured retentions can be costly and other costs, or limit the number of mortgages it insures. Due to federal budget deficits, the U.S. Treasurycould result in significant liability. We may not be able to continue supportingrenew our insurance coverage or renew it at reasonable rates and may incur significant costs or expenses (including repair costs and litigation expenses) surrounding possible construction defects, product liability claims, soil subsidence or building related claims. 

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Any claim that becomes litigated is inherently unpredictable. Plaintiffs may seek to consolidate multiple parties in one lawsuit or seek class action status in some of these legal proceedings with potential class sizes that vary from case to case. Consolidated and class action lawsuits can be costly to defend and, if we were to lose any consolidated or certified class action suit, it could result in substantial liability. Litigated matters, including those related to construction defects, can also result in negative publicity in traditional and social media, which can damage our reputation and adversely affect our ability to sell homes.  In addition, we conduct most of our business in California, one of the mortgage-related activitiesmost highly regulated and litigious jurisdictions in the United States, which imposes a ten-year, strict liability tail on many construction liability claims. As a result, our potential losses and expenses due to litigation, new laws and regulations may be greater than those of Fannie Mae, Freddie Mac,our competitors who have smaller California operations as a percentage of the FHAtotal enterprise.

We could be responsible for employment-related liabilities with respect to our contractors’ employees.

Although contractors are independent of the homebuilders that contract with them under normal management practices and the VA at present levels, or itterms of trade contracts and subcontracts within the homebuilding industry, if regulatory agencies reclassify the employees of contractors as employees of homebuilders, homebuilders using contractors could be responsible for wage and hour labor laws, workers’ compensation and other employment-related liabilities of their contractors. Even if we are not deemed joint employers with our contractors, we are, and may revise significantly the federal government’s participation in and support of the residential mortgage market. Because the availability of Fannie Mae, Freddie Mac, FHA and VA-backed mortgage financing is an important factor in marketing and selling many of our homes, any limitations, restrictions or changesbecome in the availabilityfuture, subject to similar measures and legislation, such as California Labor Code Section 2810.3, that require us to share liability with our contractors for the payment of wages and the failure to secure valid workers’ compensation insurance coverage. In addition, California law makes direct contractors liable for wages, fringe benefits, or other benefit payments or contributions owed by a subcontractor that does not fulfill these obligations to its employees.  While the Company ordinarily negotiates with its subcontractors to obtain broad indemnification rights, there is no guarantee that it will be able to recover from its subcontractors for actions brought against the Company by its subcontractors’ employees or unions representing such government-backed financing could reduce our home sales, whichemployees and such liability could have a material and adverse effect on our business, prospects, liquidity, financial condition andposition or results of operations.

Changes in tax laws can increase the after tax cost of owning a home, and further tax law changes or government fees could adversely affect demand for the homes we build, increase our costs, or negatively affect our operating results.

Under previous tax law, certain significant expenses of owning a home, including mortgage loan interest costs and real estate taxes, generally are deductible expenses for the purpose of calculating an individual’s federal, and in some cases state, tax liability. However, the Tax Cuts and Jobs Act (the "Tax Act") signed into law on December 22, 2017 may limit these deductions for some individuals starting in 2018. The Tax Act caps individual state and local tax deductions at $10,000 for the aggregate of state and local real property and income taxes or state and local sales taxes. Additionally, the Tax Act reduces the cap on mortgage interest deduction to $750,000 of debt for debt incurred after December 15, 2017 while retaining the $1 million debt cap for debt incurred prior to December 15, 2017. The limits on deductibility of mortgage interest and property taxes may increase the after-tax cost of owning a home for some individuals.

Any increases in personal income tax rates and/or additional tax deduction limits could adversely impact demand for new homes, including homes we build, which could adversely affect our results of operations. Furthermore, increases

 Increases in real estate taxes and other local government fees, such as fees imposed on developers to fund schools, open space, and road improvements, and/or provide low- and moderate-income housing, could increase our costs and have an adverse effect on our operations. We also benefit from the availability of various deductions and tax credits.  For example, in December 2019, energy tax credits were extended through 2020 and retroactively applied to properties sold after December 31, 2017.  Elimination of such credits or deductions could negatively impact our financial results. 

We may not be able to generate sufficient taxable income to fully realize our net deferred tax assetand if we were to experiencean “ownership change” as defined in Section 382 of the Internal Revenue Code our net operating loss carryforwards would be substantially limited

At December 31, 2020, we had a net deferred tax asset of $15.4 million, of which $8.2 million relates to tax-effected, net operating loss and tax credit carryforwards from prior periods, and the remaining $7.2 million related to the timing of the recognition of various expenses which were deducted from book income but are not deductible for income tax purposes until actually paid or realized.  Federal net operating losses may be carried forward indefinitely; however, the loss can only be utilized to offset 80% of taxable income generated in a tax year.  At December 31, 2020, the Company had no federal net operating losses as all were carried back to prior years as allowed by the Coronavirus Relief and Economic Security Act ("CARES Act").  The Company has sizable state net operating losses totaling $87.4 million which may be carried forward 20 years in California and Arizona and will begin to expire in 2039, unless previously utilized.  If we are unable to generate future sufficient taxable income, we will not be able to realize the full amount of the deferred tax asset. We regularly review our deferred tax asset for recoverability and establish a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. Our projections of future taxable income required to fully realize the recorded amount of the gross deferred tax asset reflect numerous assumptions about our operating businesses and investments and are subject to change as conditions change specific to our business units, investments or general economic conditions. Changes that are adverse to us could result in the need to increase the deferred tax asset valuation allowance resulting in a charge to income and a decrease to stockholders’ equity.

Federal and state tax laws impose restrictions on the utilization of net operating loss (“NOL”) and tax credit carryforwards in the event of an “ownership change” as defined by Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”). Generally, an “ownership change” occurs if the percentage of the value of the stock that is owned by one or more direct or indirect “five percent shareholders” increases by more than 50% over their lowest ownership percentage at any time during an applicable testing period (typically, three years). Under Section 382, if a corporation undergoes an “ownership change,” such corporation’s ability to use its pre-change NOL and tax credit carryforwards and other pre-change tax attributes to offset its post-change income may be limited. While no “ownership change” has resulted in annual limitations, future changes in our stock ownership, which may be outside of our control, may trigger an “ownership change.” In addition, increases in local real estate taxes as well as the limitation on deductibility of such costs could adversely affect our potential home buyers, who may consider those costs in determining whether to make a new home purchase and decide,future equity offerings or acquisitions that have equity as a component of the consideration could result not to purchase onein an “ownership change.” If an “ownership change” occurs in the future, utilization of our homes.

NOL and tax credit carryforwards or other tax attributes may be limited, which could potentially result in increased future tax liability to us. We believehave adopted a tax benefit preservation plan, discussed below under “Risks Related to Ownership of Our Common Stock”, to protect our utilization of our NOL and tax credit carryforwards, but the plan only deters, and cannot ultimately block, all transfers of common stock that our recorded tax balances are adequate; however it is not possible to predict the effectsmight result in an ownership change.

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Table of possible changes in the tax laws or changes in their interpretation (including the interpretation of laws included in the newly enacted Tax Act), and whether they could adversely impact our operating results.Contents

New and existing laws and regulations, including environmental laws and regulations, or other governmental actions may increase our expenses, limit the number of homes that we can build, or delay the completion of our projects.

projects, or otherwise negatively impact our operations.

We are subject to numerous local, state, federal and other statutes, ordinances, rules and regulations concerning zoning, development, building design, construction, accessibility, anti-discrimination, and similar matters which imposeaffect the housing industry such as by imposing restrictive zoning and density requirements, which can limit the number of homes that can be built within the boundaries of a particular area.area, among other things. Governmental regulation affects construction activities as well as sales activities, mortgage lending activities, and other dealings with home buyers, including anti-discrimination laws such as the Fair Housing Act and data privacy laws such as the California Consumer Privacy Act.  Projects that are not entitled may be subjected to periodic delays, changes in use, less intensive development or elimination of development in certain specific areas due to government regulations. We may also be subject to periodic delays or may be precluded entirely from developing in certain communitiesregulations as well as due to building moratoriums or "slow-growth" or "no-growth" initiatives that could be implemented in the future. Local governments also have broad discretion regarding the imposition of development fees, assessments and exactions for projects in their jurisdiction. Projects for which we have received land use and development entitlements or approvals maythat are entitled still require a variety of other governmental approvals and permits during the development process and can also be impacted adversely by unforeseen health, safety and welfare issues, which can further delay these projects or prevent their development. As a result, home sales could decline and costs could increase, which could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

process.

We are also subject to a significant number and variety of local, state and federal lawsstatutes, ordinances, rules and regulations concerning the protection of health, safety, labor standards and the environment.environment, including those regulating the emission or discharge of materials into the environment, the management of storm water runoff at construction sites, the handling, use, storage and disposal of hazardous substances, impacts to wetlands and other sensitive environments, and the remediation of contamination at properties that we own or develop. The particular environmental lawsregulations applicable to each community in which apply to any given propertywe operate vary according to multiple factors, includinggreatly depending on the property’s location itsof the community site, the site's environmental conditions and geographic attributes, the present and former usesuse of the property, the presence or absence of endangered plants or animals or sensitive habitats, as well as conditions at nearby properties.site. Environmental laws and conditionsregulations may result incause delays, may cause us to incur substantial compliance, andremediation or other costs, and can prohibit or severely restrict development and homebuilding activityactivity. In addition, noncompliance with these regulations could result in environmentally sensitive regionsfines and penalties, obligations to remediate, permit revocations or areas. For example, under certainother sanctions; and contamination or other environmental laws and regulations, third parties, such as environmental groupsconditions at or neighborhood associations, may challengein the permits and other approvals required forvicinity of our projects and operations. Any such claims may adversely affect our business, prospects, liquidity, financial condition and results of operations. Insurance coveragedevelopments, whether or not we were responsible for such claimsconditions, may be limited or non-existent.

In addition, in those cases where an endangered or threatened species is involved and agency rulemaking and litigation are ongoing, the outcome of such rulemaking and litigation can be unpredictable, and at any time can result in unplannedclaims against us for personal injury, property damage or unforeseeable restrictions on or even the prohibition of development in identified environmentally sensitive areas. other losses.

From time to time, the EPAUnited States Environmental Protection Agency and similarother federal state or localstate agencies review land developers’ and homebuilders’homebuilders' compliance with environmental laws and may levy fines and penalties for failure to strictly comply with applicable environmental laws including those applicable to control or storm water discharges during construction, or impose additional requirements for future compliance as a result of past failures. Any such actions taken with respect to us may increase our costs and result in project delays. Weor harm our reputation. Further, we expect that increasingly stringent requirements will be imposed on land developers and homebuilders in the

future. Environmental regulations can also have an adverse impact on the availability and price of certain raw materials such as lumber, and on other building materials.

lumber. Our communities in California isare especially susceptible to restrictive government regulations and environmental laws. For example, California imposes notification obligations respecting environmental conditions, sometimes recorded on deeds, and also those required to be delivered to persons accessing property or to home buyers or renters, which may cause some persons, or their financing sources, to view the subject parcels as less valuable or as impaired.

Under various environmental laws, current or former owners of real estate,particularly surrounding water usage, as well as certain other categoriesresidential building codes and zoning regulations designed to counteract climate change or otherwise enhance the sustainability of parties, may be requiredthe environment. Any or all of these changes could increase our costs to investigatedevelop homes and clean up hazardousadversely affect our financial condition and results of operations.

Changes in global or toxic substances or petroleum product releases,regional climate conditions and may be held liable to a governmental entity or to third parties for related damages, including for bodily injury, and for investigation and clean-up costs incurred by such parties in connection with the contamination.

Legislationlegislation relating to energy and climate change could increase our costs to construct homes.

Projected climate change may exacerbate the scarcity or presence of water and other natural resources in affected regions, which could limit, prevent or increase the costs of residential development in certain areas. There is a variety of new legislation being enacted, or considered for enactment at the federal, state and local level relating to energy, emissions and climate change. This legislation relates to items such as carbon dioxide emissions control and building codes that impose energy efficiency standards.  New building code requirements, including California's solar mandate that went into effect in 2020, that impose stricter energy efficiency standards could significantly increasehave increased our cost to construct homes.homes and legislation imposing additional efficiency standards may cause us to be unable to fully recover the costs associated with compliance.  California, our largest market, enacted the Global Warming Solutions Act of 2006 to achieve the goal of reducing greenhouse gas emissions. As climate change concerns continue to grow, legislationa result, California has adopted and regulations of this nature areis expected to continue and become more costly to comply with.adopt significant regulations to reduce greenhouse gas emissions. Similarly, energy-related initiatives affect a wide variety of companies throughout the United States and the world and because our operations are heavily dependent on significant amountsmay impact manufacturers of raw materials upon which we are dependent, such as lumber, steel, and concrete, theywhich could have an indirect adverse impact on our operations and profitability to the extent the manufacturers and suppliers of our materials are burdened with expensive cap and trade and similar energy-related regulations. All of the foregoing could result in increased costs to build homes and cause a reduction in our homebuilding gross margin and materially and adversely affect our results of operations.

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Failure to comply with privacy laws or an information systems interruption or breach in security that releases personal identifying information or other confidential information could adversely affect us.

Privacy, security, and compliance concerns have continued to increase as technology has evolved.  We use information technology and other computer resources to carry out important operational and marketing activities, to maintain our business records, and to collect and store personal identifying information, including information about employees, homebuyers, customers, vendors and suppliers as well as share information with vendors who assist us with certain aspects of our business. The regulatory environment in California and throughout the U.S. surrounding information security and privacy is increasingly demanding. The information technology systems we use are dependent upon global communications providers, web browsers, third-party software and data storage providers and other aspects of the Internet infrastructure that have experienced security breaches, cyber-attacks, ransomware attacks, significant systems failures and service outages in the past. A data security breach, a significant and extended disruption in the functioning of our information technology systems or a breach of any of our data security controls could include the theft or release of customer, employee, vendor or company data, and could disrupt our business operations, damage our reputation, cause us to lose customers, adversely impact our sales and revenue, and require us to incur significant expense to address and remediate or otherwise resolve these kinds of issues. The release of confidential information as a result of a security breach could also lead to litigation or other proceedings against us by affected individuals, vendors or regulators and the outcome of such proceedings, which could include penalties or fines, could have a significant negative impact on our business. We may also be required to incur significant costs to protect against damages caused by information technology failures or security breaches in the future. With the outbreak of COVID-19 and the federal and state mandates implemented to control its spread, we have taken steps to allow our workforce to perform critical business functions remotely. Many of these measures were deployed for the first time and there is no guarantee the safeguards we have put in place will be completely effective or that we will not encounter some of the common risks associated with employees accessing Company data and systems remotely. We provide employee awareness training of cybersecurity threats, procure cyber insurance, and routinely utilize information technology consultants to assist us in our evaluations of the effectiveness of the security of our information technology systems. However, because methods used to obtain unauthorized access or disable systems evolve frequently, we may be unable to anticipate these attacks or to implement adequate preventative measures and we cannot eliminate the risk of such security breaches, cyber attacks, or other significant system or security failures, and such occurrences could have a material and adverse effect on our consolidated results of operations or financial position. In addition, the cost and operational consequences of implementing further data or system protection measure could be significant and our efforts to deter, identify, mitigate and/or eliminate any security breaches or incidents may not be successful.

Risks Related to Financing and Indebtedness

Difficulty in obtaining sufficient capital could prevent us from acquiring land for our developments or increase costs and delays in the completion of our development projects.

The homebuilding

Our business and land development industry is capital-intensiveresults of operations depend substantially on our ability to obtain financing, whether from bank borrowings or from financing in the public debt markets. Our unsecured revolving Credit Facility, which provides for $60 million in committed borrowing capacity, matures on April 30, 2023 and requires significant up-front expenditures to acquire land parcels and complete development. We cannot assure you that we will maintain cash reserves and generate sufficient cash flow from operations in an amount to enable us to service our debt or to fund other liquidity needs. Additionally, while we have issued $325$250 million in aggregate principal amount of 7.25% Senior Notes (the "2025 Notes") becomes due 2022in October 2025. We cannot be certain that we will be able to continue to replace existing financing or find additional sources of financing in the future on favorable terms or at all. If we are not able to obtain suitable financing at reasonable terms or replace existing debt and debt commitments of

$200 million undercredit facilities when they become due or expire, our revolving credit facility, our ability and capacity to borrow under the credit facility is limited by our asset based borrowing basecosts for borrowings will likely increase and our abilityrevenues may decrease or we could be precluded from continuing our operations at current levels. In such event, we could be required to meet the covenantsbecome more reliant on other forms of the facility. In addition, our senior notes contain certain restrictions on our business,financing, including the incurrence of additional debt under certain circumstances. If our senior notes, credit facility and internally generated funds are insufficient to cover our liquidity needs, we may seek additional capital in the form of equity or debt financing from a variety of potential sources, including additional bank financings, formation of joint venture relationships or securities offerings.  The availabilityThese types of borrowed funds, especially for land acquisition and construction financing, may be greatly reduced nationally, and the lending community may require increased amounts of equity to be invested in a project by borrowers in connection with both new loans and the extension of existing loans. If we are required to seek additional financing to fund our operations, continued volatility in these marketsfinancings may restrict our flexibility, to access such financing. If we are not successful in obtaining sufficient capital to fundbe more costly, and reduce our planned capitalprofitability and other expenditures, we may be unable to acquire land foradversely impact our housing developments or to develop the land and construct homes.financial position. Additionally, if we cannot obtain additional financing to fund the purchase of land under our option contracts or purchase contracts, we may be forced to forfeit nonrefundable deposits or incur other contractual penalties and fees. Any difficulty in obtaining sufficient capital for planned development expenditures could also cause project delays, which could increase our costs. Furthermore, if additional funds are raised through the issuance of stock, dilution to stockholders could result. If additional funds are raised through the incurrence of debt, we will incur increased debt servicing costs and may become subject to additional restrictive financial and other covenants. We can give no assurance as to the terms or availability of additional capital. If we are not successful in obtaining or refinancing capital when needed, it could adversely impact our ability to operate our business effectively, which could reduce our sales and earnings, and adversely impact our financial position.

Our level of indebtedness is significant and may adversely affect our financial position and prevent us from fulfilling our debt obligations, andobligations; we may incur additional debt in the future.

The homebuilding and land development industry is capital-intensive and requires significant up-front expenditures to secureacquire land parcels and pursuecomplete development and construction on such land.our cash flow from operations may not be sufficient to enable us to service our debt or fund other liquidity needs. Accordingly, we incur substantial indebtedness to finance our homebuilding activities. As discussed elsewhere in this filing, including "Management's Discussion and Analysis of Financial Condition and Result of Operations - Liquidity and Capital Resources," the Company has outstanding $325$250 million in aggregate principal amount of 7.25% Senior Notes due 2022 (the "Notes").the 2025 Notes. As of December 31, 2017, we2020, the 2025 Notes had approximately $318.7a carrying value of $244.9 million, in aggregate principle amount of debt outstanding, net of the unamortized discount of $2.2 million, unamortized premium of $1.8 million and $5.9$5.1 million of unamortized debt issuance costs. In addition, we have $200$60 million in debt commitments under our revolving credit facility,Credit Facility, none of which no indebtedness iswas outstanding or utilized to provide letters of credit at December 31, 2017 and $2002020 leaving $60 million is available for borrowing, subject to satisfaction of the financial covenants and borrowing base requirements in our revolving credit facility. Moreover, the termsCredit Facility agreement.

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Table of the indenture governing the NotesContents

Our level of indebtedness and our revolving credit facility permit us to incurincurring additional debt in each case,could subject to certain restrictions.

Incurring substantial debt subjects us to many risks that, if realized, would adversely affect us, including the risk that:

our ability to obtain additional financing as needed for working capital, land acquisition costs, building costs, other capital expenditures, or general corporate purposes, or to refinance existing indebtedness before its scheduled maturity, may be limited;

our debt may increase our vulnerability to adverse economic and industry conditions with no assurance that investment yields will increase with higher financing costs;

we would be required to dedicate a portion of our cash flow from operations to payments on our debt, thereby reducing funds available for other purposes such as land and lot acquisition, development and construction activities;

our cash flow from operations may be insufficient to make required payments of principal of and interest on the debt, which would likely result in acceleration of the maturity of such debt;

we may be put at a competitive disadvantage and reduce our flexibility in planning for, or responding to, changing conditions in our industry, including increased competition; and

the terms of any refinancing may not be as favorable as the terms of the debt being refinanced.

•

our ability to obtain additional financing as needed for working capital, land acquisition costs, building costs, other capital expenditures, or general corporate purposes, or to refinance existing indebtedness before its scheduled maturity, may be limited;

•

our debt may increase our vulnerability to adverse economic and industry conditions;

•

we may be required to dedicate a portion of our cash flow from operations to payments on our debt, thereby reducing funds available for other purposes such as land and lot acquisition, development and construction activities;

•

our cash flow from operations may be insufficient to make required payments of principal of and interest on the debt, which would likely result in acceleration of the maturity of such debt;

•

we may be put at a competitive disadvantage and reduce our flexibility in planning for, or responding to, changing conditions in our industry, including increased competition; and

Our ability to meet our expenses depends, to a large extent, on our future performance, which will be affected by financial, business, economic and other factors. We will not be able to control many of these factors, such as economic conditions in the markets where we operate and pressure from competitors.competitors and we cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness, including the notes. If we do not have sufficient funds, we may be required to refinance all or part of our existing debt, sell assets or borrow additional funds. We cannot guarantee that we will be able to do so on terms acceptable to us, if at all. If we are unable to refinance our debt on acceptable terms, we may be forced to dispose of our assets on disadvantageous terms, potentially resulting in losses. To the extent we cannot meet any future debt service obligations, we may lose some or all of our assets or property that may be pledged to secure our obligations to foreclosure. Also, debt agreements may contain specific cross-default provisions with respect to specified other indebtedness, giving the lenders the right to declare a default if we are in default under other loans in some circumstances. Defaults under our debt agreements could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

We currently have significant amounts investedinvestments in unconsolidated joint ventures with third parties - some of which are affiliated with certain of our board members - in which we have less than a controlling interest. These investments are highly illiquid and have significant risks due to, in part, a lack of sole decision-making authority and reliance on the financial condition and liquidity of our joint venture partners.

We own interests in various joint ventures and as of December 31, 2017,2020, our investments in and advances to our unconsolidated joint ventures was $55.8$2.1 million. WeIn the past, we have entered into joint ventures in order to acquire land positions, to manage our risk profile and to leverage our capital base. WeAlthough we consider all of our current joint ventures to have entered the winddown stage, we may enter into additional joint ventures in the future. SuchThese investments are generally highly illiquid and absent partner agreement, we may not be able to liquidate our joint venture investments involve risks not otherwise present in wholly owned projects, including the following:

Control and Partner Dispute Risk.to generate cash. We do not have exclusive control over the development, financing, management and other aspects of the project or joint venture,ventures which may prevent us from taking actions that are in our best interest but opposed by our partners. We cannot exercise sole decision-making authority regarding the project or joint venture,partners which could create the potential risk of creating impasses on decisions, such as acquisitions or sales.including related to development and financing. Disputes between usourselves and our partners may result in litigation or arbitration that would increase our expenses and preventtake valuable time from our officers and directors from focusing their time and efforts on our business and could result in subjecting the projects owned by the

joint venture to additional risk. Our existing joint venture agreements contain, andhandling any future joint venture agreements may contain, buy-sell provisions pursuant to which one partner may initiate procedures requiring the other partner to choose between buying the other partner’s interest or selling its interest to that partner; we may not have the capital to purchase our joint venture parties’ interest under these circumstances even if we believe it would be beneficial to do so.

Covenant Compliance Risk. Our revolving credit facility prohibits us from making investments in and advances to joint ventures when we are unable to meet certain financial covenants.such litigation.  In addition, the Indenture governing theour Credit Facility and indenture for our Senior Notes limitslimit our ability to make investments in joint ventures or give guarantees of joint venture indebtedness when our aggregate investments in joint ventures exceeds 15% of our consolidated tangible assets (before the operation of general baskets and other exceptions). If we become unable to fund our joint venture obligations this could result in, among other things, our default under our joint venture operating agreements, loan agreements, and credit enhancements.And, our failure to satisfy our joint venture obligations could also affect our joint venture's ability to carry out its operations or strategy which could impair the value of our investment in the joint venture.

Development Risk. Typically, we serveventures. 

We have historically served as the administrative member, managing member or general partner of our joint ventures and one of our subsidiaries acts as the general contractor while our joint venture partner serves as the capital provider. Due to our respective role in these joint ventures, we may become liable for obligations beyond our proportionate equity share. In addition, the projects we build through joint ventures are often larger and have a longer time horizon than the typical project developed by our wholly owned homebuilding operations. Time delays associated with obtaining entitlements, unforeseen development issues, unanticipated labor and material cost increases, higher carrying costs, and general market deterioration and other changes are more likely to impact larger, long-term projects, all of which may negatively impact the profitability and capital needs of these ventures and our proportionate share of income and capital.

Financing Risk. There are generally a limited number of sources willing to provide acquisition, development and construction financing to land development and homebuilding joint ventures. During difficult market conditions, it may be difficult or impossible to obtain financing for our joint ventures on commercially reasonable terms, or to refinance existing joint venture borrowings as such borrowings mature. In addition, a partner may fail to fund its share of required capital contributions or may become bankrupt, which may cause us and any other remaining partners to fulfill the obligations of the venture in order to preserve our interests and retain any benefits from the joint venture. As a result, we could be required, or elect, to contribute our corporate funds to the joint venture to finance acquisition and development and/or construction costs following termination or step-down of joint venture financing that the joint venture is unable to restructure, extend, or refinance with another third party lender. In addition, our ability to contribute our funds to or for the joint venture may be limited if we do not meet the credit facility conditions discussed above. In addition, we sometimes finance projects in ourcontribution interest.

Our unconsolidated joint ventures with debt that iswill frequently finance development utilizing secured by the underlying real property.financing. Secured indebtedness increases the risk of the joint venture’s loss of ownership of the property (which would, in turn, impair the value of our ownership interests in the joint venture). See Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Off-Balance Sheet Arrangements and Contractual Obligations"

Contribution Risk. Under credit enhancements that we typicallymay provide with respect to joint venture borrowings, we and our partners could be required to make additional unanticipated investments in and advances to these joint ventures, either in the form of capital contributions or loan repayments, to reduce such outstanding borrowings. We may have to make additional contributions that exceed our proportional share of capital if our partners fail to contribute any or all of their share. While in most instances we would be able to exercise remedies available under the applicable joint venture documentation if a partner fails to contribute its proportional share of capital, our partner's financial condition may preclude any meaningful cash recovery on the obligation. See Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Off-Balance Sheet Arrangements and Contractual Obligations" and Note 11 to the Consolidated Financial Statements for more information on LTV maintenance agreements and completion guaranties.

Completion Risk. Wealso often sign a completion agreement in connection with obtaining financing for our joint ventures. Under such agreements, we may be compelled to complete a project, usually with costs within the budget related to the project being funded by the lender with any budget shortfalls being borne by us, even if we no longer have an economic interest in the joint venture or the joint venture no longer has an interest in the property.

Illiquid Investment Risk. We lack a controlling interest in our joint ventures and therefore are generally unable A partner may fail to compel our joint ventures to sell assets, return invested capital, require additionalfund its share of required capital contributions or takemay become bankrupt, which may cause us and any other action withoutremaining partners to need to fulfill the voteobligations of at least onethe venture in order to preserve our interests and retain any benefits from the joint venture. As a result, we could be contractually required, or more ofelect, to contribute our venture partners. This means that, absent partner agreement, we may not be ablecorporate funds to liquidate ourthe joint venture investments to generate cash.finance acquisition and development and/or construction costs and such ability to contribute may be limited by our corporate debt covenants.

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Consolidation Risk. The accounting rules for joint ventures are complex and the decision as to whether it is proper to consolidate a joint venture onto our balance sheet is fact intensive. If the facts concerning an unconsolidated joint

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venture were to change and a triggering event under applicable accounting rules were to occur, we might be required to consolidate previously unconsolidated joint ventures onto our balance sheet which could adversely impact our leverage and other financial conditions or covenants.

Any of the above might subject a project to liabilities in excess of those contemplated and adversely affect the value of our current and future joint venture investments.

Our current financing arrangements contain, and our future financing arrangements likely will contain, restrictive covenants relating to our operations.

Our current financing arrangements, including the Credit Facility and the Indenture governing the 2025 Notes (the "Indenture"), contain covenants (financial and otherwise) affecting our ability to incur additional debt, make certain investments, reduceallow liquidity to fall below certain levels, make distributions to our stockholders, and otherwise affect our operating policies. These restrictions limit our ability to, among other things:

incur or guarantee additional indebtedness or issue certain equity interests;

pay dividends or distributions, repurchase equity or prepay subordinated debt;

make certain investments;

sell assets;

incur liens;

create certain restrictions on the ability of restricted subsidiaries to transfer assets;

enter into transactions with affiliates;

create unrestricted subsidiaries; and

consolidate, merge or sell all or substantially all of our assets.

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incur or guarantee additional indebtedness or issue certain equity interests;

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pay dividends or distributions, repurchase equity, repurchase our Senior Notes, or prepay subordinated debt;

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make certain investments, including investments in joint ventures;

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sell assets;

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incur liens;

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create restrictions on the ability of restricted subsidiaries to transfer assets;

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enter into transactions with affiliates;

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create unrestricted subsidiaries; and

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consolidate, merge or sell all or substantially all of our assets.

In addition, our revolving credit facilityCredit Facility provides that our maximum net leverage ratio must be less than 65%60%, which, as defined in our creditCredit Facility agreement, is calculated on a net debt basis after a minimum liquidity threshold. Our net leverage ratio as of December 31, 2017,2020, as calculated under our revolving credit facility,Credit Facility, was approximately 44%42.8%. Our credit facilityCredit Facility also contains financial covenants related to our tangible net worth, (subject to adjustment if joint ventures exceed 35% of our tangible net worth), liquidity, and interest coverage.coverage or a minimum unrestricted cash balance. Tables measuringpresenting our compliance with the financial conditions and covenants under the Notes and credit facilityCredit Facility are set forth in "Management's"Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Senior Unsecured Revolving Credit Facility" included elsewhereResources" in this Report on Form 10-K and incorporated herein by reference. 10-K. As of December 31, 2020, we did not meet the minimum interest coverage ratio test under our Credit Facility which requires us to maintain an interest coverage ratio of at least 1.75 to 1.00 (the “Interest Coverage Test”). The Credit Facility provides that if the Interest Coverage Test  is not satisfied on the last day of any fiscal quarter, we are required to maintain during any period in which the Interest Coverage Test is not satisfied unrestricted cash equal to not less than the trailing 12 month consolidated interest incurred (as defined in the Credit Facility agreement) which was $23.9 million as of December 31, 2020. As of December 31, 2020, we were in compliance with such requirement. This cash balance maintenance requirement may reduce our ability to use our cash flow for other purposes, including land investments.  Failure to have sufficient borrowing base availability in the future or to be in compliance with our financial covenants under our revolving credit facilityCredit Facility could have a material adverse effect on our operations and financial condition.

A breach of the covenants under the Indenture or any of the other agreements governing our indebtedness could result in an event of default under the Indenture or other such agreements.

A default under the Indenture governing the Notes or our revolving credit facility or other agreements governing our indebtedness may allow our creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the credit agreement governing our revolving credit facility would permit the lenders thereunder to terminate all commitments to extend further credit under our revolving credit facility. Furthermore, if we were unable to repay the amounts due and payable under any future secured credit facilities, those lenders could proceed against the collateral granted to them to secure that indebtedness. In the event our lenders or the holders of our Notes accelerate the repayment of our borrowings, we cannot assure you that we and our subsidiaries would have sufficient assets to repay such indebtedness. As a result of these restrictions, we may be:

limited in how we conduct our business;

unable to raise additional debt or equity financing to operate during general economic or business downturns; or

unable to compete effectively or to take advantage of new business opportunities. These restrictions may affect our ability to grow in accordance with our plans.

Potential future downgrades of our credit ratings could adversely affect our access to capital and could otherwise have a material adverse effect on us.

Rating agencies may elect in the future to downgrade our corporate credit rating or any rating of the Notes due to

deterioration in our homebuilding operations, credit metrics or other earnings-based metrics, as well as our leverage or a significant decrease in our tangible net worth. These ratings and our current credit condition affect, among other things, our ability to access new capital, especially debt, as well as our stock price, and negative changes in these ratings may result in more stringent covenants and higher interest rates under the terms of any new debt. Our credit ratings could be downgraded or rating agencies could issue adverse commentaries in the future, which could have a material adverse effect on our stock price, business, results of operations, financial condition and liquidity. In particular, a weakening of our financial condition, including a significant increase in our leverage or decrease in our profitability or cash flows, could adversely affect our ability to obtain necessary funds, result in a credit rating downgrade or change in outlook, or otherwise increase our cost of borrowing.

Interest expense on debt we incur may limit our cash available to fund our growth strategies.

As of December 31, 2017,2020, we had approximately $318.7outstanding $250 million in aggregate principal amount of debt outstanding, net of the unamortized discount of $2.2 million, unamortized premium of $1.8 million and $5.9 million of debt issuance costs.our 7.25% 2025 Senior Notes.  In addition, we have $200$60 million in debt commitments under our revolving credit facility,Credit Facility, of which no indebtedness isnone was outstanding or utilized to provide letters of credit at December 31, 2017 and $2002020 with $60 million is available for borrowing, subject to the satisfaction of the financial covenants and the state of the borrowing base requirementsand the conditions precedent to borrowing under our Credit Facility.  A significant portion of our cash flows from operations is dedicated to the payment of principal and interest on our indebtedness and therefore such cash flows are not available to make investments in our senior unsecured revolving credit facility. As part of our financing strategy, we may incur a significant amount of additional debt.business. Our revolving credit facilityCredit Facility has, and any additional debt we subsequently incur may have, a floating rate of interest. Our Notes have a fixed rate of interest. WeAs part of our financing strategy, we may incur fixed rate debt in the future that may be at a higher interest rate than our floating ratesignificant amount of additional debt. Higher interest rates could increase debt service requirements on our current floating rate debt and on any floating or fixed rate debt we subsequently incur, and could reduce funds available for operations, future business opportunities or other purposes. If we need to repay existing debt during periods of rising interest rates, we could be required to refinance our then-existing debt on unfavorable terms or liquidate one or more of our assets to repay such debt at times that may not permit realization of a favorable return on such assets and could result in a loss or lower profitability. The occurrence of either such event or bothevents could materially and adversely affect our business, prospects, liquidity, financial condition and results of operations.

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We may be unable to repurchase the Notes upon a change of control triggering event as required by the Indenture.

Upon the occurrence of certain specific kinds ofa change of control events,triggering event, we must offer to repurchase the 2025 Notes at 101% of their principal amount, plus accrued and unpaid interest thereon.thereon to the purchase date. In such circumstances, we cannot assure you that we would have sufficient funds available to repay all of our indebtedness that would become payable upon a change of control triggering event and to repurchase all of the 2025 Notes. Our failure to purchase the 2025 Notes tendered in such an offer would be a default under the Indenture and would trigger a cross default of the revolving credit facility.

Credit Facility.

Risks Related to Our Organization and Structure

We are and will continue to be dependent on key personnel and certain members of our management team.

Our success depends to a significant degree upon the contributions of certain key personnel including, but not limited to, our Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and Chief Investment Officerexecutive officers, each of whom would be difficult to replace. Although we have entered into employment agreements with our executive officers, there is no guarantee that these executives will remain employed with us. If any of our key personnel were to cease employment with us, our operating results could suffer. Our ability to retain our key personnel or to attract suitable replacements should any members of our management team leave depends on the competitive nature of the employment market. The loss of services from key personnel or a limitation in their availability could materially and adversely impact our business, prospects, liquidity, financial condition and results of operations. Further, such a loss could be negatively perceived in the capital markets. We have not obtained key person life insurance that would provide us with proceeds in the event of death or disability of any of our key personnel.

The loss of services from key personnel could materially and adversely impact our business, prospects, liquidity, financial condition and results of operations and/or be negatively perceived in the capital markets and with our bank group.

Termination of the employment agreements with the members of our management team could be costly and prevent a change in control of our company.

Our employment agreements with Messrs. Webb, Miller and Stephens each provide that if their employment with us terminates under certain circumstances, we may be required to pay them significant amounts of severance compensation, thereby making it costly to terminate their employment. Furthermore, these provisions could delay or prevent a transaction or a change in control of our company that might involve a premium paid for shares of our common stock or otherwise be in the best interests of our stockholders, which could materially and adversely affect the market price of our common stock.

Our charter and bylaws could prevent a third party from acquiring us or limit the price that investors might be willing to pay for shares of our common stock.

Provisions of the Delaware General Corporation Law, our certificate of incorporation and our bylaws could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of us. These provisions could delay or prevent a change in control of and could limit the price that investors might be willing to pay in the future for shares of our common stock.

Our Board of Directors is divided into three classes, with the term of one class expiring each year, which could delay a change in our control. Our certificate of incorporation also authorizes our Board of Directors to issue new series of common stock and preferred stock without stockholder approval. Depending on the rights and terms of any new series created, and the reaction of the market to the series, rights of existing stockholders could be negatively affected. For example, subject to applicable law, our Board of Directors could create a series of common stock or preferred stock with preferential rights to dividends or assets upon liquidation, or with superior voting rights to our existing common stock. The ability of our Board of Directors to issue these new series of common stock and preferred stock could also prevent or delay a third party from acquiring us, even if doing so would be beneficial to our stockholders.

We are also subject Our certificate of incorporation contains a provision similar to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which prohibits Delaware corporationsthe Company from engaging in certain business combinations specified in the statute with an interested stockholder as(as defined in the statute, for a periodcertificate of three years after the date of the transaction in which the person first becomes an interested stockholder,incorporation) unless the business combination is approved in advance by a majority of the independent directors or by the holders of at least two-thirds of the outstanding disinterested shares. The application of Section 203 of the Delaware General Corporation Lawthis provision could also have the effect of delaying or preventing a change of control of us.

The obligations associated with being See also "The Company has entered into a public company require significant resourcesSection 382 Rights Agreement, and management attention.

Section 404 ofif the Sarbanes-Oxley Act of 2002, or the Sarbanes Oxley Act, requires annual management assessments of the effectiveness of our internal control over financial reporting and generally requires in the same report a report by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting. However, under the recently enacted JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reportingshare purchase rights issued pursuant to Section 404 ofsuch agreement is exercised, it could materially and adversely affect the Sarbanes-Oxley Act until we are no longer an "emerging growth company." We could be an "emerging growth company" until the end of our 2019 fiscal year. The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.

We may encounter problems or delays in completing the implementation of any necessary improvements and receiving an unqualified opinion on the effectiveness of the internal controls over financial reporting in connection with the attestation provided by our independent registered public accounting firm. If we cannot favorably assess the effectiveness of our internal control over financial reporting, or if our independent registered public accounting firm is unable to provide an unqualified attestation report on our internal controls, investors could lose confidence in our financial information and themarket price of our common stock could decline.

As we transition from our status as "an emerging growth company," we may needstock" under "Risks Relating to upgrade our systems or create new systems, implement additional financial and management controls, reporting systems and procedures, create or outsource an internal audit function, and hire additional accounting and finance staff. If we are unableOwnership of Our Common Stock."

Risks Related to accomplish these objectives in a timely and effective fashion, our ability to comply with the financial reporting requirements and other rules that apply to reporting companies could be impaired. Any failure to maintain effective internal control over financial reporting could have a material adverse effect on our business, prospects, liquidity, financial condition and resultsOwnership of operations.

Our Common Stock

We are an "emerging growtha "smaller reporting company", and, as a result of the reduced disclosure and governance requirements applicable to emerging growthsmaller reporting companies, our common stock may be less attractive to investors.

We are an "emerging growtha "smaller reporting company" because we had public float of less than $250 million on the applicable measurement date. As a smaller reporting company," as defined in the JOBS Act, and we are eligiblesubject to take advantage of certain exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including, but not limited to, an exemption from the auditor attestation requirement of Section 404 of the Sarbanes-Oxley Act, reduced disclosure about executive compensation arrangements pursuant to the rules applicable to smaller reporting companiesobligations in our periodic reports and no requirement to seek non-binding advisory votes on executive compensation. We have elected to adopt these reduced disclosure requirements. We could be an emerging growth company until the last day of the fiscal year following the fifth anniversary of the completion of our initial public offering, although a variety of circumstances could cause us to lose that status earlier.proxy statements. We cannot predict whether investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If some investors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may be more volatile.

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Risks Related to Ownership

Table of Our Common StockContents

The price of our Common Stock is subject to volatility and our trading volume is relatively low.

The market price of our common stock may be highly volatile and subject to wide fluctuations. Compared to other public homebuilders, we believe we have relatively low trading volume. Because of this limited trading volume, purchases and sales of large numbers of our shares may cause rapid price swings in our stock. In addition, our financial performance, government regulatory action, tax laws, additions or departures of key personnel, interest rates and market conditions in general could have a significant impact on the future market price of our common stock.

If securities or industry analysts do not publish, or cease publishing, research or reports about us, our business or our market, or if they change their recommendations regarding our common stock adversely, our stock price and trading volume could decline.

The trading market for our common stock is influenced by whether industry or securities analysts publish research and reports about us, our business, our market or our competitors and, if any analysts do publish such reports, what they publish in those reports. Any analysts who do cover us may make adverse recommendations regarding our common stock, adversely change their recommendations from time to time or provide more favorable relative recommendations about our competitors. We are covered by a limited number of analysts.  If any analyst who covercovers us now or may cover us in the future were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn couldmay cause our stock price or trading volume to decline.

We do not intend to pay dividends on our common stock for the foreseeable future.

We currently intend to retain our future earnings to finance the development and expansion of our business and, therefore, do not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, restrictions contained in any financing instruments, applicable legal requirements and such other factors as our board of directors deems relevant. Accordingly, stockholders may need to sell their shares of our common stock to realize a return on investment, and may not be able to sell shares at or above the price paid for them.

The Company has entered into a Section 382 Rights Agreement, and if the share purchase rights issued pursuant to such agreement are exercised, it could materially and adversely affect the market price of our common stock.

We entered into a Section 382 tax benefit preservation plan on May 8, 2020 with American Stock Transfer & Trust Company, LLC, as Rights Agent (the “Rights Agreement”). The Rights Agreement is intended to discourage acquisitions of our common stock which could result in a cumulative “ownership change” as defined under Section 382, thereby preserving our current ability to utilize net operating loss carryforwards to offset future income tax obligations, which would become subject to limitations if we were to experience an “ownership change,” as defined under Section 382. While this Rights Agreement is intended to preserve our current ability to utilize net operating loss carryforwards, it effectively deters current and future purchasers from accumulating more than 4.95% of our common stock, which could delay or discourage takeover attempts that our stockholders may consider favorable. This limitation may impact our trading volume and limit the price that investors might be willing to pay for our common stock. In addition, if the share purchase rights issued pursuant to the Rights Agreement are exercised, additional shares of our common stock will be issued, which could materially and adversely affect the market price of our common stock. Moreover, sales in the public market of any shares of our common stock issued upon such exercise, or the perception that such sales may occur, could also adversely affect the market price of our common stock. These issuances would also cause our per share net income, if any, to decrease in future periods.

Certain stockholders have rights to cause our Company to undertake securities offerings. Future sales of our common stock or other securities convertible into our common stock could cause the market value of our common stock to decline and could result in dilution of your shares.

Our board of directors is authorized, without stockholder approval, to cause us to issue additional shares of our common stock or to raise capital through the issuance of preferred stock, securities (including debt securities) convertible into common stock, options, warrants and other rights, on terms and for consideration as our board of directors in its sole discretion may determine. In addition, we

We entered into a registration rights agreement with the individual founders and certain of our institutional shareholders, IHP Capital Partners VI, LLC, TCN/TNHC LP,LLC and Watt/TNHC LLC (the "Institutional Investors") at the time our Company consummated its initial public offering. Ifoffering which gives such holders registration rights to cause our Company to undertake securities offerings. Sales by these holders, or any shareholders, sellin substantial amounts, of their shares,could cause the price of our common stock couldto decline significantly. In addition, the sale of these shares could impair our ability to raise capital through the sale of additional equity securities. We cannot predict the effect, if any, of future sales of our common stock, or other securities on the value of our common stock. Sales of substantial amounts of our common stock by a large stockholder or otherwise, or the perception that such sales could occur, may adversely affect the market price of our common stock.

Our Notes and Futurefuture offerings of debt securities, which rank senior to our common stock upon our bankruptcy or liquidation, and future offerings of equity securities that may be senior to our common stock for the purposes of dividend and liquidating distributions, may adversely affect the market price of our common stock.

We have issued $325outstanding $250 million in aggregate principal amount of Notes. In the future, we may attempt to increase our capital resources by conducting offerings of debt securities or additional offerings of equity securities. Upon bankruptcy or liquidation, holders of our debt securities, including the Senior Notes, and shares of preferred stock and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our common stock. Additional equity offerings may dilute the holdings

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Table of our existing stockholders or reduce the market price of our common stock, or both. Our preferred stock, if issued, could have a preference on liquidating distributions or a preference on dividend payments or both that could limit our ability to make a dividend distribution to the holders of our common stock. Our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control. As a result, we cannot predict or estimate the amount, timing or nature of our future offerings, and purchasers of our common stock bear the risk of our future offerings reducing the market price of our common stock and diluting their ownership interest in our company.Contents

Certain large stockholders own a significant percentage of our shares and exert significant influence over us. Their interests may not coincide with ours and may have conflicts of interests with us in the future.

The Institutional Investors,

IHP Capital Partners VI, LLC ("IHP"), H. Lawrence Webb, Wayne Stelmar Tom Redwitz and Joseph Davis (collectively, the "Founders") beneficially own (as such term is defined in Section 13(d)(3) of the Exchange Act), directly or indirectly through their affiliates, approximately 37%approximately 14% of ourour common stock. Such holdersstock and are also party to an investor rights agreement, pursuant to which each such holder agreed to vote, for eachin respect of the Institutional Investors,IHP, in favor of one individual for nomination and election to the Board chosen by such Institutional InvestorIHP for so long as such Institutional InvestorIHP owns 4% or more of our then-outstanding stock. Each Institutional InvestorIHP has also agreed to vote its shares of common stock in favor of Messrs. Webb, Stelmar or Berchtold (or, if at that time nominated as a director, Messrs. Davis or Redwitz)Mr. Davis) in any election in which any such individual is a nominee. In addition to the influence such holders have due to their voting arrangement, to the extent they and their affiliates vote their shares together on any matter, their combined stock ownership may effectively give them the power to influence matters reserved for our shareholders, including the election of members of our board of directors and significant corporate or change of control transactions.

Circumstances may occur in which the interest of these shareholders could be in conflict with your interests or our interests. In addition, such persons may have an interest in pursuing transactions that, in their judgment, enhance the value of their equity investment in us, even though such transactions may involve risks to you. For example, our Institutional Investors areIHP is also in the real estate and land development business. Such Institutional Investorsbusiness and their affiliates may have an interest in directly or indirectly pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their other equity investments, even though such transactions might involve risks to us. We have entered into various business relationships with some of our Institutional Investors,IHP, or entities affiliated with or controlled by them, including real estate development or homebuilding joint ventures. While our audit committee, andour related party review committee, or in some cases all of our independent or disinterested board members, have reviewed and approved all such transactions, we do not have exclusive control over suchinvestment in joint ventures which may prevent us from taking actions that are in our best interest but opposed by our partners. If the projects within such joint ventures do not perform well, it is possible that disputes between us and our partners may result in litigation or arbitration which would be further complicated due to the conflict of interest. Any such dispute would increase our expenses and prevent our officers and directors from focusing their time and efforts on our business and could have a material and adverse effect on our business.considerable risks. See the Risk Factor entitled "We"We currently have significant amounts investedinvestments in unconsolidated joint ventures with independent third parties inparties--some which are affiliated with certain of our board members--in which we have less than a controlling interest. These investments are highly illiquid and have significant risks due to, in part, a lack of sole decision-making authority and reliance on the financial condition and liquidity of our joint venture partners" for a description of additional risks arising from our investments in joint ventures. Institutional InvestorsIHP and their affiliates are involved in business that provides equity capital for residential housing, land and development, including for businesses that directly or indirectly compete with our business. In their capacities as principals or executives of those businesses, they may also pursue opportunities that may be complementary to our business, and, as a result, those opportunities may not be available to us.

There is no assurance that the existence of a stock repurchase program will result in additional repurchases of our common stock or enhance long term stockholder value, and repurchases, if any, could affect our stock price and increase its volatility and will diminish our cash reserves.

On November 18, 2020, the Company’s Board of Directors authorized a stock repurchase program (“Repurchase Program”) pursuant to which the Company may purchase up to $10.0 million of shares of its common stock (the “New Repurchase Program”) to replace its existing $15.0 million share repurchase program which had previously been authorized in May 2018 (the “existing program”).  The existing program was cancelled upon the authorization of the New Repurchase Program.  Repurchases pursuant to the Repurchase Program or any other stock repurchase program we adopt in the future could affect our stock price and increase its volatility and will reduce the market liquidity for our stock. The existence of a stock repurchase program could also cause our stock price to be higher than it would be in the absence of such a program. Additionally, these repurchases will diminish our cash reserves and increase our leverage, which could impact our ability to pursue possible future strategic opportunities and acquisitions, result in lower overall returns on our cash balances and impact our debt covenants and our ability to incur more indebtedness. There can be no assurance that any stock repurchases will, in fact, occur, or, if they occur, that they will enhance stockholder value. Although stock repurchase programs are intended to enhance long term stockholder value, short-term stock price fluctuations could reduce the effectiveness of these repurchases.

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Item 1B.	Unresolved Staff Comments

Not Applicable.

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Item 2. Properties We lease our corporate headquarters in Aliso Viejo,Irvine, California. The lease on this facility consists of approximately 18,700approximately 13,000 square feet and expires in November 2020.December 2025. In addition, we lease divisional offices in Northern California, Southern California and Arizona, including approximately 6,8007,300 square feet through May 2020July 2025 in Roseville, (of which approximately 5,800 square feet is sublet),CA approximately 7,700 square feet through SeptemberOctober 2021 in Walnut Creek, CA (all of which is sublet), approximately 1,400 square feet through July 20182021 in Agoura Hills, CA and approximately 2,0003,100 square feet through February 2021 in Scottsdale.Scottsdale, AZ. For information on land owned and controlled by us and our joint ventures for use in our homebuilding activities, please refer to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Lots Owned and Controlled", "- Equity in Net IncomeLoss of Unconsolidated Joint Ventures" and "- Off-Balance Sheet Arrangements and Contractual Obligations - Joint Ventures". Item 3. Legal Proceedings We are involved in various claims, legal and regulatory proceedings, and litigation arising in the ordinary course of business.business, including, without limitation warranty claims and litigation and arbitration proceedings alleging construction defects. We do not believe that any such claims and litigation will have a material adverse effect uponmaterially affect our results of operations or financial position. For a discussion of our legal matters and associated reserves, please see Note 11, Commitments and Contingencies to the accompanying notes to our consolidated financial statements included in this annual report on Form 10-K which is incorporated herein by reference. Item 4. Mine Safety Disclosures Not Applicable. 30 Table of Contents PART II Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the New York Stock Exchange under the ticker symbol "NWHM" and began trading on January 31, 2014. The following table sets forth the high and low intra-day sales prices per share of our common stock for the periods indicated, as reported by the NYSE.   High   Low Fiscal Year 2017       First Quarter $11.93   $10.07 Second Quarter $12.23   $10.24 Third Quarter $11.96   $9.75 Fourth Quarter $13.20   $10.27 Fiscal Year 2016       First Quarter $12.78   $7.51 Second Quarter $12.79   $8.62 Third Quarter $11.28   $8.85 Fourth Quarter $12.55   $9.45 The following performance graph shows a comparison of the cumulative total returns to stockholders of the Company’s common stock from January 31, 2014 (the date of our initial public offering, using the price of which our shares of common stock were initially sold to the public) to December 31, 2017, as compared with the Standard & Poor’s 500 Composite Stock Index and the Dow Jones Industry Group-U.S. Home Construction Index. The comparison assumes $100 was invested in our common stock on January 31, 2014 and in each of the foregoing indices on January 31, 2014 and assumes the reinvestment of dividends. The performance graph and related information shall not be deemed to be "soliciting material" or to be "filed" with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference. The above graph is based upon common stock and index prices calculated as of the end of each period. The stock price performance of the Company’s common stock depicted in the graph above represents past performance only and is not necessarily indicative of future performance. As of February 12, 2018,9, 2021, we had 12nine holders of record of our common stock. The number of holders of record is based upon the actual numbers of holders registered at such date and does not include holders of shares in "street name" or persons, partnerships, associates, corporations or other entities in security position listings maintained by depositories. Dividends We currently intend to retain our future earnings to finance the development and expansion of our business and, therefore, do not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, compliance with Delaware law, restrictions contained in any financing instruments, including but not limited to, our unsecured credit facilityCredit Facility and senior notes2025 Notes indenture, and such other factors as our board of directors deem relevant. Purchases of Equity Securities by the Issuer Share Repurchases We had no share repurchases during During the year ended December 31, 2017. Recent 2020, the Company repurchased and retired 2,160,792 shares of its common stock at an aggregate purchase price of $4.3 million.  Of this amount 109,609 shares of common stock were repurchased during the three month period ending December 31, 2020 at an aggregate purchase price of $0.6 million.  During the year ended December 31, 2019, the Company repurchased and retired 153,916 shares of its common stock at an aggregate purchase price of $1.0 million.   The following table provides information about repurchases of our common stock during the fourth quarter of the year ended December 31, 2020: Period   Total number of shares purchased     Average price paid per share     Total number of shares purchased as part of publicly announced plans or programs(1)     Approximate dollar value of shares that may be purchased under the plans or programs (in thousands)(1)   October 1, 2020 to October 31, 2020     —     $ —       —     $ —   November 1, 2020 to November 30, 2020     15,109     $ 5.54       15,109     $ 9,916   December 1, 2020 to December 31, 2020(2)     94,500     $ 5.02       94,500     $ 9,442   Total     109,609     $ 5.09       109,609     $ 9,442   (1) On November 18, 2020, the Company’s Board of Directors (the “Board”) authorized a stock repurchase program pursuant to which the Company may purchase up to $10.0 million of shares of its common stock (the “New Repurchase Program”) to replace its existing $15.0 million share repurchase program which had previously been authorized in May 2018 (the “Existing Program”). As of November 19, 2020, there was $1.7 million of remaining availability under the Existing Program which was cancelled upon the authorization of the New Repurchase Program. Repurchases of the Company’s common stock may be made in open-market transactions, effected through a broker-dealer at prevailing market prices, in privately negotiated transactions, in block trades, or by other means in accordance with federal securities laws, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.  The Board did not fix any expiration date for the New Repurchase Program. (2) Starting December 16, 2020, our repurchases were done pursuant to a 10b5-1 plan entered into by the Company which covers the period December 16, 2020 to February 16, 2021. Sales of Unregistered Securities We did not sell any unregistered equity securities during the year ended December 31, 2017.2020. 31 Table of Contents Item 6. Selected Financial Data The following sets forth our selected financial data and other operating data on a historical basis. You should read the following selected financial data in conjunction with our consolidated financial statements and the related notes, "Risk Factors" and with "Management’s Discussion and Analysis of Financial Condition and Results of Operations," which are included elsewhere in this annual report on Form 10-K. The historical results presented below are not necessarily indicative of the results to be expected for any future period.     Year Ended December 31,       2020     2019     2018     2017     2016       (Dollars in thousands, except per share amounts)   Income Statement Data                                         Home sales revenue   $ 426,251     $ 532,352     $ 504,029     $ 560,842     $ 507,949   Land sales revenue     157       41,664       —       —       —   Fee building revenue, including management fees     81,003       95,333       163,537       190,324       186,507   Total revenues   $ 507,411     $ 669,349     $ 667,566     $ 751,166     $ 694,456                                             Pretax income (loss):                                         Homebuilding   $ (60,876 )   $ (10,463 )   $ (24,706 )   $ 27,034     $ 25,546   Land     —       (3,405 )     —       —       —   Fee building     1,420       2,052       4,401       5,497       8,404   Pretax income (loss)   $ (59,456 )   $ (11,816 )   $ (20,305 )   $ 32,531     $ 33,950                                             Net income (loss) attributable to the Company   $ (32,819 )   $ (8,037 )   $ (14,216 )   $ 17,152     $ 21,022   Basic earnings (loss) per share   $ (1.76 )   $ (0.40 )   $ (0.69 )   $ 0.82     $ 1.02   Diluted earnings (loss) per share   $ (1.76 )   $ (0.40 )   $ (0.69 )   $ 0.82     $ 1.01   Weighted Average Common Shares Outstanding:                                         Basic     18,680,993       20,063,148       20,703,967       20,849,736       20,685,386   Diluted     18,680,993       20,063,148       20,703,967       20,995,498       20,791,445                                             Balance Sheet Data                                         Cash and cash equivalents   $ 107,279     $ 79,314     $ 42,273     $ 123,546     $ 30,496   Real estate inventories   $ 314,957     $ 433,938     $ 566,290     $ 416,143     $ 286,928   Investment in and advances to unconsolidated joint ventures   $ 2,107     $ 30,217     $ 34,330     $ 55,824     $ 50,857   Total assets   $ 495,699     $ 603,189     $ 696,097     $ 644,512     $ 419,136   Total debt   $ 244,865     $ 304,832     $ 387,648     $ 318,656     $ 118,000   Stockholders’ equity   $ 197,442     $ 232,647     $ 239,954     $ 263,990     $ 244,523   Stockholders' equity per common share outstanding   $ 10.89     $ 11.58     $ 11.96     $ 12.64     $ 11.81   Cash dividends declared per share   $ —     $ —     $ —     $ —     $ —                                             Operating Data (excluding unconsolidated JVs)                                         Net new home orders     816       532       536       412       253   New homes delivered     555       574       498       341       250   Average sales price of homes delivered   $ 768     $ 927     $ 1,012     $ 1,645     $ 2,032   Selling communities at end of year     23       21       20       17       15   Backlog at end of year, number of homes     410       149       191       153       79   Backlog at end of year, dollar value   $ 235,991     $ 125,803     $ 207,071     $ 162,250     $ 187,296   Average sales price of homes in backlog   $ 576     $ 844     $ 1,084     $ 1,060     $ 2,371                                             Operating Data – Fee Building Projects (excluding unconsolidated JVs)                                         Homes started     65       284       545       533       784   Homes delivered     336       309       600       820       644   32 Table of Contents   Year Ended December 31,   2017   2016   2015   2014   2013(1)   (Dollars in thousands, except per share amounts) Income Statement Data                   Home sales revenue $ 560,842   $ 507,949   $ 280,209   $ 56,094   $ 35,663 Fee building revenue, including management fees 190,324   186,507   149,890   93,563   47,565 Land sales revenue —   —   —   —   — Total revenues $ 751,166   $ 694,456   $ 430,099   $ 149,657   $ 83,228                     Pretax income:         Homebuilding $ 27,034   $ 25,546   $ 23,698   $ 497   $ 1,748 Fee building 5,497   8,404   10,213   4,506   5,248 Pretax income $ 32,531   $ 33,950   $ 33,911   $ 5,003   $ 6,996                     Net income attributable to the Company $ 17,152   $ 21,022   $ 21,688   $ 4,787   $ 6,706 Basic earnings per share $ 0.82   $ 1.02   $ 1.29   $ 0.30   $ 0.85 Diluted earnings per share $ 0.82   $ 1.01   $ 1.28   $ 0.30   $ 0.85 Weighted Average Common Shares Outstanding: (2)                   Basic 20,849,736   20,685,386   16,767,513   15,927,917   7,905,757 Diluted 20,995,498   20,791,445   16,941,088   15,969,199   7,905,757                     Balance Sheet Data                   Cash and cash equivalents $ 123,546   $ 30,496   $ 45,874   $ 44,058   $ 9,541 Real estate inventories (3) $ 416,143   $ 286,928   $ 200,636   $ 157,629   $ 44,088 Investment in and advances to unconsolidated joint ventures $ 55,824   $ 50,857   $ 60,572   $ 60,564   $ 32,270 Total assets $ 644,512   $ 419,136   $ 351,270   $ 291,958   $ 98,949 Total debt $ 318,656   $ 118,000   $ 83,082   $ 113,751   $ 17,883 Stockholders’ equity (4) $ 263,990   $ 244,523   $ 220,775   $ 148,084   $ 64,356 Stockholders' equity per common share outstanding $ 12.64   $ 11.81   $ 10.75   $ 9.00   $ 7.45 Cash dividends declared per share $ —   $ —   $ —   $ —   $ —                     Operating Data (excluding unconsolidated JVs)                   Net new home orders 412   253   174   79   72 New homes delivered 341   250   148   53   82 Average sales price of homes delivered $ 1,645   $ 2,032   $ 1,893   $ 1,058   $ 435 Selling communities at end of year 17   15   10   4   3 Backlog at end of year, number of homes 153   79   67   41   15 Backlog at end of year, dollar value $ 162,250   $ 187,296   $ 166,567   $ 86,711   $ 11,867 Average sales price of homes in backlog $ 1,060   $ 2,371   $ 2,486   $ 2,115   $ 791                     Operating Data – Fee Building Projects (excluding unconsolidated JVs)                 Homes started 533   784   513   550   215 Homes delivered 820   644   537   206   194 Homes under construction at end of period 299   586   446   470   126                     (1) The Company completed its initial public offering ("IPO") on January 30, 2014. Data presented for the years prior to 2014 represent our results operating as TNHC LLC, a private company. (2) The Company completed a follow-on offering on December 9, 2015 issuing and selling 4,025,000 shares of common stock at a price of $12.50 per share. (3) Effective July 1, 2016, certain capitalizable selling and marketing costs were reclassified to other assets from real estate inventories. Prior year periods have been reclassified to conform to current year presentation. $9.3 million, $5.9 million, and $1.3 million, was reclassified from real estate inventories to other assets for the years ended December 31, 2015, 2014, and 2013, respectively. (4) For the year ended December 31, 2013 (prior to the Company's IPO), amount represents members' equity in TNHC LLC. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following in conjunction with the sections of this annual report on Form 10-K entitled "Risk Factors," "Cautionary Note Concerning Forward-Looking Statements," "Selected Financial Data" and "Business" and our historical financial statements and related notes thereto included elsewhere in this annual report on Form 10-K. This discussion contains forward-looking statements reflecting current expectations that involve risks and uncertainties. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the section entitled "Risk Factors" and elsewhere in this annual report on Form 10-K. Non-GAAP Measures This annual report on Form 10-K includes certain non-GAAP measures, including home sales gross margin before impairments (or homebuilding gross margin before impairments, homebuildingimpairments), home sales gross margin percentage before impairments, AdjustedAdjusted EBITDA, Adjusted EBITDA margin percentage, the ratio of Adjusted EBITDA to total interest incurred, adjusted net income attributable to theThe New Home Company before noncash deferred tax asset charge, earnings per share and dilutedInc., adjusted earnings per share attributable to theThe New Home Company before noncash deferred tax asset charge,Inc., net debt, the ratio of net debt-to-capital, adjusted homebuilding gross margin (or homebuilding gross margin before impairments and interest in cost of sales), adjusted homebuilding gross margin percentage, general and the effective tax rate before noncash deferred tax asset charge.administrative costs excluding severance charges, general and administrative costs excluding severance charges as a percentage of home sales revenue, selling, marketing and general and administrative costs excluding severance charges, and selling, marketing and general and administrative costs excluding severance charges as a percentage of home sales revenue.  For a reconciliation of home sales gross margin before impairments (or homebuilding gross margin before impairments), adjusted homebuilding gross margin (or homebuilding gross margin before impairments and interest in cost of sales), home sales gross margin before impairments percentage and adjusted homebuilding gross margin percentage before impairments,to the comparable GAAP measures, please see  "-- Results of Operations - Homebuilding Gross Margin."  For a reconciliation of Adjusted EBITDA, Adjusted EBITDA margin percentage, and the ratio of Adjusted EBITDA to total interest incurred to the comparable GAAP measures please see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations -"-- Consolidated Financial Data." For a reconciliation of adjusted net income attributable to theThe New Home Company before noncash deferred tax asset charge,Inc. and adjusted earnings per share and diluted earnings per share attributable to theThe New Home Company before noncash deferred tax asset charge, and the effective tax rate before noncash deferred tax asset chargeInc. to the comparable GAAP measures, please see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations -"-- Overview." For a reconciliation of adjusted homebuilding gross margin and adjusted homebuilding gross margin percentage to the comparable GAAP measures, please see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Homebuilding Gross Margin."  For a reconciliation of net debt and net debt-to-capital to the comparable GAAP measures, please see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations -"-- Liquidity and Capital Resources - Debt-to-Capital Ratios."  For a reconciliation of general and administrative costs excluding severance charges, general and administrative expenses excluding severance charges as a percentage of homes sales revenue, selling, marketing and general and administrative expenses excluding severance charges and selling, marketing and general and administrative expenses excluding severance charges as a percentage of home sales revenue, please see "-- Results of Operations - Selling, General and Administrative Expenses."    33 Table of Contents Consolidated Financial Data     Year Ended December 31,       2020     2019     2018       (Dollars in thousands)   Revenues:                         Home sales   $ 426,251     $ 532,352     $ 504,029   Land sales     157       41,664       —          Fee building, including management fees     81,003       95,333       163,537         507,411       669,349       667,566   Cost of Sales:                         Home sales     367,026       469,557       436,530   Home sales impairments     19,000       8,300       10,000   Land sales     157       43,169       —   Land sales impairments     —       1,900       —   Fee building     79,583       93,281       159,136         465,766       616,207       605,666   Gross Margin:                         Home sales     40,225       54,495       57,499   Land sales     —       (3,405 )     —   Fee building     1,420       2,052       4,401         41,645       53,142       61,900                             Home sales gross margin     9.4 %     10.2 %     11.4 % Home sales gross margin before impairments(1)     13.9 %     11.8 %     13.4 % Land sales gross margin     — %     (8.2 )%     — % Fee building gross margin     1.8 %     2.2 %     2.7 %                           Selling and marketing expenses     (30,777 )     (36,357 )     (36,065 ) General and administrative expenses     (26,699 )     (25,723 )     (25,966 ) Equity in net loss of unconsolidated joint ventures     (18,791 )     (3,503 )     (19,653 ) Interest expense     (3,655 )     —       —   Project abandonment costs     (14,098 )     (94 )     (206 ) Gain (loss) on early extinguishment of debt     (7,254 )     1,164       —   Other income (expense), net     173       (445 )     (315 ) Pretax loss     (59,456 )     (11,816 )     (20,305 ) Benefit for income taxes     26,587       3,815       6,075   Net loss     (32,869 )     (8,001 )     (14,230 ) Net (income) loss attributable to non-controlling interest     50       (36 )     14   Net loss attributable to The New Home Company Inc.   $ (32,819 )   $ (8,037 )   $ (14,216 )                           Loss per share attributable to The New Home Company Inc.:                         Basic   $ (1.76 )   $ (0.40 )   $ (0.69 ) Diluted   $ (1.76 )   $ (0.40 )   $ (0.69 )                           Interest incurred   $ 23,936     $ 28,819     $ 28,377   Adjusted EBITDA(2)   $ 37,325     $ 41,430     $ 38,668   Adjusted EBITDA margin percentage (2)     7.4 %     6.2 %     5.8 %   Year Ended December 31,   2017   2016   2015   (Dollars in thousands) Revenues:           Home sales $ 560,842   $ 507,949   $ 280,209 Fee building, including management fees from unconsolidated joint ventures of $4,945, $8,202 and $12,426, respectively 190,324   186,507   149,890   751,166   694,456   430,099 Cost of Sales:           Home sales 473,213   433,559   235,232 Home sales impairments 2,200   2,350   — Land sales impairment —   1,150   — Fee building 184,827   178,103   139,677   660,240   615,162   374,909 Gross Margin:           Home sales 85,429   72,040   44,977 Land sales —   (1,150 )   — Fee building 5,497   8,404   10,213   90,926   79,294   55,190             Home sales gross margin 15.2 %   14.2 %   16.1 % Home sales gross margin before impairments(1) 15.6 %   14.6 %   16.1 % Fee building gross margin 2.9 %   4.5 %   6.8 %             Selling and marketing expenses (32,702 )   (26,744 )   (13,741 ) General and administrative expenses (26,330 )   (25,882 )   (20,278 ) Equity in net income of unconsolidated joint ventures 866   7,691   13,767 Other income (expense), net (229 )   (409 )   (1,027 ) Pretax income 32,531   33,950   33,911 Provision for income taxes (15,390 )   (13,024 )   (12,533 ) Net income 17,141   20,926   21,378 Net loss attributable to noncontrolling interest 11   96   310 Net income attributable to The New Home Company Inc. $ 17,152   $ 21,022   $ 21,688             Interest incurred $ 21,978   $ 7,484   $ 4,722 Adjusted EBITDA(2) $ 50,145   $ 43,144   $ 46,209 Adjusted EBITDA margin percentage (2) 6.7 %   6.2 %   10.7 % Ratio of Adjusted EBITDA to total interest incurred (2) 2.3x   5.8x   9.8x 34 Table of Contents (1) (1) Home sales gross margin before impairments (also referred to as homebuilding gross margin before impairments) is a non-GAAP measure. The table below reconciles this non-GAAP financial measure to homebuilding gross margin, the nearest GAAP equivalent.   Year Ended December 31,   2017   %   2016   %   2015   %   (Dollars in thousands) Home sales revenue $ 560,842   100.0 %   $ 507,949   100.0 %   $ 280,209   100.0 % Cost of home sales 475,413   84.8 %   435,909   85.8 %   235,232   83.9 % Homebuilding gross margin 85,429   15.2 %   72,040   14.2 %   44,977   16.1 % Add: Home sales impairments 2,200   0.4 %   2,350   0.4 %   —   — % Homebuilding gross margin before impairments  87,629   15.6 %   74,390   14.6 %   44,977   16.1 %     Year Ended December 31,       2020     %     2019     %     2018     %       (Dollars in thousands)   Home sales revenue   $ 426,251       100.0 %   $ 532,352       100.0 %   $ 504,029       100.0 % Cost of home sales     386,026       90.6 %     477,857       89.8 %     446,530       88.6 % Homebuilding gross margin     40,225       9.4 %     54,495       10.2 %     57,499       11.4 % Add: Home sales impairments     19,000       4.5 %     8,300       1.6 %     10,000       2.0 % Homebuilding gross margin before impairments(1)   $ 59,225       13.9 %   $ 62,795       11.8 %   $ 67,499       13.4 % (2) (2) Adjusted EBITDA, Adjusted EBITDA margin percentage and ratio of Adjusted EBITDA to total interest incurred are non-GAAP measures. Adjusted EBITDA margin percentage is calculated as a percentage of total revenue. Management believes that Adjusted EBITDA, which is a non-GAAP measure, assists investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective capitalization, interest costs, tax position, inventory impairments and inventory impairments.other non-recurring events.  Due to the significance of the GAAP components excluded, Adjusted EBITDA should not be considered in isolation or as an alternative to net income (loss), cash flows from operations or any other performance measure prescribed by GAAP. The table below reconciles net income (loss), calculated and presented in accordance with GAAP, to Adjusted EBITDA,EBITDA.     Year Ended December 31,       2020     2019     2018       (Dollars in thousands)   Net loss   $ (32,869 )   $ (8,001 )   $ (14,230 ) Add:                         Interest amortized to cost of sales excluding impairment charges and interest expensed(3)     27,519       27,234       18,678   Benefit for income taxes     (26,587 )     (3,815 )     (6,075 ) Depreciation and amortization     6,721       8,957       6,631   Amortization of stock-based compensation     2,197       2,260       3,090   Cash distributions of income from unconsolidated joint ventures     110       374       715   Severance charges     1,091       1,788       —   Noncash inventory impairments and abandonments     33,098       10,294       10,206   Less:                         Loss (gain) on early extinguishment of debt     7,254       (1,164)       —   Equity in net loss of unconsolidated joint ventures     18,791       3,503       19,653   Adjusted EBITDA   $ 37,325     $ 41,430     $ 38,668   Total Revenue   $ 507,411     $ 669,349     $ 667,566   Adjusted EBITDA margin percentage     7.4 %     6.2 %     5.8 % Interest incurred     23,936       28,819       28,377   Ratio of Adjusted EBITDA to total interest incurred     1.6x       1.4x       1.4x   (3) Due to an inadvertent oversight in prior periods, interest amortized to certain inventory impairment charges and to equity in net loss of unconsolidated joint ventures was duplicated in the Adjusted EBITDA margin percentage and ratio of Adjusted EBITDAcalculation.  The prior periods have been restated to total interest incurred.correct this duplication.  35 Table of Contents   Year Ended December 31,   2017   2016   2015   (Dollars in thousands) Net income $ 17,141   $ 20,926   $ 21,378 Add:           Interest amortized to cost of sales and other expense 11,057   5,331   2,596 Provision for income taxes 15,390   13,024   12,533 Depreciation and amortization 449   511   473 Amortization of equity-based compensation 2,803   3,471   3,884 Cash distributions of income from unconsolidated joint ventures 1,588   3,742   18,477 Noncash impairments and abandonments 2,583   4,080   635 Less:           Gain from notes payable principal reduction —   (250 )   — Equity in income of unconsolidated joint ventures (866 )   (7,691 )   (13,767 ) Adjusted EBITDA $ 50,145   $ 43,144   $ 46,209 Total Revenue $ 751,166   $ 694,456   $ 430,099 Adjusted EBITDA margin percentage 6.7 %   6.2 %   10.7 % Interest incurred 21,978   7,484   4,722 Ratio of Adjusted EBITDA to total interest incurred 2.3x   5.8x   9.8x Overview Solid buyer The New Home Company finished the year on a strong note with solid progress made across many key operating metrics during the fourth quarter. Robust demand continuedfor new housing resulted in California during 2017 as the Company continued to make progress with its strategy to grow its wholly owned business by increasing its wholly owned deliveries by 36%, community count at period end by 13% andan 89% increase in net new orders by 63%in the fourth quarter. The Company’s quarterly sales absorption rates improved sequentially throughout 2020 and ended the year strong, with December’s monthly sales absorption pace of 4.4 representing the highest monthly net order total in the Company's history. While the Company’s affordable product offerings continue to grow as a percentage of its total community offerings, new home demand was evident across all product segments and contributed to ending 2020 with a strong level of the number of homes in backlog, up 175% as compared to the end of 2019. The increase in sales pace and improved pricing power experienced in the latter half of 2020 provided opportunities for meaningful price increases at nearly all of the Company’s communities and contributed to an increase in gross margin.  Homebuilding gross margin for 2020 was 9.4% and included $19.0 million in inventory impairment charges. Homebuilding gross margin for 2019 was 10.2% and included $8.3 million in inventory impairment charges. Excluding impairment charges, homebuilding gross margin for 2020 was 13.9%* as compared to 11.8%* in 2019, and excluding impairment charges and interest in cost of home sales, homebuilding gross margin for 2020 was 19.5%* as compared to 16.7%* in 2019, a 280 basis point improvement*. Total revenues for 2017 totaled $751.2the year ended December 31, 2020 were $507.4 million as compared to $694.5$669.3 million for the prior year. The year-over-year decrease in 2016, withrevenues was driven largely by a 20% decrease in home sales revenue, up 10% to $560.8a $41.5 million even after a 19% lower average selling price to $1.6 million as compared to $2.0 million a year ago. The decrease in average selling price was theland sales revenue and, to a lesser extent, a 15% decrease in fee building revenue as a result of expanding our total community count as well as our strategy to broaden our product price points to more affordably-priced product. Ata decrease in construction activity at fee building communities in Irvine, California. For the same time our gross margins from home sales improved 100 basis points during 2017 to 15.2%. Net incomefull year 2020, the net loss attributable to the Company for 2017 was $17.2$32.8 million, or $0.82$(1.76) per diluted share, and included a noncash deferred tax asset charge of $3.2 million (or $0.15share. Adjusted net income for 2020 was $3.6 million*, or $0.19 per diluted share)share*, and excluded pretax charges of $19.0 million in inventory impairment charges, $22.3 million in joint venture impairment charges, a $14.0 million project abandonment charge, an $8.0 million debt refinance charge and $1.1 million in severance charges. The Company's net loss for 2019 was $8.0 million, or $(0.40) per diluted share. Adjusted net income for 2019 was $4.6 million*, or $0.23 per diluted share*, after excluding pretax charges of $10.2 million in inventory impairment charges, including $1.9 million related to a land sale, a $3.5 million joint venture impairment charge, $1.8 million in severance charges and $1.5 million in land sales losses. The year-over-year increase in net loss was primarily attributable to the revaluation$41.6 million pretax increase in impairment and project abandonment charges, an $8.4 million increase in debt extinguishment charges, a $3.7 million increase in interest expense and a 20% decrease in home sale revenues. These decreases were partially offset by an improvement in gross margins excluding impairments and an increase in income tax benefit as a result of the Company's deferred tax asset related to the reduction in the federal corporate tax rate in connection with the Tax Cuts and Jobs Act enacted in December 2017. Excluding the noncash deferred tax asset charge, net income for 2017 was $20.3 million*, or $0.97* per diluted share, compared to $21.0 million, or $1.01 per diluted share, for 2016. Net income excluding the noncash deferred tax asset charge is a non-GAAP measure. See the table below reconciling this non-GAAP financial measure to net income. The slight decrease in net income before the adjustment to our deferred tax asset was primarily due to a $6.8 million reduction in joint venture income, a $3.3 million decrease in joint venture management fees and a $2.9 million decline in fee building gross margin, which was largely offset by a 10% increase in the Company's wholly owned home sales revenues and a 100 basis point improvement in homes sales gross margin. During 2017, the Company executed on its strategic initiative to broaden its product portfolio by including more affordably-priced product to attract a deeper, more diverse customer base. The strategic shift in product offerings included the opening of seven new communities with initial base pricing below $750,000. Overall, the Company ended 2017 with 17 active selling communities compared to 15 at the end of 2016. Net new orders for 2017 were up 63% compared to 2016 due to a 59% higher monthly sales absorption rate driven by healthy buyer demand and lower price points offered in 2017. The increase in orders drove a 94% increase in backlog units at December 31, 2017 as compared to a year ago. CARES Act.   The Company also made significant progressgenerated operating cash flow of $93.1 million during the year in improving its financial position2020 and liquidity by issuing $325 million of senior unsecured notes due 2022. The Company ended the year with $123.5$107.3 million in cash and cash equivalents and had no debtborrowings outstanding under its $200 million unsecured revolving credit facility. The Company also strengthened its balance sheet by refinancing its Senior Notes to October 2025, reduced its debt outstanding by $60 million during 2020, and extended the maturity date of its bank credit facility to April 2023. At December 31, 2020, the Company had a debt-to-capital ratio of 54.7%55.4% and a net debt-to-capital ratio of 42.4%41.0%*., which represented an 820-basis point improvement compared to 2019.  The Company also grew the numberrepurchased 2,160,792 shares of lots owned and controlled by its wholly owned operations by 75% to approximately 2,750 lots, including the first acquisition of wholly owned lots in Arizona. Of the wholly owned lots owned and controlled, approximately 66% were controlled through option contracts. We expect the product transition experienced in 2017 to continue into 2018our common stock during 2020 for $4.3 million. In connection with the anticipated openingnet operating loss carryback tax benefit recognized during 2020 as a result of sixthe CARES Act, the Company had approximately $27.4 million of expected federal income tax refunds receivable recorded as of December 31, 2020.  In addition, the Company made significant progress during 2020 to wind down its joint venture activities in order to reduce its related capital commitments, and is actively looking to reinvest its capital in areas where it believes such investments will yield results that meet its investment criteria.  The Company had reduced the level of land acquisition over the last year as a result of its focus to generate cash flows and reduce its leverage, however, the Company has been actively evaluating new communities at price pointsland opportunities to rebuild its pipeline as economic conditions have improved over the past few months, especially for the homebuilding industry. The Company plans to execute a balanced approach of $750,000 or below. Withacquiring new land positions and improving our operating metrics to generate positive shareholder returns. Although economic conditions have improved since mid-March and April, in particular for the continued product mix shift,housing industry, we expect increased deliveries for 2018 at a lower average selling price. The foundation we have established during 2017 positions us well in our markets and has set us up to deliver solid returns for our shareholders. * Net income attributableremain cautious as to the impact of the COVID-19 pandemic on the economy, among other things. Despite the uncertainty related to this pandemic, we believe pent up demand for housing continues to be strong and that The New Home Company before noncash deferred tax asset charge, dilutedis on more solid footing moving forward. * Net-debt-to capital ratio, adjusted net income, adjusted earnings per diluted share, attributable to the Companyhome sales gross margin excluding impairment charges (homebuilding gross margin before noncash deferred tax asset charge,impairments) and net debt-to-capital ratioadjusted homebuilding gross margin (or homebuilding gross margin excluding impairments and interest in cost of home sales) are non-GAAP measures. For a reconciliation of net income attributable to the Company before noncash deferred tax asset charge and diluted earnings per share attributable to the Company before noncash deferred tax asset to the comparable GAAP measures, please see the table below. For a reconciliation of the net debt-to-capital ratio to the appropriate GAAP measure, please see "Liquidity and Capital Resources - Debt-to-Capital Ratios." We believe removing the impact of the noncash deferred tax asset charge is relevant to provide investors with an understanding of the impact the charge had to earnings and our effective tax rate and to allow a more direct comparison of earnings to the prior year period.  We believe that the ratio of net debt-to-capital is a relevant financial measure for management and investors to understand the leverage employed in our operations and as an indicator of the Company’s ability to obtain financing.   We believe adjusted net income and adjusted earnings per diluted share are meaningful as the impact of impairments, loss on land sales, debt refinance charges and severance charges are removed to provide investors with an understanding of the impact these items had on earnings. We believe home sales gross margin before impairments and homebuilding gross margin excluding impairments and interest in cost of home sales is meaningful, as it isolates the impact home sales impairments and interest costs have on homebuilding gross margin and provides investors better comparisons with our competitors, who may adjust gross margins in a similar fashion. 36 Table of Contents Non-GAAP Footnote (continued)     Year Ended December 31,       2020     2019     2018       (Dollars in thousands)                             Net loss attributable to The New Home Company Inc.   $ (32,819 )   $ (8,037 )   $ (14,216 ) Total impairments and other charges, net of tax     36,422       12,643       21,810   Adjusted net income attributable to The New Home Company Inc.   $ 3,603     $ 4,606     $ 7,594                             Loss per share attributable to The New Home Company Inc.:                         Basic   $ (1.76 )   $ (0.40 )   $ (0.69 ) Diluted   $ (1.76 )   $ (0.40 )   $ (0.69 )                           Adjusted earnings per share attributable to The New Home Company Inc.:                         Basic   $ 0.19     $ 0.23     $ 0.37   Diluted   $ 0.19     $ 0.23     $ 0.37                             Weighted average shares outstanding for adjusted earnings per share:                         Basic     18,680,993       20,063,148       20,703,967   Diluted     18,799,780       20,120,450       20,804,859                             Inventory impairments   $ 19,000     $ 10,200     $ 10,000   Abandoned project costs related to Arizona luxury condominium community     14,000       —       —   Joint venture impairments     22,325       3,500       20,000   Loss related to retirement of 2022 Notes     8,024       —       —   Severance charges     1,091       1,788       —   Loss on land sales     —       1,505       —   Less: Related tax benefit     (28,018 )     (4,350 )     (8,190 ) Total impairments and other charges, net of tax   $ 36,422     $ 12,643     $ 21,810                                   Year Ended December 31,       2017   2016   2015     (Dollars in thousands, except per share amounts) Net income attributable to The New Home Company Inc.     $ 17,152   $ 21,022   $ 21,688 Noncash deferred tax asset charge     3,190   —   — Net income attributable to The New Home Company before noncash deferred tax asset charge   $ 20,342   $ 21,022   $ 21,688                 Earnings per share attributable to The New Home Company Inc.:               Basic     $ 0.82   $ 1.02   $ 1.29 Diluted     $ 0.82   $ 1.01   $ 1.28                 Earnings per share attributable to The New Home Company Inc. before noncash deferred tax asset charge:         Basic     $ 0.98   $ 1.02   $ 1.29 Diluted     $ 0.97   $ 1.01   $ 1.28                 Weighted average shares outstanding:               Basic     20,849,736   20,685,386   16,767,513 Diluted     20,995,498   20,791,445   16,941,088                 Effective tax rate for The New Home Company Inc.:               Pretax Income     $ 32,531   $ 33,950   $ 33,911 Provision for income taxes     $ 15,390   $ 13,024   $ 12,533 Effective tax rate(1)     47.3 %   38.4 %   37.0 %                 Effective tax rate for The New Home Company Inc. before noncash deferred tax asset charge:             Provision for income taxes     $ 15,390   $ 13,024   $ 12,533 Less: noncash deferred tax asset charge     (3,190 )   —   — Provision for income taxes before noncash deferred tax asset charge   $ 12,200   $ 13,024   $ 12,533 Effective tax rate for The New Home Company Inc. before noncash deferred tax asset charge(1)   37.5 %   38.4 %   37.0 % 37 (1) Effective Table of Contents Market Conditions and COVID-19 Impact and Strategy  While the broader economic recovery following the nationwide COVID-19 related shutdown is ongoing, our business generally was only impacted from mid-March of 2020 through mid-second quarter 2020 when economic conditions in our markets started to improve. The Company has recently experienced very strong demand for its homes. This resurgence in demand began in the back half of the 2020 second quarter, following the significant drop in sales experienced at the end of the 2020 first quarter through mid-second quarter 2020 as a result of the initial impact of the COVID-19 pandemic.   The demand for new and existing homes is dependent on a variety of demographic and economic factors, including job and wage growth, household formation, consumer confidence, mortgage financing, interest rates and overall housing affordability.  We attribute the recent higher levels of demand to a number of factors, including low interest rates, a continued undersupply of homes, consumers’ increased focus on the importance of home, and a general desire for more indoor and outdoor space. As a result, many of the Company's operating metrics improved significantly as compared to 2019, as described below. We believe these factors will continue to support demand in the near term but recognize our year-over-year order improvement is not necessarily indicative of future results due to various factors including seasonality, anticipated community openings and closeouts, and continued uncertainty surrounding the economic and housing market environments due to the impacts of the ongoing COVID-19 pandemic and the related COVID-19 control responses. Overall economic conditions in the United States have been, and continue to be, impacted negatively by the COVID-19 pandemic and uncertainty exists with respect to unemployment levels, consumer confidence, political uncertainty, civil unrest, financial and mortgage markets, as well as the impacts of COVID-19-related government directives, actions and economic relief efforts, all of which could impact the demand for our homes.   The COVID-19 pandemic has resulted in, among other things, quarantines, "stay-at-home" or "shelter-in-place" orders, and similar mandates from national, state and local governments that have substantially restricted daily activities and caused many businesses to curtail or cease normal operations. Notwithstanding these developments, the state and local governments in the markets in which we operate have deemed housing to be an essential business, which has allowed us to continue with construction and sales of homes. We have also implemented several health and safety protocols to protect our employees, trade partners and customers as required by state and local government agencies and taking into consideration the CDC and other public health authorities’ guidelines. While these actions are and have been necessary, they do impact our ability to operate our business in its ordinary and traditional course due to, among other things, a reduction in efficiency and capacity of municipal and private services necessary to progress our operations, delays as a result of some supply chain disruptions, and, showing homes by "appointment only" at various times throughout the year. Our sales operations continue to leverage our virtual sales tools to connect with our customers online, including through the use of our online sales concierges, providing virtual options for online home tours and design center selections, and providing for self-guided tour options to allow homebuyers to tour models privately.  Much uncertainty existed at the onset of the COVID-19 pandemic and we experienced adverse business conditions, including a slowdown in customer traffic and sales pace and an increase in cancellations during this time.  To mitigate the adverse impacts and uncertainty, we implemented initiatives to preserve capital, including implementing additional cost cutting measures, curtailing the acquisition and development of land, renegotiating lot takedown arrangements and limiting the number of speculative homes under construction.  As a result, we made strategic decisions to (i) liquidate the remaining developable lots in a land development joint venture in Northern California which resulted in a $20.0 million other-than-temporary impairment charge in the 2020 second quarter, (ii) cease further development at a wholly owned community in Scottsdale, Arizona resulting in a $14.0 million project abandonment charge during the 2020 first quarter, and (iii) exit a land development joint venture in Southern California which resulted in a $2.3 million other-than-temporary impairment charge in the 2020 first quarter. By not continuing with these projects, we avoided capital outlays to help preserve capital for the future, and will be able to seek federal tax rate is computed by dividing provision for income taxes by pretax income.refunds. 38 Table of Contents Results of Operations Net New Home Orders   Year Ended December 31,       Change       Change       2017   Amount   %   2016   Amount   %   2015 Net new home orders                           Southern California 197   56   40 %   141   55   64  %   86 Northern California 215   103   92 %   112   24   27  %   88 Total net new home orders 412   159   63 %   253   79   45  %   174                             Selling communities at end of period                           Southern California 10   2   25 %   8   4   100  %   4 Northern California 7   —   — %   7   1   17  %   6 Total selling communities 17   2   13 %   15   5   50  %   10                             Average selling communities 13   1   8 %   12   5   71  %   7 Monthly sales absorption rate per community (1) 2.7   1.0   59 %   1.7   (0.2 )   (11 )%   1.9 Cancellation rate 9 %   (3 )%   NA   12 %   2 %   NA   10 %     Year Ended December 31,             Change             Change             2020     Amount     %     2019     Amount     %     2018   Net new home orders                                                   Southern California   266       (22 )     (8 )%     288     (13 )     (4 )%   301   Northern California   353       138       64 %     215     13       6 %   202      Arizona   197       168       579 %     29     (4 )     (12 )%   33   Total net new home orders   816       284       53 %     532     (4 )     (1 )%   536                                                       Monthly sales absorption rate per community (1)                                               Southern California   2.4       0.3       14 %     2.1     (0.1 )     (5 )%   2.2   Northern California   2.9       0.6       26 %     2.3     (0.4 )     (15 )%   2.7      Arizona   3.7       2.5       208 %     1.2     (0.5 )     (29 )%   1.7   Total monthly sales absorption rate per community (1)   2.9       0.8       38 %     2.1     (0.2 )     (9 )%   2.3                                                       Cancellation rate   9 %     (2 )%     NA       11 %   1 %     NA     10 %                                                     Selling communities at end of year:                                                   Southern California   6       (4 )     (40 )%     10     (3 )     (23 )%   13   Northern California   10       1       11 %     9     4       80 %   5      Arizona   7       5       250 %     2     —       — %   2   Total selling communities   23       2       10 %     21     1       5 %   20                                                       Average selling communities                                                   Southern California   9       (2 )     (18 )%     11     (1 )     (8 )%   12   Northern California   10       2       25 %     8     2       33 %   6      Arizona   4       2       100 %     2     —       — %   2   Total average selling communities   24       3       14 %     21     1       5 %   20   (1) Monthly sales absorption represents the number of net new home orders divided by the number of average selling communities for the period. (1) Monthly sales absorption represents the number of net new home orders divided by the number of average selling communities for the period. Net new home orders for the year ended December 31, 20172020 increased 63%53% as compared to the same period in 2016. The increase was primarilyprior year, driven by a 59%38% increase in the monthly sales absorption rate of 2.9 per community and, to a lesser extent, an 8%a 14% year-over-year increase in average selling communities. The improvement in absorption rate was driven by solid order activity in both Southern and Northern California resulting from the addition of more affordably-priced product,communities, which generally sells at a faster pace than move-up or luxury product. Southern California experienced monthly absorption of 2.3 sales per community in 2017, compared to 1.8 in the prior year, while high buyer demand resulted in an 82% increase inending community count of 23 compared to 21 for the prior year. Quarterly sales absorption rates improved sequentially throughout 2020 and ended the year strong, with December’s monthly sales absorption pace of 4.4 representing the highest monthly net order total in the Company's history.  We attribute the recently higher level of demand to 3.1a number of factors, including low interest rates, a continued undersupply of homes, consumers’ increased focus on the importance of the home, and the opening of more affordable communities in the strong Phoenix, Arizona market. The Company also benefited from the success of its enhanced virtual selling platform from which a large portion of our net new orders were generated from during the year. Home buyers are demonstrating an increased level of comfort with shopping for homes online allowing our sales team to identify qualified, motivated buyers and converting those leads into sales. Demand was strongest during 2020 for our more-affordable, entry-level product, which averaged a monthly sales pace of 3.5 per community compared to a total of 2.9 per community for Northern California in 2017 compared to 2016. Netthe companywide average. Approximately half of all net new home orders forduring the year ended December 31, 2016 increased 45%2020 were from entry-level communities compared to 2015approximately 35% during the prior year. We opened 12 new communities during 2020, the majority of which are classified as entry-level product. The sales pace for our entry-level product was strong across substantially all entry-level communities, where all but one community was at or above the 2.9 companywide average. In addition to the success with our entry-level product, the sales pace for our first time move up product increased 82% year-over-year, primarily due to anstrong order volume from two of our recently opened first time move up communities in Arizona and our single family detached community in Rancho Mission Viejo which opened early in 2020.  Additionally, Arizona’s 208% increase in sales pace compared to the numberprior year was driven by the opening of sellingseven new communities during 2020, five of which was partially offset by a slightly slower monthly sales absorption rate. were classified as entry-level product and two of which were classified as first time move up product, and all were above the 2.9 companywide average. The Company continued to experience a fairly modestCompany’s cancellation rate in 2017 thatfor 2020 was relatively consistent with9% as compared to 11% in the prior two years. We believe our cancellation rate is oneyear.  Since peaking in the first quarter of 2020 as a result of the lowereconomic impact COVID-19 had on our buyers, we have seen year-over-year decreases in our quarterly cancellation rates infor each quarter subsequent to the industry due to many factors, including loan prequalifying buyers before writing sales contracts, the high level2020 second quarter. 39 Table of personalized options that our homebuyers select, which creates emotional attachment, and a higher proportion of affluent buyers with strong credit profiles. Backlog Contents   Year Ended December 31,   2017   2016   % Change   Homes   Dollar Value   Average Price   Homes   Dollar Value   Average Price   Homes   Dollar Value   Average Price   (Dollars in thousands) Southern California 71   $ 93,955   $ 1,323   48   $ 162,599   $ 3,387   48 %   (42 )%   (61 )% Northern California 82   68,295   833   31   24,697   797   165 %   177  %   5  % Total 153   $ 162,250   $ 1,060   79   $ 187,296   $ 2,371   94 %   (13 )%   (55 )%   Year Ended December 31,   2016   2015   % Change   Homes   Dollar Value   Average Price   Homes   Dollar Value   Average Price   Homes   Dollar Value   Average Price   (Dollars in thousands) Southern California 48   $ 162,599   $ 3,387   45   $ 149,405   $ 3,320   7 %   9 %   2  % Northern California 31   24,697   797   22   17,162   780   41 %   44 %   2  % Total 79   $ 187,296   $ 2,371   67   $ 166,567   $ 2,486   18 %   12 %   (5 )% Backlog     Year Ended December 31,       2020     2019     % Change       Homes     Dollar Value     Average Price     Homes     Dollar Value     Average Price     Homes     Dollar Value     Average Price       (Dollars in thousands)   Southern California     76     $ 55,322     $ 728       72     $ 69,263     $ 962       6 %     (20 )%     (24 )% Northern California     172       116,594       678       66       41,973       636       161 %     178 %     7 % Arizona     162       64,075       396       11       14,567       1,324       1373 %     340 %     (70 )% Total     410     $ 235,991     $ 576       149     $ 125,803     $ 844       175 %     88 %     (32 )%     Year Ended December 31,       2019     2018     % Change       Homes     Dollar Value     Average Price     Homes     Dollar Value     Average Price     Homes     Dollar Value     Average Price       (Dollars in thousands)   Southern California     72     $ 69,263     $ 962       90     $ 111,024     $ 1,234       (20 )%     (38 )%     (22 )% Northern California     66       41,973       636       68       59,847       880       (3 )%     (30 )%     (28 )% Arizona     11       14,567       1,324       33       36,200       1,097       (67 )%     (60 )%     21 % Total     149     $ 125,803     $ 844       191     $ 207,071     $ 1,084       (22 )%     (39 )%     (22 )% Backlog reflects the number of homes, net of cancellations, for which we have entered into a sales contractcontracts with a customer,customers, but for which we have not yet delivered the home. Backlog dollar value athomes. The number of homes in backlog as of December 31, 2017 declined 13% compared to the prior year end due to a 55% decrease in average selling price to $1.1 million2020 increased 175% as compared to $2.4 million, which was2019 primarily driven by the 53% increase in net new orders during 2020, coupled with a lower backlog conversion rate for the 2020 fourth quarter and a 3% decrease in deliveries during 2020, partially offset by a 94%lower number of backlog units to begin the year as compared to 2019.  Our backlog conversion rate was 57% for the 2020 fourth quarter as compared to 97% in the year ago period. The decrease in the 2020 conversion rate resulted from fewer spec homes sold and delivered during the fourth quarter as a result of a lower available spec homes inventory. The dollar value of the Company's wholly owned backlog rose 88% to $236.0 million driven by the increase in backlog units. The declineunits, partially offset by a 32% decrease in the average selling price of homes in backlog was primarily related to $576,000 as the delivery of the final homes from two higher-priced luxury communities in Newport Coast, CA in 2017. Additionally, ending 2017 backlog included increased contributions from more affordably-priced communities consistent with the Company's strategic shiftCompany continues to diversify its product offerings, and accessincluding its expansion into more affordable communities in Arizona. In Southern California, the total backlog dollar value decreased primarily as a deeper buyer pool as compared toresult of a 24% decrease in average selling price. The mix of homes in Southern California ending backlog shifted to more-affordable communities, as the prior year had a higher number of homes in backlog with average selling prices over $1.1 million, including a large concentration at a luxury community and a higher-priced second move up community in Orange County which were closed out as of December 31, 2016.2020. The decrease in average selling price from the mix shift was partially offset by homes in backlog from a popular community in Rancho Mission Viejo that opened during 2020 and comprised approximately 30% of the Southern California ending backlog units where the average selling price of homes in backlog was approximately $1.0 million. Northern California ending backlog units increased 161% year-over-year due to a 64% increase in orders during 2020 and a lower backlog conversion rate for the 2020 fourth quarter. The increase in the number of homes in Northern California backlog as of December 31, 2017 comparedcontributed to the prior year period was largely the result of higher monthly sales absorption rates. Thea 178% increase in backlog dollar value, of backlog at December 31, 2016 was up 12% to $187.3 million over the prior year period due to an 18%which included a 7% increase in the numberaverage price which increased primarily as a result of homestwo higher-priced second move up communities in Folsom that opened during 2020 and comprised approximately 24% of the Northern California ending backlog partially offset by a 5% reduction inunits where the average selling price of homes in backlog. The higherbacklog is approximately $1.0 million. In Arizona, the year-over-year increase in homes in backlog dollar value was due to the division opening seven active selling communities in Southern California2020. All seven new communities have average selling prices within the $300,000 to $500,000 range, as compared to Northern California was due to higherprior year backlog units for Arizona which were mainly comprised of homes from our higher-end, closed-out community counts in Southern California combined with higher-priced communities, particularly in Newport Coast, CA,Gilbert, Arizona where we had two coastal luxury communities wherethe average home prices in backlog exceeded $5 million. The increase in the numberprice of homes in backlog as ofwas $1.1 million at December 31, 2016 compared to the prior year period was the result2019. 40 Table of increased net new home orders.Contents Lots Owned and Controlled   December 31,       Change       Change       2017   Amount   %   2016   Amount   %   2015 Lots Owned                           Southern California 563   273   94  %   290   167   136  %   123 Northern California 318   18   6  %   300   11   4  %   289 Arizona 65   65   NA   —   —   NA   — Total 946   356   60  %   590   178   43  %   412 Lots Controlled(1)                           Southern California 278   (443 )   (61 )%   721   (33 )   (4 )%   754 Northern California 1,031   766   289  %   265   113   74  %   152 Arizona 497   497   NA   —   —   —  %   — Total 1,806   820   83  %   986   80   9  %   906 Lots Owned and Controlled - Wholly Owned 2,752   1,176   75  %   1,576   258   20  %   1,318 Fee Building(2) 920   (15 )   (2 )%   935   (487 )   (34 )%   1,422 Total Lots Owned and Controlled 3,672   1,161   46  %   2,511   (229 )   (8 )% 2,740     December 31,               Change             Change               2020     Amount     %     2019     Amount     %     2018   Lots Owned:                                                         Southern California     300       (201 )     (40 )%     501       (125 )     (20 )%     626   Northern California     582       (100 )     (15 )%     682       (60 )     (8 )%     742   Arizona     458       63       16 %     395       96       32 %     299   Total     1,340       (238 )     (15 )%     1,578       (89 )     (5 )%     1,667   Lots Controlled(1):                                                         Southern California     376       (54 )     (13 )%     430       225       110 %     205   Northern California     132       (246 )     (65 )%     378       (73 )     (16 )%     451   Arizona     170       (145 )     (46 )%     315       (174 )     (36 )%     489   Total     678       (445 )     (40 )%     1,123       (22 )     (2 )%     1,145   Total Lots Owned and Controlled - Wholly Owned     2,018       (683 )     (25 )%     2,701       (111 )     (4 )%     2,812   Fee Building Lots(2)     54       (1,081 )     (95 )%     1,135       329       41 %     806   (1) (1) Includes lots that we control under purchase and sale agreements or option agreements or non-binding letters of intentwith refundable and nonrefundable deposits that are subject to customary conditions and have not yet closed. There can be no assurance that such acquisitions will occur. The 170 lots for Arizona at December 31, 2020 exclude 177 lots that were under a purchase and sale agreement with a refundable deposit, as the Company terminated the contract in January 2021. (2) (2) Lots owned by third party property owners for which we perform general contracting or construction management services. Consistent with our focus to grow our wholly owned business, the Company increased the number of The Company's wholly owned lots owned and controlled by 75% and 20% year-over-year for the years endingas of December 31, 2017 and 2016, respectively. Of the2020 decreased 25% year-over-year to 2,018 lots, owned and controlled at December 31, 2017, 66%of which 34% were controlled through option contracts.contracts compared to 42% optioned in 2019. The increasedecrease in wholly owned lots owned and controlled was due to our planned expansionmore deliveries in Arizona where we entered into contracts on four land parcels totaling 562 aggregatethe year ended December 31, 2020 than lots contracted during the same period and an increase inthe termination of a purchase contract for lots controlled in Northern California primarily duethat the Company decided to twono longer pursue. The Company reduced the level of land acquisition over the last year as a result of its focus to generate cash flows and reduce its leverage, however, the Company continued to make investments in land so long as it believes such investments will yield results that meet its investment criteria. Further, over the past few months, as economic conditions have improved, especially for the homebuilding industry, the Company has been focused on evaluating new developments with multiple planning areas, one for 418 lots in Vacaville, CA and a second for 394 lots in a masterplan development in Folsom, CA. land opportunities to rebuild its pipeline. The increase in wholly owned lots owned and controlled was partially offset by a 36% increase in new home deliveries in 2017. The slight decrease in fee building lots at December 31, 20172020 as compared to 2016the prior year was primarily attributable to delivering 820the delivery of homes to customers during 2017, offset partiallythe year ended December 31, 2020, and as a result of the decision made by contracts from the Company'sIrvine Pacific, our largest customer awarded in 2017 for seven new fee building communities totaling 804 lots.customer, to wind down its fee building arrangement with the Company moving forward. Please see “Fee Building” section below for additional information. 41 Table of Contents Home Sales Revenue and New Homes Delivered   Year Ended December 31,   2017   2016   % Change   Homes   Dollar Value   Average Price   Homes   Dollar Value   Average Price   Homes   Dollar Value   Average Price   (Dollars in thousands) Southern California 174   $ 433,651   $ 2,492   147   $ 422,041   $ 2,871   18 %   3 %   (13 )% Northern California 167   127,191   762   103   85,908   834   62 %   48 %   (9 )% Total 341   $ 560,842   $ 1,645   250   $ 507,949   $ 2,032   36 %   10 %   (19 )%                                   Year Ended December 31,   2016   2015   % Change   Homes   Dollar Value   Average Price   Homes   Dollar Value   Average Price   Homes   Dollar Value   Average Price   (Dollars in thousands) Southern California 147   $ 422,041   $ 2,871   74   $ 205,815   $ 2,781   99 %   105 %   3  % Northern California 103   85,908   834   74   74,394   1,005   39 %   15 %   (17 )% Total 250   $ 507,949   $ 2,032   148   $ 280,209   $ 1,893   69 %   81 %   7  %     Year Ended December 31,       2020     2019     % Change       Homes     Dollar Value     Average Price     Homes     Dollar Value     Average Price     Homes     Dollar Value     Average Price       (Dollars in thousands)   Southern California     262     $ 220,351     $ 841       306     $ 312,410     $ 1,021       (14 )%     (29 )%     (18 )% Northern California     247       163,185       661       217       159,832       737       14 %     2 %     (10 )% Arizona     46       42,715       929       51       60,110       1,179     (10 )%   (29 )%   (21 )% Total     555     $ 426,251     $ 768       574     $ 532,352     $ 927       (3 )%     (20 )%     (17 )%     Year Ended December 31,       2019     2018     % Change       Homes     Dollar Value     Average Price     Homes     Dollar Value     Average Price     Homes     Dollar Value     Average Price       (Dollars in thousands)   Southern California     306     $ 312,410     $ 1,021       282     $ 317,373     $ 1,125       9 %     (2 )%     (9 )% Northern California     217       159,832       737       216       186,656       864       0 %     (14 )%     (15 )% Arizona     51       60,110       1,179       —       —       —       NA       NA       NA   Total     574     $ 532,352     $ 927       498     $ 504,029     $ 1,012       15 %     6 %     (8 )% New home deliveries increased 36%decreased 3% for the year ended December 31, 20172020 compared to the prior year period. The increase in deliveries was the result ofprimarily due to a higherlower number of homes in backlog at December 31, 2016the beginning of the year, decreased speculative home sales from lower available speculative home inventory, and an increasea decrease in new home orders during the year. Home sales revenue for 2017 increased 10% compared to 2016 primarily due to an increase inconstruction starts and new home deliveries which wasduring the 2020 second quarter resulting from the stay-at-home orders in California related to COVID-19.  These items were partially offset by a 19% lower average sales price per delivery. The year-over-year decrease53% increase in average sales price was driven by increased deliveries from our Northern California operations, which has lower-priced communities than Southern California, coupled with a product mix shiftnet new orders for both Southern California and Northern California as deliveries from more affordably-priced communities increased. 2020.  Home sales revenue for the year ended December 31, 2016 increased 81% to $507.9 million2020 decreased 20% compared to $280.2 million2019, primarily due to a 17% decrease in 2015. The increase in home sales revenue in 2016 as compared to 2015 was driven primarily by a 69% increase in deliveriesaverage selling price per delivery and, to a lesser extent, a 7% increase3% decrease in thehome deliveries. The decrease in average selling price of homesper delivery for the year was consistent with the Company's strategic shift to $2.0 million. The increase in deliveriesmore-affordable product. For the year ended December 31, 2020, Southern California home sales revenue was thedown 29% as a result of a higher number of homesan 18% decrease in beginning backlog to start 2016 and a 45% increase in net new home orders during 2016. The increase in our average selling price due to 2019 including deliveries from several higher-priced, closed-out Orange County and Los Angeles communities, and a 14% decrease in homes delivered from fewer orders in 2020 as the number of average selling communities decreased. The decrease in home sales revenue during 2020 for Arizona was primarily due to a 99%21% decrease in average sales price due to product mix and, to a lesser extent, a 10% decrease in units delivered. In Northern California, home sales revenue for 2020 increased 2% due to a 14% increase in homes delivered, partially offset by a 10% decrease in average selling price related to a shift in deliveries from our Southern California operations, which had a significantly higher average selling price than our Northern California operations duethe higher-priced Bay Area to a higher concentration of luxury homes in coastal locations. the more-affordable Sacramento region. Homebuilding Gross Margin Homebuilding gross margin percentage for 2017 improved 100 basis points to 15.2% as2020 was 9.4% compared to 14.2%10.2% in the prior year. 2017The 2020 period included $2.2 million in noncash inventory impairments related to one homebuilding community in Southern California while 2016 included $2.4$19.0 million in noncash inventory impairment charges related to twofive homebuilding communities one in each of Southern and Northern California. The impairments in both years wereexperiencing slower sales pace due to project specific issues, including slowerthe COVID-19 pandemic, resulting in higher incentives and carrying costs for these projects. The 2019 period included $8.3 million in noncash inventory impairment charges related to one luxury condominium community in Scottsdale, Arizona with slow monthly sales absorption rates that required additional sales incentives. In addition,price adjustments and one higher-priced homebuilding community within the 2017 and 2016 homebuilding gross margins included a benefit relatedInland Empire in Southern California that required more incentives than originally expected. For more information on these impairments, please refer to warranty adjustmentsNote 4 of $0.8 million and $1.1 million, respectively. Theour Consolidated Financial Statements. Excluding impairment charges, homebuilding gross margin before impairmentswas 13.9% for 2017 was 15.6% versus 14.6% in 2016. Homebuilding gross margin before impairments is a non-GAAP measure. See the table below reconciling this non-GAAP financial measure2020 as compared to homebuilding gross margin, the nearest GAAP equivalent.11.8% for 2019. The 100210 basis point improvementincrease in homebuilding gross margin before impairments as compared to the prior year was primarily due primarily to a change in product mix including the favorable impact of higher-margin, coastal communities located in Newport Coast, CA. Homebuilding gross margin percentage for the year ended December 31, 2016 was 14.2%, compared to 16.1% for 2015. Homebuilding gross margin before impairments for 2016 was 14.6% versus 16.1%shift and improved pricing power experienced in the prior year period.latter half of 2020.  The 150 basis point decline in homebuildingpositive product mix shift was driven by a higher percentage of our total homes sales revenue generated at more affordably-priced communities, which have had higher gross margin before impairments as compared to the prior year was due primarily to a change in mix, including lower margins in masterplan communities located in Irvine and lower margins in the Bay Area.margins. These decreasesitems were partially offset by higher margins from the initial deliveries in our Crystal Cove communities in Newport Coast, CA, and to a lesser extent, a 2070 basis point benefit from a warranty accrual adjustment made during the 2016 third quarter that increasedincrease in interest costs included in cost of home sales. Adjusted homebuilding gross margin, by $1.1 million. Excluding homewhich excludes homes sales impairments and interest in cost of home sales, adjusted homebuilding gross margin percentagewas 19.5% and 16.7% for the years ended December 31, 2017, 20162020 and 2015 were 17.6%, 15.7%2019, respectively. 42 Table of Contents Homebuilding gross margin before impairments and 16.9%, respectively.adjusted homebuilding gross margin are non-GAAP measures.  See the table below reconciling thisthese non-GAAP financial measuremeasures to homebuilding gross margin, the nearest GAAP equivalent.   Year Ended December 31,   2017   %   2016   %   2015   %   (Dollars in thousands) Home sales revenue $ 560,842   100.0 %   $ 507,949   100.0 %   $ 280,209   100.0 % Cost of home sales 475,413   84.8 %   435,909   85.8 %   235,232   83.9 % Homebuilding gross margin 85,429   15.2 %   72,040   14.2 %   44,977   16.1 % Add: Home sales impairments 2,200   0.4 %   2,350   0.4 %   —   — % Homebuilding gross margin before impairments (1) 87,629   15.6 %   74,390   14.6 %   44,977   16.1 % Add: Interest in cost of home sales 11,021   2.0 %   5,331   1.1 %   2,511   0.8 % Adjusted homebuilding gross margin(1) $ 98,650   17.6 %   $ 79,721   15.7 %   $ 47,488   16.9 %     Year Ended December 31,       2020     %     2019     %     2018     %       (Dollars in thousands)   Home sales revenue   $ 426,251       100.0 %   $ 532,352       100.0 %   $ 504,029       100.0 % Cost of home sales     386,026       90.6 %     477,857       89.8 %     446,530       88.6 % Homebuilding gross margin     40,225       9.4 %     54,495       10.2 %     57,499       11.4 % Add: Home sales impairments     19,000       4.5 %     8,300       1.6 %     10,000       2.0 % Homebuilding gross margin before impairments (1)     59,225       13.9 %     62,795       11.8 %     67,499       13.4 % Add: Interest in cost of home sales     23,864       5.6 %     26,304       4.9 %     18,678       3.7 % Adjusted homebuilding gross margin(1)   $ 83,089       19.5 %   $ 89,099       16.7 %   $ 86,177       17.1 % (1) (1) Homebuilding gross margin before impairments and adjusted homebuilding gross margin are non-GAAP financial measures. We believe this information is meaningful as it isolatesThese measures isolate the impact that home sales impairments and leverage have on homebuilding gross marginmargin.  We believe this information is meaningful as it allows investors to evaluate metrics of our ongoing homebuilding operations without the impact of isolated events and interest costs and permits investors to make better comparisons with our competitors who also break out and adjust gross margins in a similar fashion. Land Sales During 2020, the fourth quarterCompany recognized $0.2 million of 2016,deferred revenue for the remaining completed work on a land sale that initially occurred during 2019.  During 2019, the Company sold three land parcels in Northern California that generated $41.7 million in land sales revenue.  In connection with the 2019 land sales, the Company recorded a noncash land salepretax loss from these sales of $3.4 million, which included a $1.9 million impairment charge of $1.2 millionbooked in the 2019 third quarter related to land under developmentthat closed during the 2019 fourth quarter.  The Company sold lots as part of a strategic decision to generate cash flow and reduce our concentration of capital investments in Northern California that the Company initially intended to sell. The land sale was ultimately not consummated and the Company made the determination to develop and build homes on this land. certain markets. Fee Building   Year Ended December 31,   2017   %   2016   %   2015   %   (Dollars in thousands) Fee building revenue $ 190,324   100.0 %   $ 186,507   100.0 %   $ 149,890   100.0 % Cost of fee building 184,827   97.1 %   178,103   95.5 %   139,677   93.2 % Fee building gross margin $ 5,497   2.9 %   $ 8,404   4.5 %   $ 10,213   6.8 % Our fee building revenues include (i) billings to third-party land owners for general contracting services, and (ii) management fees from our unconsolidated joint ventures for construction management services. Cost of fee building includes (i) labor, subcontractor, and other indirect construction and development costs that are reimbursable by the land owner, and (ii) general and administrative, or G&A, expenses that are attributable to fee building activities and joint venture management overhead. Besides allocable G&A expenses, there are no other material costs associated with management fees from our unconsolidated joint ventures. Billings to land owners are a function of construction activity and reimbursable costs are incurred as homes are started. The total billings and reimbursable costs are driven by the pace at which the land owner has us execute its development plan. Management fees from our unconsolidated joint ventures are collected over the project's life and as homes and lots are delivered.     Year Ended December 31,       2020     %     2019     %     2018     %       (Dollars in thousands)   Fee building revenues   $ 81,003       100.0 %   $ 95,333       100.0 %   $ 163,537       100.0 % Cost of fee building     79,583       98.2 %     93,281       97.8 %     159,136       97.3 % Fee building gross margin   $ 1,420       1.8 %   $ 2,052       2.2 %   $ 4,401       2.7 % For the year ended December 31, 2017,2020, fee building revenues increased 2%decreased 15% from the prior year period primarily due to an increase2019, driven by a decrease in construction activity at fee building costs incurred relatedcommunities in Irvine, California.  In August 2020, Irvine Pacific, our largest customer, made a decision to a higherbegin building homes using their own general contractor’s license, effectively terminating our fee building delivery volume.arrangement with Irvine Pacific moving forward. Although we are transitioning construction management responsibilities to Irvine Pacific and are not expected to be engaged for new fee building contracts with them going forward, we are currently in the process of finishing certain existing homes under construction and generating revenues in connection therewith, which we expect to continue through the first quarter of 2021. The Company is actively seeking and entering into new fee building opportunities with other land developers with the objective of at least partially offsetting the expected reduction in Irvine Pacific business in future years, such as our new fee building relationship with FivePoint in Irvine, California.  Included in fee building revenues for the years ended December 31, 20172020 and December 31, 20162019 were (i) $185.4$78.7 million and $178.3$91.5 million of billings to land owners, for general contracting services for 2017 and 2016, respectively, and (ii) $4.9$2.3 million and $8.2$3.8 million of management fees from our unconsolidated joint ventures for 2017 and 2016,third-party land owners, respectively.  The decrease in management fees from JVs was primarily the resultcost of fewer deliveries and lower land sales revenue from JV communities. Forfee building decreased for the year ended December 31, 2017, cost of fee building increased2020 compared to 2019 primarily due to the increasedecrease in fee building activity comparedmentioned above and to the same period during 2016.a lesser extent, lower allocated general and administrative ("G&A") expenses. The amount of G&A expenses included in the cost of fee building was $8.3$3.6 million and $8.8 $5.4 million for the years ended December 31, 20172020 and 2016,2019, respectively. Fee building gross margin percentage decreased to 2.9%$1.4 million for the year ended December 31, 20172020 from 4.5%$2.1 million in the prior year period. The decrease in fee building gross margin wasperiod primarily due to a change in thelower fee building business arrangements on certain projects combined with a decrease inbillings and reduced management fees, received from joint ventures. For the year ended December 31, 2016, fee building revenues were up 24% from the prior year period due to an increase in fee building activity resulting from a higher number of homes under construction during the year. The increase in number of homes under construction was due to an increased number of homes started during the year, at the direction of the land owner, offset partially by an increase in the number of homes completed and delivered. Included in fee building revenues for the years ended December 31, 2016 and December 31, 2015 were (i) $178.3 million and $137.5 million of billings to land owners for general contracting services for 2016 and 2015, respectively, and (ii) $8.2 million and $12.4 million of management fees from our unconsolidated joint ventures for 2016 and 2015, respectively. The decrease in management fees from JVs was primarily the result of fewer deliveries and lower home and land sales revenue from JV communities, which was consistent with the Company’s strategic shift to emphasize wholly owned operations. For the year ended December 31, 2016, cost of fee building increased due to the increase in fee building revenues, compared to the same period during 2015. The amount of G&A expenses included in cost of fee building was $8.8 million in both 2016 and 2015. Fee building gross margin percentage decreased to from 6.8% to 4.5% for the year ended December 31, 2016 compared to the prior year period. The reduction in fee building gross margin percentage was largely due to a decrease in management fees received from joint ventures, partially offset by a slightly higher fee rate with our largest customer on certain fee building communities. lower allocated G&A expenses. Our fee building revenue has historically been concentrated with a small number of customers. For the years ended December 31, 2017, 20162020, 2019 and 2015, one customer2018, Irvine Pacific comprised 97%91%,  96%95% and 92%95% of fee building revenue, respectively. 43 Table of Contents Selling, General and Administrative Expenses   Year Ended December 31,   As a Percentage of Home Sales Revenue   2017   2016   2015   2017   2016   2015   (Dollars in thousands) Selling and marketing expenses $ 32,702   $ 26,744   $ 13,741   5.8 %   5.3 %   4.9 % General and administrative expenses ("G&A") 26,330   25,882   20,278   4.7 %   5.1 %   7.2 % Total selling, marketing and G&A expenses ("SG&A") $ 59,032   $ 52,626   $ 34,019   10.5 %   10.4 %   12.1 %     Year Ended December 31,     As a Percentage of Home Sales Revenue       2020     2019     2018     2020     2019     2018       (Dollars in thousands)   Selling and marketing expenses   $ 30,777     $ 36,357     $ 36,065       7.2 %     6.8 %     7.1 % General and administrative expenses ("G&A")     26,699       25,723       25,966       6.3 %     4.9 %     5.2 % Total selling, marketing and G&A ("SG&A")   $ 57,476     $ 62,080     $ 62,031       13.5 %     11.7 %     12.3 %                                                   G&A   $ 26,699     $ 25,723     $ 25,966       6.3 %     4.9 %     5.2 % Less: Severance charges     (873 )     (1,788 )     —       (0.2 )%     (0.4 )%     —   G&A, excluding severance charges   $ 25,826     $ 23,935     $ 25,966       6.1 %     4.5 %     5.2 %                                                   Selling and marketing expenses   $ 30,777     $ 36,357     $ 36,065       7.2 %     6.8 %     7.1 % G&A, excluding severance charges     25,826       23,935       25,966       6.1 %     4.5 %     5.2 % SG&A, excluding severance charges   $ 56,603     $ 60,292     $ 62,031       13.3 %     11.3 %     12.3 % During 2020, our SG&A rate as a percentage of home sales revenue was 13.5%, up 180 basis points from the comparable prior year period. The 2020 period included $0.9 million in severance charges taken in the 2020 second quarter related to staffing reductions made to lower headcount as a result of lower revenue volumes which were negatively impacted by COVID-19. The 2019 period included $1.8 million in severance charges taken during the 2019 first quarter related to reducing headcount, including the departure of one of our executive officers. Excluding these severance charges, the Company's SG&A expense ratiorate for the yearyears ended December 31, 2017 increased 102020 and 2019 was 13.3% and 11.3%, respectively. The 200 basis points over 2016 to 10.5%. The slightpoint increase was primarily attributabledue largely to higher sellingthe decrease in home sales revenue, an increase in internal commissions as a percentage of home sales revenue that accompanied the increase in deliveries from more affordable communities, an increases in incentive compensation and marketing costs, drivena $1.8 million year-over-year reduction in G&A expenses allocated to fee building cost of sales due to lower fee building activity and lower joint venture management fees earned in 2020 as compared to 2019. These items were partially offset by greaterlower amortization of capitalized selling and marketing costs from our two luxury communities located in Newport Coast, CA and an increase in marketing spend and model operating costs related to new community openings. SG&A expenses for the year ended December 31, 2016 were up year-over-year, consistent with the 81% increase in our homebuilding revenues and 50% increase in wholly owned community count at December 31, 2015. However, our SG&A operating leverage improved significantly resulting in a 170 basis point reduction in our SG&A expense ratio for the year ended December 31, 2016 from 12.1% to 10.4%. The improvement was largely attributable2020 as compared to the increase in home sales revenue, which was driven by a significant increase in new home deliveries and higher average selling prices due to a heavier Southern California mix. Selling and marketing expensesprior year. SG&A excluding severance charges as a percentage of home sales revenue for 2016 was up 40 basis points year-over-yearis a non-GAAP measure. See the table above reconciling this non-GAAP financial measure to 5.3% dueSG&A as a percentage of home sales revenue, the nearest GAAP equivalent.  We believe removing the impact of these charges from our SG&A rate is relevant to higher amortizationprovide investors with a better comparison to prior year rates that do not include these charges. 44 Table of capitalizable marketing costs and increased model operating costs associated with higher-priced, luxury homes in Southern California.Contents Equity in Net IncomeLoss of Unconsolidated Joint Ventures As of December 31, 20172020 and 2016,2019, we had ownership interests in 10nine and 13, respectively,ten unconsolidated joint ventures.ventures, respectively, one of which had active homebuilding operations at December 31, 2020 and which became inactive in January 2021 as the last homes in such joint venture were delivered.  Active homebuilding or land development operations include joint ventures with ongoing homebuilding or land development where the entity continues to own homebuilding lots or homes remaining to be sold. We own interests in our unconsolidated joint ventures that generally range from 5%10% to 35% and these interests vary by entity. The Company's share of joint venture income was $0.9 millionloss for the year ended December 31, 20172020 was $18.8 million as compared to $7.7a $3.5 million loss for the year ended December 31, 2016. A 37% reduction in joint venture revenues from decreased home and lot deliveries and lower gross margins from joint venture home sales contributed to the year-over-year decrease2019.  The increase in the Company's share of joint venture income. The declineloss in home sales revenue is attributable2020 was primarily related to other-than-temporary impairment charges taken by the Company related to its investments in two unconsolidated land development joint ventures.  During the 2020 first quarter, the Company recorded a 24% decrease$2.3 million impairment charge related to its investment in the Bedford joint venture home deliveries partially offsetas the result of an agreement by the Company to sell its interest in this joint venture to our partner for less than our current carrying value which closed during the 2020 third quarter.  During the 2020 second quarter, the Company recognized a 6% increase$20.0 million other-than-temporary impairment charge in average selling price.connection with its intent to exit the Russell Ranch land development joint venture in Folsom, California. The year-over-year reduction in land sales revenues was dueCompany determined that the expected financial returns relative to the close-out of one masterplan community located in Foster City, CA as well as fewer lot sales from a masterplan community in Davis, CA where substantially all lots were delivered at December 31, 2016. The 2017 joint venture home sales gross margin decrease was primarily duefuture capital contributions required to a mix shift in deliveries including increased deliveries in 2017 from five Sacramento communities with lower margins as well asdevelop and build out such property did not outweigh the close out of our higher-margin Orchard Park project in the Bay Area, which delivered its last home in the 2017 first quarter. Additionally, in 2017, the Company purchased the equity interest of its joint venture partner inrelated market and cost risks for this development.  In addition, exiting the joint venture knownallows the Company to pursue certain federal tax loss carryback refund opportunities form the passage of the CARES Act. As a result, the Company determined that the value of its investment was not recoverable and wrote off its investment balance and recorded its remaining costs to complete. During the 2020 fourth quarter, substantially all of the assets within the joint venture were sold to a third party for an amount higher than originally estimated by the Company, and as Larkspur. Prior toa result the close out,Company recognized $4.5 million of income within equity in net loss of unconsolidated joint ventures.  As part of this sale, the Company received a $0.1cash distribution of $2.0 million.  The Company's 2019 loss was primarily the result of a $3.5 million income allocation of an inventory impairment charge from theits Bedford joint venture. Upon close out, the Company recognized a gain of $0.3 million due to the purchase of its joint venture partner's interest for less than its carrying value. In 2016, the Company purchased the equity interest of its joint venture partner in the joint venture known as Lambert Ranch. Prior to the close out, the Company received a $0.5 million income allocation from the joint venture. Upon closeout, the Company recognized a gain of $1.1 million due to the purchase of its joint venture partner's interest for less than its carrying value.  The joint venture close outs mentioned are discussed in further detail within Note 11, "Related Party Transactions," in our accompanying Consolidated Financial Statements. The Company's share of joint venture income for the year ended December 31, 2016 was $7.7 million as compared to $13.8 million for the year ended December 31, 2015. The reduction in joint venture incomeimpairment was driven by a 47% decrease in total JV homehigher infrastructure costs than originally expected and lower anticipated land sales revenues resulting from a 29% decrease in our JV average selling price and a 26% decrease in JV home deliveries. This decline was partially offset by a one-time gain related to the close-out of Lambert Ranch, described above. revenue.   The following sets forth supplemental operational and financial information about our unconsolidated joint ventures. Such information is not included in our financial data for GAAP purposes, but is reflected in our results as a component of equity in net incomeloss of unconsolidated joint ventures. This data is included for informational purposes only.     Year Ended December 31,               Change             Change               2020     Amount     %     2019     Amount     %     2018       (Dollars in thousands)           Unconsolidated Joint Ventures—Homebuilding   Operational Data                                                         Net new home orders     25       (85 )     (77 )%     110       (32 )     (23 )%     142   New homes delivered     72       (65 )     (47 )%     137       (9 )     (6 )%     146   Average sales price of homes delivered   $ 1,020     $ 74       8 %   $ 946     $ (5 )     (1 )%   $ 951                                                             Home sales revenue   $ 73,427     $ (56,154 )     (43 )%   $ 129,581     $ (9,311 )     (7 )%   $ 138,892   Land sales revenue   $ 64,392       29,935       87 %     34,457       (8,274 )     (19 )%     42,731   Total revenues   $ 137,819     $ (26,219 )     (16 )%   $ 164,038     $ (17,585 )     (10 )%   $ 181,623   Net loss   $ (23,953 )   $ 42,962       64 %   $ (66,915 )   $ (39,011 )     (140 )%   $ (27,904 )                                                           Selling communities at end of period     —       (4 )     (100 )%     4       (3 )     (43 )%     7   Backlog (dollar value)   $ 4,849     $ (37,803 )     (89 )%   $ 42,652     $ (24,240 )     (36 )%   $ 66,892   Backlog (homes)     2       (47 )     (96 )%     49       (27 )     (36 )%     76   Average sales price of backlog   $ 2,425     $ 1,555       179 %   $ 870     $ (10 )     (1 )%   $ 880                                                             Homebuilding lots owned and controlled     2       (72 )     (97 )%     74       (137 )     (65 )%     211   Land development lots owned and controlled     —       (1,798 )     (100 )%     1,798       (81 )     (4 )%     1,879   Total lots owned and controlled     2       (1,870 )     (100 )%     1,872       (218 )     (10 )%     2,090   45 Table of Contents   Year Ended December 31,        Change       Change       2017   Amount   %   2016   Amount   %   2015   (Dollars in thousands)     Unconsolidated Joint Ventures—Homebuilding Operational Data                           Net new home orders 170   11   7  %   159   (140 )   (47 )%   299 New homes delivered 149   (48 )   (24 )%   197   (68 )   (26 )%   265 Average sales price of homes delivered $ 958   $ 57   6  %   $ 901   $ (365 )   (29 )%   $ 1,266                             Home sales revenue $ 142,697   $ (34,847 )   (20 )%   $ 177,544   $ (157,971 )   (47 )%   $ 335,515 Land sales revenue 4,750   (50,925 )   (91 )%   55,675   (18,691 )   (25 )%   74,366 Total Revenue $ 147,447   $ (85,772 )   (37 )%   $ 233,219   $ (176,662 )   (43 )%   $ 409,881 Net income $ (529 )   $ (26,720 )   (102 )%   $ 26,191   $ (39,003 )   (60 )%   $ 65,194                             Selling communities at end of period 7   (2 )   (22 )%   9   1   13  %   8 Backlog (dollar value) $ 66,636   $ 11,222   20  %   $ 55,414   $ (62,522 )   (53 )%   $ 117,936 Backlog (homes) 80   18   29  %   62   (47 )   (43 )%   109 Average sales price of homes in backlog $ 833   $ (61 )   (7 )%   $ 894   $ (188 )   (17 )%   $ 1,082                             Homebuilding lots owned and controlled 341   (244 )   (42 )%   585   (164 )   (22 )%   749 Land development lots owned and controlled 2,323   (92 )   (4 )%   2,415   (160 )   (6 )%   2,575 Total lots owned and controlled 2,664   (336 )   (11 )%   3,000   (324 )   (10 )%   3,324 Provision Interest Expense During the year ended December 31, 2020, we expensed $3.7 million of interest costs related to the portion of our debt in excess of our qualified assets in accordance with ASC 835, Interest.  To the extent our debt exceeds our qualified inventory in the future, we will expense a portion of the interest related to such debt.  No interest was expensed during the year ended December 31, 2019. Project Abandonment Costs During 2020, the Company terminated its option agreement for a luxury condominium project in Scottsdale, Arizona due to lower demand levels experienced at this community, substantial investment required to build out the remainder of the project, uncertainty associated with the economic impacts of COVID-19, and the opportunity to recognize a tax benefit from the resulting net operating loss carrybacks. As a result of this strategic decision to forgo developing the balance of the property, we recorded a project abandonment charge of $14.0 million related to the capitalized costs, including interest, associated with the portion of the project that was abandoned. Gain (Loss) on Early Extinguishment of Debt During the year ended December 31, 2020, the Company repurchased and retired approximately $15.7 million of its 2022 Notes for a cash payment of approximately $14.8 million.  The Company recognized a total gain on early extinguishment of debt of $0.8 million and wrote off approximately $0.1 million of unamortized discount, premium and debt issuance costs associated with these 2022 Notes retired.  Additionally, the remaining 2022 Notes were redeemed in full on November 12, 2020.  As a result of the redemption, the Company recognized an $8.0 million loss included in gain (loss) on the early extinguishment of debt.  Included in this loss is $0.8 million of interest paid for the period of time between the issuance of the 2025 Notes on October 28, 2020 and the redemption of 2022 Notes on November 12, 2020.   During the year ended December 31, 2019, the Company repurchased and retired approximately $17.0 million of its 2022 Notes for a cash payment of approximately $15.6 million.  The Company recognized a total gain on early extinguishment of debt of $1.2 million and wrote off approximately $0.2 million of unamortized discount, premium and debt issuance costs associated with the 2022 Notes retired during 2019.  Benefit for Income Taxes For the year ended December 31, 2017,2020, the Company recorded a provision foran income taxestax benefit of $15.4 million. The effective tax rate for 2017 differs from the 35% federal statutory tax rate, primarily due$26.6 million compared to a $3.2$3.8 million noncash, provisional charge related to the revaluation of the Company's deferred tax asset to reflect a reduction in the federal corporate tax rate from 35% to 21%, effectivebenefit for fiscal year 2018 that was enacted in 2017, and state income taxes, offset partially by the benefit from production activities. On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses.2019. For businesses, the Tax Act reduces the corporate federal tax rate from a maximum of 35% to a flat 21% rate. The rate reduction took effect on January 1, 2018. In accordance with ASC 740, Income Taxes ("ASC 740"), the consolidated provision for income taxes is calculated using the asset and liability method, under which deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. As a result of the reduction in the corporate income tax rate from 35% to 21% under the Tax Act, the Company revalued its net deferred tax asset atended December 31, 2017 and recorded a noncash, provisional charge of $3.2 million, which is included in the tax provision for 2017. The Company is currently analyzing the effects of the Tax Act and will update this provisional rate as it completes its analysis. Excluding the $3.2 million deferred tax asset charge,2020, the Company's effective tax rate would have been 37.5%was a 44.7% benefit and included the benefit associated with net operating loss carrybacks to years when the Company was subject to a 35% federal tax rate as permitted by the CARES Act.  The CARES Act was signed into law on March 27, 2020 and allows companies to carry back net operating losses generated in 2018 through 2020 for 2017 asfive years.  The 2020 effective tax rate differed from the federal statutory rate due the net operating loss carryback benefit, state income tax rates and tax credits for energy efficient homes.  For the year ended December 31, 2019, the Company's effective tax rate was a 32.3% benefit and differed from the federal statutory rate primarily due to federal energy credits related to homes delivered during 2018 and 2019, state income taxes, stock compensation shortfalls and the impact of expected deduction limitations related to executive compensation.   Year Ended December 31, 2019 Compared to Year Ended December 31, 2018 For discussion related to the results of operations and changes in financial condition for fiscal 2019 compared to 38.4% in 2016. Effective tax rate before noncash deferred tax charge is a non-GAAP measure. Pleasefiscal 2018, refer to "Management'sPart II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview" for a reconciliation to effective tax rate,Operations” in our fiscal 2019 Annual Report on Form 10-K, which was filed with the nearest GAAP equivalent. As part of the Tax Act, the Company will no longer be able to take certain tax deductions for production activities that currently reduce our effective tax rate. Additionally, the Company will be subject to increased deduction limitationsSEC on certain executive compensation. For 2018, we believe the Company's deduction for certain executive compensation will not be limited due to transition rules included in the Tax Act. However, the deduction limitation could increase our effective tax rate for 2019 and beyond. Based on our current operations and geographic footprint coupled with current state income tax laws, our preliminary estimate for the full year 2018 effective tax rate is approximately 28% to 29%, excluding the impact of any potential discrete items; however actual results could differ.  For the year ended December 31, 2016, the Company recorded a provision for income taxes of $13.0 million and its effective tax rate was 38.4%. Included in this provision is an allocation of income of $0.5 million from LR8 and a $1.1 million gain from the closeout of our LR8 joint venture, which resulted in a provision for income taxes of $0.6 million for the year December 31, 2016 and did not impact our effective tax rate. The effective tax rate for 2016 differs from the 35% federal statutory tax rate, primarily due to state income taxes, offset partially by the benefit from production activities and energy efficient credits. For the year ended December 31, 2015, we recorded a provision for income taxes of $12.5 million and its effective tax rate was 37.0%. The effective tax rate for the year ended December 31, 2015 differs from the 35% statutory tax rate due to state income taxes, offset partially by the benefit from production activities and energy efficient credits. February 14, 2020. Liquidity and Capital Resources Overview Our principal uses of capital for the year ended December 31, 2017 were land purchases, land development, home construction, repayments on our revolving credit facility, contributions and advances to our unconsolidated joint ventures, and payment of operating expenses and routine liabilities. Our principal sources of capital for the year ended December 31, 20172020 were proceeds from the sale of our senior notes due 2022, cash generated from home sales activities, advancesproceeds from our unsecured revolving credit facility,2025 Notes, distributions from our unconsolidated joint ventures, and management fees from our fee building agreements. Our principal uses of capital for 2020 were land purchases, land development, home construction, repurchases and retirements of our 2022 Notes, contributions and advances to our unconsolidated joint ventures, repurchases of the Company's common stock and payment of operating expenses, interest and routine liabilities. 46 Table of Contents Cash flows for each of our communities depend on their stage in the development cycle, and can differ substantially from reported earnings. Early stages of development or expansion require significant cash outlays for land acquisitions, entitlements and other approvals, and construction of model homes, roads, utilities, general landscaping and other amenities. Because these costs are a component of our real estate inventories and not recognized in our consolidated statement of operations until a home is delivered, we incur significant cash outlays prior to our recognition of earnings. In the later stages of community development, cash inflows may significantly exceed earnings reported for financial statement purposes, as the cash outflowoutflows associated with home and land construction waswere previously incurred. From a liquidity standpoint, we are activelygenerally active in acquiring and developing lots to increasemaintain or grow our lot supply and community count. As we continue to expand our business, weWe expect cash outlays for land purchases, land development and home construction at times to exceed our cash generated by operations.  We focused on debt reduction and cash preservation in the second and third quarters of 2020 in light of the continued economic uncertainty produced by the COVID-19 pandemic; however, with the sustained strong housing demand over the second half of 2020, we have been actively seeking to rebuild our land pipeline. During the year ended December 31, 2020, we generated cash flows from operating activities of $93.1 million.  We ended 2017 with $123.52020 with $107.3 million of cash and cash equivalents, a $93.1$28.0 million increaseincrease from December 31, 2016, primarily as a result of the issuance of our senior notes due 2022 and home closing revenues offset by land acquisition expenditures and development activity. We expect to generate cash from the sale of our inventory, but2019.  Generally, we intend to redeploymaintain our debt levels within our target net leverage ranges in the netnear term, and then to deploy a portion of cash generated from the sale of inventory to acquire and develop strategic, well-positioned lots that represent opportunities to generate future income and cash flows.   Our investments in land and land development in the future will depend significantly on market conditions and available opportunities that meet our investment return standards. During the year ended December 31, 2020, the Company completed the sale of $250 million in aggregate principal amount of 7.25% Senior Notes due 2025 (the "2025 Notes").  The 2025 Notes were issued at an offering price of 100% of their face amount, which represents a yield to maturity of 7.25%.  Net proceeds from the offering of the 2025 Notes, together with cash on hand, were used to redeem all of the Company's outstanding 7.25% Senior Notes due 2022 (the "2022 Notes") at a redemption price of 101.813% of the principal amount thereof, plus accrued and unpaid interest to the redemption date.   As of December 31, 20172020 and 2016,2019, we had $11.3had $2.6 million and $22.8and $9.6 million, respectively, in accounts payable that related to costs incurred under our fee building agreements. Funding to pay these amounts is the obligation of the third-party land owner, which is generally funded on a monthly basis. Similarly, contracts and accounts receivable and due from affiliates as of the same dates included $11.6$3.1 million and $24.3$10.4 million, respectively, related to the payment of the above payables. We intend to utilize both debt and equity as part of our ongoing financing strategy, coupled with redeployment of cash flows from continuing operations, to provide us with the financial flexibility to operate our business.  In that regard, we expect to employ prudent levels of leverage to finance the acquisition and development of our lots and construction of our homes. As of December 31, 2017,2020, we had outstanding borrowings of $325$250.0 million in aggregateaggregate principal related to our senior notes.2025 Notes and no borrowings outstanding under our credit facility. We will consider a number of factors when evaluating our level of indebtedness and when making decisions regarding the incurrence of new indebtedness, including the purchase price of assets to be acquired with debt financing, the estimated market value of our assets and the ability of particular assets, and our companyCompany as a whole, to generate cash flow to cover the expected debt service. In addition, our debt contains certain financial covenants, among others, that limitslimit the amount of leverage we can maintain. maintain, and minimum tangible net worth and liquidity requirements.  We intend to finance future acquisitions and developments with what we believe to be the most advantageous source of capital available to us at the time of the transaction, which may include unsecured corporate level debt, property-level debt, and other public, private or bank debt, land banking arrangements, or common and preferred equity. While the COVID-19 pandemic and related mitigation efforts have created significant uncertainty as to general economic and housing market conditions for the remainder of 2020 and beyond, we believe that we will be able to fund our current and foreseeable liquidity needs with our cash on hand, cash generated from operations, our revolving credit facility or, to the extent available, through accessing debt or equity capital, as needed, although no assurances can be provided that such additional debt or equity capital will be available or on acceptable terms, especially as a result of economic consequences arising from the COVID-19 pandemic or the response thereto. 47 Senior Table of Contents 2022 Notes The carrying amount of the 2022 Notes Dueat December 31, 2019, is net of an unamortized discount of $1.1 million, unamortized premium of $0.9 million, and unamortized debt issuance costs of $3.0 million, each of which were amortized and capitalized to interest costs on a straight-line basis over the respective term of the 2022 Notes which approximated the effective interest method. During 2020, the Company repurchased and retired approximately $15.7 million in face value of the 2022 Notes for cash payments of approximately $14.8 million.  The Company recognized a total gain on early extinguishment of debt of $0.8 million and wrote off approximately $0.1 million of unamortized discount, premium and debt issuance costs associated with the 2022 Notes retired.  During 2019, the Company repurchased and retired approximately $17.0 million in face value of the 2022 Notes for cash payments of approximately $15.6 million. The Company recognized a total gain on early extinguishment of debt of $1.2 million and wrote off approximately $0.2 million of unamortized discount, premium and debt issuance costs associated with the 2022 Notes retired.  As a result of the full redemption of the 2022 Notes during the 2020 fourth quarter, the Company recognized and $8.0 million loss included in gain (loss) on the early extinguishment of debt in the accompanying consolidated statements of operations.  Included in this loss is $0.8 million of interest paid for the period of time between the issuance of the 2025 Notes on October 28, 2020 and the redemption of 2022 Notes on November 12, 2020.   2025 Notes On March 17, 2017,October 28, 2020, the Company completed the sale of $250 million in aggregate principal amount of 7.25% Senior Unsecuredthe 2025 Notes due 2022 (the "Existing Notes"), in a private placement. The Notes were issued at an offering price of 98.961% of their face amount, which represents a yieldplacement to maturity of 7.50%. On May 4, 2017, the Company completed a tack-on private placement offering through the sale of an additional $75 million“qualified institutional buyers” as defined in aggregate principal amount of the 7.25% Senior Notes due 2022 ("Additional Notes"). The Additional Notes were issued at an offering price of 102.75% of their face amount plus accrued interest since March 17, 2017, which represented a yield to maturity of 6.438%. Net proceeds from the Existing Notes were used to repay all borrowings outstandingRule 144A under the Company’s senior unsecured revolving credit facility withSecurities Act and outside the remainderUnited States in reliance on Regulation S under the Securities Act.  Pursuant to be used for general corporate purposes. Net proceeds from the Additional Notes will be used for working capital, land acquisition and general corporate purposes. InterestIndenture, interest on the Existing2025 Notes and the Additional Notes (the "Original Notes") will be paid semiannually in arrears on April 115 and October 1, which commenced15 of each year, commencing on April 15, 2021. The 2025 Notes will mature on October 1, 2017. In accordance with its obligations under two registration rights agreements executed in connection with the private placements15, 2025.  The carrying amount of the Original2025 Notes on September 8, 2017, the Company completed an exchange offerlisted above at December 31, 2020, is net of the Originalunamortized debt issuance costs of $5.1 million which are amortized and capitalized to interest costs using the effective interest method.  The 2025 Notes forare general senior unsecured obligations that rank equally in right of payment to all existing and future senior indebtedness, including borrowings under the Company's senior unsecured revolving credit facility. The 2025 Notes are guaranteed, on an equal principal amountunsecured basis, jointly and severally, by all of 7.25% Seniorthe Company's 100% owned subsidiaries.  The 2025 Notes due 2022 (the "Notes") which terms are identical in all material respects to the Original Notes except that the Notes arehave not been registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of 1933,the Securities Act and any applicable state securities laws.   On or after October 15, 2022, the Company may redeem all or a portion of the 2025 Notes upon not less than 15 nor more than 60 days’ notice, at the redemption prices (expressed as amended (the "Securities Act")percentages of the principal amount on the redemption date) set forth below plus accrued and are freely tradeableunpaid interest, if any, to the applicable redemption date, if redeemed during the 12-month period, as applicable, commencing on October 15 of the years as set forth below:       Year                Redemption Price              2022    103.625% 2023    101.813% 2024    100.000% In addition, any time prior to October 15, 2022, the Company may, at its option on one or more occasions, redeem the 2025 Notes (including any additional notes that may be issued in accordancethe future under the Indenture) in an aggregate principal amount not to exceed 40% of the aggregate principal amount of the 2025 Notes (including any additional notes that may be issued in the future under the Indenture) issued prior to such date at a redemption price (expressed as a percentage of principal amount) of 107.25%, plus accrued and unpaid interest, if any, to the redemption date, with applicable law. Thean amount equal to the net cash proceeds from one or more equity offerings by the Company.   If the Company experiences a change of control triggering event (as described in the Indenture), holders of the 2025 Notes will maturehave the right to require the Company to repurchase all or a portion of the 2025 Notes at 101% of their principal amount thereof on April 1, 2022.     the date of repurchase, plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).  The Indenture also provides for events of default, which, if any of them occurs, would permit or require the principal of and accrued interest on such 2025 Notes to be declared due and payable. In addition, if the 2025 Notes are assigned an investment grade rating by certain rating agencies and no default or event of default has occurred or is continuing, certain covenants related to the 2025 Notes would be suspended. If the rating on the 2025 Notes should subsequently decline to below investment grade, the suspended covenants would be reinstated. 48 Table of Contents The 2025 Notes contain certain restrictive covenants, including a limitation on additional indebtedness and a limitation on restricted payments. Restricted payments include, among other things, dividends, investments in unconsolidated entities, and stock repurchases. Under the limitation on incurring or guaranteeing additional indebtedness, we are permitted to incur specified categories of indebtedness but are prohibited, aside from those exceptions, from incurring further indebtedness if we do not satisfy either a leverage condition or an interest coverage condition. The leverage and interest coverage conditions are summarized in the table below, as described and defined further in the indenture for the Notes. Exceptions to the additional indebtedness limitation include, among other things, (1) borrowings of up to $260the greater of (i) $100 million and (ii) 20% of our consolidated tangible assets under existing or future bank credit facilities, (2) non-recourse indebtedness, and (3) indebtedness incurred for the purpose of refinancing or repaying certain existing indebtedness. Under the limitation on restricted payments, we are also prohibited from making restricted payments, aside from certain exceptions, if we do not satisfy either the leverage condition or interest coverage condition. In addition, the amount of restricted payments that we can make is subject to an overall basket limitation, which builds based on, among other things, 50% of consolidated net income from January 1, 20172021 forward and 100% of the net cash proceeds from qualified equity offerings. Exceptions to the foregoing limitations on our ability to make restricted payments include, among other things, investments in joint ventures and other investments up to 15% of our consolidated tangible net assets and a general basket of up to the greater of $15 million.million and 3% of our consolidated tangible assets. The Notes are guaranteed byIndenture contains certain other covenants, among other things, the ability of the Company and its restricted subsidiaries to issue certain equity interests, make payments in respect of subordinated indebtedness, make certain investments, sell assets, incur liens, create certain restrictions on the ability of restricted subsidiaries to pay dividends or to transfer assets, enter into transactions with affiliates, create unrestricted subsidiaries, and consolidate, merge or sell all or substantially all of its assets. These covenants are subject to a number of exceptions and qualifications as set forth in the Company's 100% owned subsidiaries, for more information about these guarantees, please see Note 17 ofIndenture. The leverage and interest coverage conditions are summarized in the notes to our consolidated financial statements. table below, as described and defined further in the Indenture. December 31, 2020 Financial Conditions Actual Requirement   December 31, 2017 Financial Conditions Actual   Requirement     Fixed Charge Coverage Ratio: EBITDA to Consolidated Interest IncurredIncurred; or 2.2 1.36   > 2.0 : 1.0 Leverage Ratio: Indebtedness to Tangible Net Worth 1.22 1.24   < 2.25 : 1.0 As of December 31, 2017,2020, we were able to satisfy both the leverage condition and the interest coverage condition. The foregoing conditions are further defined and described in the indenture for the Notes. Senior Unsecured Revolving Credit Facility Facilities The Company'sCompany had an unsecured revolving credit facility ("Credit Facility") is with a bank group. group (the "existing facility") which, as amended on June 26, 2020, provided for a maturity date of September 30, 2021 and total commitments under the facility of $60 million and an accordion feature allowing up to $150 million of borrowings, subject to certain financial conditions, including the availability of bank commitments.  The existing facility, as amended in June 2020, also provided a $10.0 million sublimit for letters of credit, subject to conditions set forth in the agreement. As of December 31, 2019, the Company had no outstanding letters of credit issued under the existing facility.  Debt issuance costs for the existing unsecured revolving credit facility, which totaled $0.5 million as of December 31, 2019 were included in other assets and amortized and capitalized to interest costs on a straight-line basis over the term of the agreement. The existing facility was terminated in connection with the Company's execution of the New Credit Agreement discussed below. On September 27, 2017,October 30, 2020, the Company entered into a ModificationCre dit Agreement (the "Modification"“New Credit Agreement” or “Credit Facility”) to itswith JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto. The New Credit Facility. The Modification, among other things, (i) extends the maturity date of theAgreement provides for a $60 million unsecured revolving credit facility, to September 1, 2020, (ii) decreases (A) the total commitmentsmaturing April 30, 2023. The New Credit Agreement also provides that, under the facility to $200 million from $260 million and (B) the accordion feature to $300 million from $350 million, (iii) revises certain financial covenants, including the tangible net worth, minimum liquidity, and interest coverage tests, in addition to providing relief on compliance with the interest coverage test so long ascircumstances, the Company maintains cash equalmay increase the aggregate principal amount of revolving commitments up to not less thanan aggregate of $100 million.  Concurrently with entering into the trailing twelve month consolidated interest incurred,New Credit Agreement, the Company repaid in full and (iv) adds certain wholly owned subsidiaries as guarantors. A portion ofterminated the net proceeds from the sale of our senior notes due 2022 was used to repay the outstanding balance of the Credit Facility. existing credit facility.   As of December 31, 2017, there was2020, we had no outstanding balance onborrowings under the Credit Facility. Interest is payable monthly and is chargedAmounts outstanding under the New Credit Agreement accrue interest at a rate of 1-monthequal to either, at the Company’s election, LIBOR plus a margin ranging from 2.25%of 3.50% to 3.00%4.50% per annum, or base rate plus a margin of 2.50% to 3.50%, in each case depending on the Company’s leverage ratio as calculated at the end of each fiscal quarter.ratio.  As of December 31, 2017,2020, the interest rate underfor the facility was 4.56%. Pursuant toLIBOR-based rate under the Credit Facility was 4.40%  The covenants of the Company is requiredNew Credit Agreement include customary negative covenants that, among other things, restrict the Company’s ability to maintainincur secured indebtedness, grant liens, repurchase or retire its senior unsecured notes, and make certain acquisitions, investments, asset dispositions and restricted payments, including stock repurchases. In addition, the New Credit Agreement contains certain financial covenants, as defined in the Credit Facility, including, but not limited to, those listed in the following table. The table below reflects any updates to covenant requirements that resulted from the modification agreement. 49   December 31, 2017   Financial Covenants Actual    Covenant Requirement     (Dollars in thousands)   Unencumbered Liquid Assets (Minimum Liquidity Covenant) $ 123,546   $ 10,000 (1)  EBITDA to Interest Incurred (2) 2.23   > 1.75 : 1.0   Tangible Net Worth $ 263,990   $ 187,349   Leverage Ratio 44 %   < 65%   Adjusted Leverage Ratio (3) NA   < 50%   Table of Contents     December 31, 2020                 Covenant   Financial Covenants   Actual       Requirement       (Dollars in thousands)   Unencumbered Liquid Assets (Minimum Liquidity Covenant)(1)   $ 107,279       $ 10,000   EBITDA to Interest Incurred (2)     1.36 (2)     > 1.75 : 1.0   Tangible Net Worth    $ 197,442       $ 150,594   Net Leverage Ratio     42.8 %     < 60.0%   (1) (1) So long as the Company is in compliance with the interest coverage test (see Note 2), the minimum unencumbered liquid assets that the Company must maintain as of the quarter end measurement date is $10 million. (2) If the CompanyEBITDA to Interest Incurred test is not in compliance withmet, it will not be considered an event of default so long as the interest coverage test, the minimum liquidity requirement as of each quarter end measurement date isCompany maintains unrestricted cash equal to not less than the trailing 12 month consolidated interest incurred (as defined in the Credit Facility agreement) which was $22.0$23.9 million as of December 31, 2017. (2) 2020. The modification of the Credit Facility executed September 27, 2017, provides relief onCompany was in compliance with the interest coverage test. If the test is notthis requirement with an unrestricted cash balance of $107.3 million at December 31, 2020. met, it will not be considered an event The Credit Facility contains customary events of default, so long assubject to cure periods in certain circumstances, that would result in the Company maintainstermination of the commitments and permit the Lenders to accelerate payment on outstanding borrowings and require cash equalcollateralization of letters of credit. These events of default include nonpayment of principal, interest and fees or other amounts; violation of covenants; inaccuracy of representations and warranties; cross default to not less than the trailing 12 month consolidated interest incurred. (3) Adjusted Leverage Ratio is computed as total joint venture debt divided by total joint venture equity. The Adjusted Leverage Ratio requirement ceases to apply as of and after the fiscal quarter in which consolidated tangible net worth is at least $250 million. During any period when the Adjusted Leverage Ratio ceases to apply, consolidated tangible net worth shall be reduced by an adjustment equal to the aggregate amount of investments in and advance to unconsolidated joint ventures that exceed 35% of consolidated tangible net worth as calculated without giving effect to this adjustment (the "Adjustment Amount"). At December 31, 2017, the Company's consolidated tangible net worth exceeded $250 million and the Adjusted Leverage Ratio ceased to apply and, accordingly, the Adjustment Amount was considered in the calculation of consolidated tangible net worth. certain other indebtedness; unpaid judgments; change in control; and certain bankruptcy and other insolvency events.  As of December 31, 2017 and 2016,2020 we were in compliance with all financial covenants.covenants under our Credit Facility. The New Credit Agreement also provides for a $30.0 million sublimit for letters of credit, subject to conditions set forth in the New Credit Agreement.  As of December 31, 2020 the Company had no outstanding letters of credit issued under the New Credit Agreement.  Debt issuance costs for the New Credit Agreement, which tot aled $1.5 million as of December 31, 2020 are included in other assets and amortized and capitalized to interest costs on a straight-line basis over the term of the agreement.   Letters of Credit and Surety Bonds In connection with the development of our communities, we are frequently required to provide performance, maintenance, and other bonds and letters of credit in support of our related obligations with respect to such developments. The amount of such obligations outstanding at any time varies in accordance with our pending development activities. In the event any such bonds or letters of credit are drawn upon, we would be obligated to reimburse the issuer of such surety bonds or letters of credit. The following table summarizes our letters of credit and surety bonds as of the dates indicated:     December 31,       2020     2019       (Dollars in thousands)   Letters of credit(1)   $ —     $ —   Surety bonds(2)     44,045       47,593   Total outstanding letters of credit and surety bonds   $ 44,045     $ 47,593   (1) As of December 31, 2020, there is a $30.0 million sublimit for letters of credit available under our Credit Facility. (2) The estimated remaining costs to complete as of December 31, 2020 and December 31, 2019 were $16.3 million and $29.1 million, respectively Stock Repurchase Program On November 18, 2020, the Company’s Board of Directors (the “Board”) authorized a stock repurchase program pursuant to which the Company may purchase up to $10.0 million of shares of its common stock (the “New Repurchase Program”) to replace its existing $15.0 million share repurchase program which had previously been authorized in May 2018 (the “existing program”). As of November 19, 2020, there was $1.7 million of remaining availability under the existing program which was cancelled upon the authorization of the New Repurchase Program. Repurchases of the Company’s common stock may be made in open-market transactions, effected through a broker-dealer at prevailing market prices, in privately negotiated transactions, in block trades, or by other means in accordance with federal securities laws, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. The New Repurchase Program does not obligate the Company to repurchase any particular amount or number of shares of common stock, and it may be modified, suspended or discontinued at any time. The timing and amount of repurchases, if any, will be determined by the Company’s management at its discretion and be based on a variety of factors, such as the market price of the Company’s common stock, corporate and contractual requirements, general market and economic conditions and legal requirements.   During the year ended December 31, 2020, the Company repurchased and retired 2,160,792 shares of its common stock at an aggregate purchase price of $4.3 million, or an average price per share of $1.97.  During the year ended December 31, 2019, the Company repurchased and retired 153,916 shares of its common stock at an aggregate purchase price of $1.0 million.  All repurchased shares were returned to the status of authorized but unissued. 50 Table of Contents Debt-to-Capital Ratios We believe that debt-to-capital ratios provide useful information to the users of our financial statements regarding our financial position and leverage. Net debt-to-capital ratio is a non-GAAP financial measure. See the table below reconciling this non-GAAP measure to debt-to-capital ratio, the nearest GAAP equivalent.   December 31,   2017   2016   (Dollars in thousands) Total debt, net $ 318,656   $ 118,000 Equity, exclusive of noncontrolling interest 263,990   244,523 Total capital $ 582,646   $ 362,523 Ratio of debt-to-capital (1) 54.7 %   32.5 %         Total debt, net $ 318,656   $ 118,000 Less: cash, cash equivalents and restricted cash 123,970   31,081 Net debt 194,686   86,919 Equity, exclusive of noncontrolling interest 263,990   244,523 Total capital $ 458,676   $ 331,442 Ratio of net debt-to-capital (2) 42.4 %   26.2 %     December 31,       2020     2019       (Dollars in thousands)   Total debt, net of unamortized discount, premium and debt issuance costs   $ 244,865     $ 304,832   Equity, exclusive of non-controlling interest     197,442       232,647   Total capital   $ 442,307     $ 537,479   Ratio of debt-to-capital (1)     55.4 %     56.7 %                   Total debt, net of unamortized discount, premium and debt issuance costs   $ 244,865     $ 304,832   Less: Cash, cash equivalents and restricted cash     107,459       79,431   Net debt     137,406       225,401   Equity, exclusive of non-controlling interest     197,442       232,647   Total capital   $ 334,848     $ 458,048   Ratio of net debt-to-capital (2)     41.0 %     49.2 % (1) (1) The ratio of debt-to-capital is computed as the quotient obtained by dividing total debt, net of unamortized discount, premium and debt issuance costs by thetotal capital (the sum of total debt, net of unamortized discount, premium and debt issuance costs plus equity,equity), exclusive of noncontrollingnon-controlling interest. (2) The ratio of net debt-to-capital is computed as the quotient obtained by dividing net debt (which is total debt, net of unamortized discount, premium and debt issuance costs less cash, cash equivalents and restricted cash to the extent necessary to reduce the debt balance to zero) by total capital, exclusive of noncontrollingnon-controlling interest. The most directly comparable GAAP financial measure is the ratio of debt-to-capital. We believe the ratio of net debt-to-capital is a relevant financial measure for investors to understand the leverage employed in our operations and as an indicator of our ability to obtain financing. We believe that by deducting our cash from our debt, we provide a measure of our indebtedness that takes into account our cash liquidity. We believe this provides useful information as the ratio of debt-to-capital does not take into account our liquidity and we believe that the ratio net of cash provides supplemental information by which our financial position may be considered. Investors may also find this to be helpful when comparing our leverage to the leverage of our competitors that present similar information. See the table above reconciling this non-GAAP financial measure to the ratio of debt-to-capital. 51 Table of Contents Cash Flows For thethe year ended December 31, 20172020 as compared to the year ended December 31, 2016,2019, the comparison of cash flows is as follows: Net cash used in operating activities was $90.7 million in 2017 versus $42.4 million in 2016. The change was primarily the result of a net increase in cash outflows for real estate inventories to $114.9 million in 2017 compared to $71.4 million in 2016 due to greater land acquisition spend and increased construction in progress. Net cash used in investing activities was $10.6 million in 2017 compared $1.8 million provided by investing activities in 2016. • Net cash provided by operating activities was $93.1 million for the year ended December 31, 2020 versus $121.3 million for the year ended December 31, 2019.  The year-over-year change was primarily a result of reduction in real estate inventories of $85.2 million for 2020 as compared to $123.2 million for 2019.  The change in real estate inventories cash flow was driven primarily by the decrease in home and land sales revenues, partially offset by a year-over-year decrease in land acquisition, development and construction in progress spend during 2020.  The year-over-year increase in net loss reduced cash inflow by $24.9 million.  The lower cash flows in 2020 also reflect an increase in other assets primarily consisting of an increase of $26.8 million due to expected income tax refunds.  These items were offset by an increase in noncash inventory impairments and project abandonment costs of $22.8 million, and an $18.8 million increase in noncash impairments to the Company’s investment in two unconsolidated joint ventures recorded during the year ended December 31, 2020.  The remaining year-over-year change in operating cash flows related to changes in contracts and accounts receivable, accounts payable, accrued expenses and other liabilities, and deferred tax assets balances as well as the Company's loss on early extinguishment of debt during 2020. • Net cash provided by investing activities was $9.0 million and $0.3 million for the years ended December 31, 2020 and 2019, respectively.  The year-over-year increase was primarily driven by a $9.0 million increase in net distributions from joint ventures for 2020 including a $5.2 million final distribution in conjunction with the Company's exit from the Bedford joint venture.  The remaining distributions were from joint ventures that recently closed out or are nearing the close-out phase of their respective underlying projects.  The close out of projects and exits from joint ventures during 2020 also drove a $3.8 million decrease in contributions to unconsolidated joint ventures compared to the year ended December 31, 2019.    • Net cash used in financing activities was $74.0 for the year ended December 31, 2020 versus $84.6 million for the year ended December 31, 2019. The outflow in 2020 related primarily to the net $62.4 million of cash paid to redeem the 2022 Notes as well as the payment of related debt issuance costs, and $4.3 million in stock repurchases.  The 2019 outflow reflects a $67.5 million net paydown of the Company's unsecured credit facility and $15.6 million of cash paid to repurchase and retire approximately $17.0 million of our 2022 Notes.   For the year ended December 31, 2017, our contributions and advances to joint ventures were $27.5 million compared to $15.1 million during the year ended December 31, 2016 and was the primary reason net cash used in investing activities increased. The increase in contributions to joint ventures primarilydiscussion related to a large contribution to a land development joint venture in Folsom, CA. Net cash provided by financing activities was $194.3 million in 2017 compared to $25.2 million in 2016. The increase was primarily due to an increase in net borrowings, in particular the issuance of our senior notes due 2022, offset partially by increased repayments of the unsecured credit facility. For the year ended December 31, 2016 as compared to the year ended December 31, 2015, the comparison of cash flows is as follows: Net cash used in operating activities was $42.4 million in 2016 versus $32.3 million in 2015. The change was primarily the result of a reduction of distributions of earnings from unconsolidated joint ventures to $3.7 million in 2016 from $18.5 million and an increase in cash outflows for real estate inventories to $71.4 million in 2016 compared to $65.9 million in 2015. Cash inflows for distributions of earnings from unconsolidated joint ventures decreased due to the reduction of total revenues of the unconsolidated joint ventures during the same periods. Despite a 43% increase in net wholly owned lots year-over-year, we were able to continue utilizing favorable lot option takedown structures that defrayed a portion of the upfront capital required to acquire land. In addition, we delivered more homes in 2016 as compared to the prior year, which partially offset increased land acquisition and construction costs capitalized to inventory as compared to 2015. Net cash provided by investing activities was $1.8 million in 2016 compared $16.6 million in 2015. For the year ended December 31, 2016, our net distributions of capital from unconsolidated joint ventures was $0.2 million compared to net distributions of $17.0 million during the year ended December 31, 2015 and was the primary reason net cash provided by investing activities decreased. The decrease in distributions related to the decrease in total revenues of the unconsolidated joint ventures. The decrease in distributions was partially offset by the assumption of $2.0 million in cash as a result in the change in control in our LR8 Investors LLC unconsolidated joint venture during 2016. The Company assumed the joint venture's cash, accounts receivable. accounts payable, and accrued liabilities upon the exit of its joint venture partner. Net cash provided by financing activities was $25.2 million in 2016 versus $17.5 million in 2015. The increase primarily related to an increase in net borrowings, offset partially by the issuance of common stock in the 2015 period. Cash inflows for net borrowings from the unsecured credit facility and other notes payable was $27.8 million for the year ending December 31, 2016 compared to net paydowns on the unsecured credit facility and other notes payable of $27.2 million for the year ended December 31, 2015. Additionally, 2015 included2019 as compared to the follow-on issuanceyears ended December 31, 2018, refer to Part II, Item 7, “Management’s Discussion and Analysis of common stock,Financial Condition and Results of Operations” in our fiscal 2019 Annual Report on Form 10-K, which generated $47.3 million in net cash proceeds while 2016 did not include any net proceeds fromwas filed with the issuanceSEC on February 14, 2020. 52 Table of common stock.Contents Off-Balance Sheet Arrangements and Contractual Obligations Option Contracts In the ordinary course of business, we enter into land option contracts in order to procure lots for the construction of our homes. We are subject to customary obligations associated with entering into contracts for the purchase of land and improved lots. These purchase contracts typically require a cash deposit and the purchase of properties under these contracts is generally contingent upon satisfaction of certain requirements by the sellers, including obtaining applicable property and development entitlements. We also utilize option contracts with land sellers and financial intermediaries as a method of acquiring land in staged takedowns, to help us manage the financial and market risk associated with land holdings, to reduce the use of funds from our corporate financing sources, and to enhance our return on capital. Option contracts generally require a nonrefundable deposit for the right to acquire lots over a specified period of time at pre-determined prices. We generally have the right, at our discretion, to terminate our obligations under both purchase contracts and option contracts by forfeiting our cash deposit with no further financial responsibility to the land seller.seller or financial intermediary. In some instances, we may also expend funds for due diligence and development activities with respect to our option contracts prior to purchase which we would have to writewrite off should we not purchase the land. As of December 31, 2017,2020, we had $34.2$8.9 million of nonrefundable and $0.8$0.1 million of refundable cash deposits pertaining to land option contracts and purchase contracts with an estimated aggregate remaining purchase price of $330.9$53.4 million, net of deposits ("Aggregate Remaining Purchase Price").deposits. These cash deposits are included as a component of our real estate inventories in ourthe accompanying consolidated balance sheets. In addition, the Company has agreed to liquidated damages of $9.1 million should the Company not fulfill its obligations under a contract to control $53.1 million which is included in the Aggregate Remaining Purchase Price noted above. Our utilization of land option contracts is dependent on, among other things, the availability of land sellers willing to enter into option arrangements, the availability of capital to financial intermediaries to finance the development of optioned lots, general housing market conditions, and local market dynamics. Options may be more difficult to procure from land sellers in strong housing markets and are more prevalent in certain geographic regions. Joint Ventures We enter into land development and homebuilding joint ventures from time to time as means of: leveraging our capital base accessing larger or desirable lot positions expanding our market opportunities managing financial and market risk associated with land holdings establishing strategic alliances • leveraging our capital base • accessing larger lot positions • expanding our market opportunities • managing financial and market risk associated with land holdings These joint ventures have historically obtained secured acquisition, development and/or construction financing which reduces the use of funds from our corporate financing sources. The We are subject to certain contingent obligations in connection with our unconsolidated joint ventures. In certain instances, the Company has provided credit enhancements in connection with joint venture borrowings in the form of loan-to-value ("LTV") maintenance agreements in order to secure the joint venture's performance under the loans and maintenance of certain LTV ratios.  TheFor unconsolidated joint ventures where the Company has provided an LTV credit enhancement, the Company has also entered into agreements with some of its unconsolidated joint venture partners in each of the unconsolidated joint ventures whereby the Company and its partners are apportioned liability under the LTV maintenance agreements according to their respective capital interest. In addition, thethese agreements provide the Company, to the extent its partner has an unpaid liability under such LTV credit enhancements, the right to receive distributions from the unconsolidated joint venture that would otherwise be made to the partner. However, there is no guarantee that such distributions will be made or will be sufficient to cover the Company's liability under such LTV maintenance agreements. The loans underlying the LTV maintenance agreements compriseinclude acquisition and development loans, construction revolvers and model home loans, and the agreements remain in force until the loans are satisfied. Due to the nature of the loans, the outstanding balance at any given time is subject to a number of factors including the status of site improvements, the mix of horizontal and vertical development underway, the timing of phase build outs, and the period necessary to complete the escrow process for homebuyers. As of December 31, 20172020 and 2016, $38.6 million2019, $0 and $56.0$28.6 million, respectively, was outstanding under the loans andthat are credit enhanced by the Company through LTV maintenance agreements. Under the terms of the joint venture agreements, the Company's proportionate share of LTV maintenance agreement liabilities was $6.7$0 million and $8.6and $5.8 million, respectively, as of December 31, 20172020 and December 31, 2016.2019. In addition, the Company has provided completion agreements regarding specific performance for certain projects whereby the Company is required to complete the given project with funds provided by the beneficiary of the agreement. If there are not adequate funds available under the specific project loans, the Company would then be subject to financial liability under such completion guaranties. Typically, under such terms of the joint venture agreements, the Company has the right to apportion the respective share of any costs funded under such completion guaranties to its partners. However, there is no guarantee that we will be able to recover against our partners for such amounts owed to us under the terms of such joint venture agreements. In connection with joint venture borrowings, the Company also selectively provides (a) an environmental indemnity provided to the lender that holds the lender harmless from and against losses arising from the discharge of hazardous materials from the property and non-compliance with applicable environmental laws; and (b) indemnification of the lender from customary "bad boy acts" of the unconsolidated entity such as fraud, misrepresentation, misapplication or non-payment of rents, profits, insurance, and condemnation proceeds, waste and mechanic liens, and bankruptcy. Additionally, in some cases, under our joint venture agreements, our shares of profits and losses are greater than our contribution percentage. 53 Table of Contents For more information about our off-balance sheet arrangements, please see Note 1011 to our consolidated financial statements. the Consolidated Financial Statements. As of December 31, 2017,2020, we held membership interests in 10nine unconsolidated joint ventures, six of which related to homebuilding activities and fourthree related to land development as noted below.  Of the nine joint ventures, one joint venture had active homebuilding or land development activities ongoing at December 31, 2020 that were completed during January of 2021.  The remaining joint ventures are effectively inactive generally with only limited warranty activities.  We were not a party to threeany loan-to-value maintenance agreements related to unconsolidated joint ventures as of December 31, 2017.2020. The following table reflects certain financial and other information related to our unconsolidated joint ventures as of December 31, 2017:         December 31, 2017     Year Formed Location   Total Joint Venture   NWHM Equity  (2) Debt-to-Total Capital- ization Loan-to- Value Maintenance Agreement Future Capital Commitment (3) Lots Owned and Controlled Joint Venture (Project Name) Ownership % Assets Debt(1) Equity           (Dollars in 000's)   TNHC-HW San Jose LLC (Orchard Park) 2012 San Jose, CA 15% 2,656 — 556   167 — % N/A — — TNHC-TCN Santa Clarita LP (Villa Metro)(4) 2012 Santa Clarita, CA 10% 1,373 — 784   196 — % N/A — — TNHC Newport LLC (Meridian)(4) 2013 Newport Beach, CA 12% 3,091 — 1,643   300 — % N/A — — Encore McKinley Village LLC (McKinley Village) 2013 Sacramento, CA 10% 87,264 23,884 56,265   5,632 30 % Yes — 255 TNHC Russell Ranch LLC (Russell Ranch)(4) (5) 2013 Folsom, CA 35% 85,897 22,513 54,152   20,739 29 % N/A 20,817 870 TNHC-HW Foster City LLC (Foster Square)(5) 2013 Foster City, CA 35% 2,861 — 1,368   635 — % N/A — — Calabasas Village LP (Avanti)(4) 2013 Calabasas, CA 10% 43,958 1,564 40,582   5,172 4 % Yes — 27 TNHC-HW Cannery LLC (Cannery Park)(5) 2013 Davis, CA 35% 10,693 — 7,028   2,459 — % N/A — 18 Arantine Hills Holdings LP (Bedford Ranch) (4) (5) 2014 Corona, CA 5% 142,172 — 139,028   6,949 — % N/A 2,120 1,435 TNHC Mountain Shadows LLC (Mountain Shadows) 2015 Paradise Valley, AZ 25% 65,885 30,380 31,144   8,274 49 % Yes — 59 Total Unconsolidated Joint Ventures   $ 445,850 $ 78,341 $ 332,550   50,523 19 %   $ 22,937 2,664 2020:       December 31, 2020                                     Debt-to-     Loan-to-   Estimated   Lots                                     Total     Value   Future   Owned   Joint Venture Year   Contribution   Total Joint Venture   NWHM   Capital-     Maintenance   Capital   and   (Project Name) Formed Location %(1)   Assets   Debt   Equity   Equity(2)   ization     Agreement   Commitment(3)   Controlled         (Dollars in 000's)   TNHC-HW San Jose LLC (Orchard Park) 2012 San Jose, CA 15%   $ 2,103   $ —   $ 133   $ 40     — %   N/A   $  —     —   TNHC-TCN Santa Clarita LP (Villa Metro) 2012 Santa Clarita, CA 10%     814     —     —     —     — %   N/A     —     —   TNHC Newport LLC (Meridian)(4) 2013 Newport Beach, CA 12%     1,066     —     400     79     — %   N/A     —     —   Encore McKinley Village LLC (McKinley Village) 2013 Sacramento, CA 10%     2,348     —     1,093     100     — %   N/A     —     —   TNHC Russell Ranch LLC (Russell Ranch)(4) (5) (6) 2013 Folsom, CA 50%     4,807     —     —     —     — %   N/A     —     —   TNHC-HW Foster City LLC (Foster Square)(5) 2013 Foster City, CA 35%     318     —     150     70     — %   N/A     —     —   Calabasas Village LP (Avanti) 2013 Calabasas, CA 10%     1,476     —     254     25     — %   N/A     —     —   TNHC-HW Cannery LLC (Cannery)(5) 2013 Davis, CA 35%     1,314     —     870     305     — %   N/A     —     —   TNHC Mountain Shadows LLC (Mountain Shadows) 2015 Paradise Valley, AZ 25%     8,080     —     5,939     1,488     — %   N/A     —     2   Total Unconsolidated Joint Ventures     $ 22,326   $ —   $ 8,839   $ 2,107     — %       $ —     2   (1) (1) Actual equity interests may differ due to current phase of underlying project's life cycle. The carrying valuecontribution percentage reflects the percentage of capital we are generally obligated to contribute (subject to adjustment under the debt is presented net of $0.5 million in unamortized debt issuance costs. Scheduled maturities of the unconsolidated joint venture debt asagreement) and generally (subject to waterfall provisions) aligns with our percentage of December 31, 2017 are as follows: $41.8 million matures in 2018distributions. In some cases our share of profit and $37.0 million matures in 2019. Projects at McKinley Village and Mountain Shadows have multiple debt instruments, some of which do not have LTV maintenance agreements.losses may be greater than our contribution percentage. (2) (2) Represents the Company's equity in unconsolidated joint ventures. Equity does not include $3.8 million in advances to unconsolidated joint ventures and $1.5 million of interest capitalized to certain investments in unconsolidated joint ventures which along with equity, are included in investments in and advances to unconsolidated joint venturesas reflected in the accompanying consolidated balance sheets.financial records of the respective joint ventures.   (3) (3) Estimated future capital commitment represents our proportionate share of estimated future contributions to the respective unconsolidated joint ventures as of December 31, 2017.2020. Actual contributions may differ materially. (4) (4) Certain members A member of the Company's board of directors areis affiliated with entities that have an investmentinvestments in these joint ventures. See Note 1112 to the consolidated financial statements of the Company included in this Annual Report.Consolidated Financial Statements. (5) (5) Land development joint venture. (6) The remaining homebuilding lots of this joint venture were sold during the 2020 fourth quarter and the losses were balanced in accordance with the members’ percentage interests. The preferred return was eliminated and the joint venture is now in close out as it completes certain obligations as the master developer.  As of December 31, 2017,2020, the unconsolidated joint ventures were in compliance with their respective loan covenants, where applicable,had no outstanding debt and we were not required to make any loan-to-value maintenance related payments during the year ended December 31, 2017.2020 or 2019. 54 Table of Contents Contractual Obligations Table The following As a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, we have elected to comply with certain scaled disclosure reporting obligations, and therefore are not providing the table summarizes our future payment obligations under existingof contractual obligations aspursuant to Item 303 of December 31, 2017 including payment obligations due by period. Our purchase obligations primarily represent commitments for land purchases under purchase and land option contracts with nonrefundable deposits and commitments for subcontractor labor and material to be utilized in the normal course of business.     Payments Due By Period Contractual Obligations   Total   Less than 1 Year   1-3 Years   4-5 Years   More than 5 Years     (Dollars in thousands) Long-term debt principal payments (1)   $ 325,000   $ —   $ —   $ 325,000   $ — Long-term interest payments (2)   100,141   23,563   47,125   29,453   — Operating leases   3,831   1,202   2,344   285   — Purchase obligations (3)   365,831   320,905   44,926   —   — Total   $ 794,803   $ 345,670   $ 94,395   $ 354,738   $ — (1) For a more detailed description of our long-term debt, please see Note 8 of the notes to our consolidated financial statements. (2) Future interest payments for our senior notes due 2022. (3) Includes $266.3 million (net of deposits) of the remaining purchase price for land option and land purchase contracts where deposits are nonrefundable and $99.0 million of subcontractor labor and material commitments as of December 31, 2017 for which we are responsible if the subcontractor completes the work as specified in their respective commitments. Excluded from this number is $63.7 million in purchase obligations made on behalf of the owner(s) of fee build projects for which we are reimbursed per our fee building agreements. Regulation S-K. Inflation Our homebuilding and fee building segments can be adversely impacted by inflation, primarily from higher land, financing, labor, material and construction costs. In addition, inflation can lead to higher mortgage rates, which can significantly affect the affordability of mortgage financing to homebuyers. While we attempt to pass on cost increases to customers through increased prices, when weak housing market conditions exist, we may be unable to offset cost increases with higher selling prices. Seasonality Historically, the homebuilding industry experiences seasonal fluctuations in quarterly operating results and capital requirements. We typically experience the highest new home order activity in springlate winter and summer,spring, although this activity is also highly dependentdepends on the number of active selling communities, timing of new community openings and other market factors. For example, we experienced high demand during the fourth quarter of 2020, which we attribute to current market factors including low interest rates, a continued undersupply of homes, and consumers’ increased focus on the importance of home amid the COVID-19 pandemic.  Accordingly, as a result of the ongoing uncertainties and evolution of COVID-19, our traditional seasonal pattern was significantly impacted during 2020.  Since it typicallytypically takes five to nineten months to construct a new home, depending on the nature of the product and whether it is single-family detached or multi-family attached, we typically deliver more homes in the second half of the year as springlate winter and summerspring home orders convert to home deliveries. Because of this seasonality, home starts, construction costs and related cash outflows have historically been highest in the second and third quarters, and a higher levelthe majority of cash receipts from home deliveries occursoccur during the second half of the year.year, particularly in the fourth quarter. We expect this seasonal pattern to continue over the long-term, although it may be affected by the evolution of COVID-19 and volatility in the homebuilding industry. industry and the opening and closeout of communities. Critical Accounting Policies and Estimates The preparation of financial statements in conformity with accounting policies generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Management evaluates such estimates and judgments on an on-going basis and makes adjustments as deemed necessary. Actual results could differ from these estimates if conditions are significantly different in the future. Our significant accounting policies are outlined in Note 1 to the Consolidated Financial Statements included in the Form 10-K. The following are accounting policies that we believe are critical because of the significance of the activity to which they relate or because they require the use of significant estimates, judgments and/or other assumptions in their application. Real Estate Inventories We capitalize pre-acquisition, land, development and other allocated costs, including interest, property taxes and indirect construction costs. Pre-acquisition costs, including nonrefundable land deposits, are expensed to real estate inventories.project abandonment costs if we determine continuation of the prospective project is not probable. Land, development and other common costs are typically allocated to real estate inventories using a methodology that approximates the relative-sales-value method. Home construction costs per production phase are recorded using the specific identification method.  Cost of sales for homes closed includes the estimated total construction costs of each home at completion and an allocation of all applicable land acquisition, land development and related common costs (both incurred and estimated to be incurred) based upon the relative-sales-value of the home within each project. Changes in estimated development and common costs are allocated prospectively to remaining homes in the project. In accordance with Accounting Standards Codification ("ASC") 360, Property, PlanPlant and Equipment ("ASC 360") inventory is stated at cost, unless the carrying amount is determined not to be recoverable, in which case inventory is written down to its fair value. We review each real estate asset at each project (including unconsolidated joint venture real estate projects) on a periodicquarterly basis or whenever indicators of impairment exist. Real estate assets include projects actively selling and projects under development or held for future development. Indicators of impairment include, but are not limited to, significant decreases in local housing market values and selling prices of comparable homes, significant decreases in gross margins or sales absorption rates, costs significantly in excess of budget, and actual or projected cash flow losses. 55 Table of Contents If there are indicators of impairment, we perform a detailed budget and cash flow review of the applicable real estate inventories to determine whether the estimated remainingfuture undiscounted future cash flows of the project are more or less than the asset’s carrying value. If the estimated future undiscounted cash flows are more thanexceed the asset’s carrying value, no impairment adjustment is required. However, if the estimated future undiscounted cash flows are less than the asset’s carrying value, then the asset is reviewed for impairment and ifimpaired. If the asset is deemed impaired, it is written down to its fair value. value in accordance with ASC 820, Fair Value Measurements and Disclosures ("ASC 820"). When estimating undiscounted future cash flows of a project, we make various assumptions, including: (i) expected sales prices and sales incentives to be offered, including the number of homes available, pricing and incentives being offered by us or other builders in other projects, and future sales price adjustments based on market and economic trends; (ii) expected sales pace and cancellation rates based on local housing market conditions, competition and historical trends; (iii) costs expended to date and expected to be incurred including, but not limited to, land and land development costs, home construction costs, interest costs, indirect construction and overhead costs, and selling and marketing costs; (iv) alternative product offerings that may be offered that could have an impact on sales pace, sales price and/or building costs; and (v) alternative uses for the property. Many assumptions are interdependent and a change in one may require a corresponding change to other assumptions. For example, increasing or decreasing sales absorption rates has a direct impact on the estimated per unit sales price of a home and the level of time sensitive costs (such as indirect construction, overhead and carrying costs). Depending on the underlying objective of the project, assumptions could have a significant impact on the projected cash flow analysis. For example, if our objective is to preserve operating margins, our cash flow analysis will be different than if the objective is to increase the velocity of sales. These objectives may vary significantly from project to project and change over time. If a real estate assets are consideredasset is deemed impaired, the impairment adjustments areis calculated by determining the amount the asset’s carrying value exceeds its fair value. Fair value is determined based on eitherin accordance with ASC 820.  We calculate the fair value of real estate inventories considering a land residual value analysis orand a discounted cash flow analysis. Under the land residual value analysis, we estimate what a willing buyer would pay and what a willing seller would sell a parcel of land for (other than in a forced liquidation) in order to generate a market rate operating margin and return.return based on the remaining life and status of the project. Under the discounted cash flow method, the fair value is determined by calculating the present value of future cash flows using a risk adjusted discount rate. CriticalSome of the critical assumptions that are included as part of these analysesinvolved with measuring the asset's fair value include estimating future housing revenues, sales absorption rates, land development and construction costs, and related carrying costs (including future capitalized interest), and all direct selling and marketingother applicable project costs. This evaluation and the assumptions used by management to determine future estimated cash flows and fair value require a substantial degree of judgment, especially with respect to real estate projects that have a substantial amount of development to be completed, have not started selling or are in the early stages of sales, or are longer in duration. Actual revenues, costs and time to complete and sell a community could vary from these estimates which could impact the calculation of fair value of the asset and the corresponding amount of impairment that is recorded in our results of operations. Home Sales Revenue and Cost of Home Sales Homebuilding In accordance with ASC 606, Revenue from Contracts with Customers ("ASC 606"), home sales revenue and cost ofis recognized when our performance obligations within the underlying sales contracts are recognized after construction is completed, a sufficient down payment has been received,fulfilled. We consider our obligations fulfilled when closing conditions are complete, title has transferred to the homebuyer, and collection of the purchase price is reasonably assured and we have no continuing involvement.assured. Sales incentives are recorded as a reduction of revenues when the respective home is closed. Cost of sales is recorded based upon total estimated costs to be allocated to each home within a community. Any changes to the estimated costs are allocated to the remaining undelivered lots and homes within their respective community. The estimation and allocation of these costs requires a substantial degree of judgment by management.   When it is determined that the earnings process is not complete, the related revenue and profit are deferred for recognition in future periods. The estimation process involved in determining relative sales or fair values is inherently uncertain because it involves estimating future sales values of homes before sale and delivery. Additionally, in determining the allocation of costs to a particular land parcel or individual home, we rely on project budgets that are based on a variety of assumptions, including assumptions about construction schedules and future costs to be incurred. It is common that actual results differ from budgeted amounts for various reasons, including construction delays, increases in costs that have not been committed or unforeseen issues encountered during development and construction that fall outside the scope of existing contracts, or costs that come in less than originally anticipated. While the actual results for a particular construction project are accurately reported over time, a variance between the budget and actual costs could result in the understatement or overstatement of costs and have a related impact on gross margins between reporting periods. To reduce the potential for such variances, we have procedures that have been applied on a consistent basis, including assessing and revising project budgets on a periodic basis, obtaining commitments from subcontractors and vendors for future costs to be incurred, and utilizing the most recent information available to estimate costs. We believe that these policies and procedures provide for reasonably dependable estimates for purposes of calculating amounts to be relieved from inventories and expensed to cost of sales in connection with the delivery of homes. 56 Table of Contents Fee Building Land Sales In accordance with ASC 606, land sales revenue is recognized when our performance obligations within the underlying sales contracts are fulfilled.  The Company enters into fee building agreements to provide services whereby it builds homes on behalf of third-party property owners. The third-party property owner funds all project costs incurred byperformance obligations in land sales contracts are typically satisfied at the Company to buildpoint in time consideration and sell the homes. The Company primarily enters into cost plus fee contracts where it charges independent third-party property owners for all direct and indirect costs, plus a negotiated management fee. For these types of contracts, the Company recognizestitle is transferred through escrow at closing.  Total revenue based on the actual total costs it has expended plus the applicable management fee. The management fee is typically recognized simultaneously with transfer of title to the customer.  In instances where material performance obligations may exist after the closing date, a per unit fixed fee or based on a percentageportion of the cost or homeprice is allocated to each performance obligation with revenue recognized as such obligations are completed.  Variable consideration, such as profit participation, may be included within the land sales revenue of the project dependingtransaction price based on the terms of a contract.  The Company includes the agreementestimated amount of variable consideration to which it will be entitled only to the extent it is probable that a significant reversal in the amount of cumulative revenue will not occur when any uncertainty associated with the third-party property owner. In accordance with ASC 605, Revenue Recognition ("ASC 605"), revenues from fee building services are recognized using a cost-to-cost approach in applying the percentage-of-completion method. Under this approach, revenuevariable consideration is earned in proportion to total costs incurred, divided by total costs expected to be incurred. The total estimated cost plus the management fee represents the total contract value. The Company recognizes revenue based on the actual labor and other direct costs incurred, plus the portion of the management fee it has earned to date. In the course of providing its services, the Company routinely subcontracts for services and incurs other direct costs on behalf of the property owners. These costs are passed through to the property owners and, in accordance with GAAP, are included in the Company’s revenue and cost of sales. The Company also enters into fee building and management contracts with third parties and its unconsolidated joint ventures where it provides construction supervision services, as well as sales and marketing services, and does not bear financial risks for any services provided. In accordance with ASC 605, revenues from these services are recognized over a proportional performance method or completed performance method. Under ASC 605, revenue is earned as services are provided in proportion to total services expected to be provided to the customer or on a straight line basis if the pattern of performance cannot be determined. Costs are recognized as incurred. Revenue recognition for any portion of the fees earned from these services that are contingent upon a financial threshold or specific event is deferred until the threshold is achieved or the event occurs. Variable Interest Entities The Company accounts for variable interest entities in accordance with ASC 810, Consolidation ("ASC 810"). Under ASC 810, a variable interest entity ("VIE") is created when: (a) the equity investment at risk in the entity is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by other parties, including the equity holders; (b) the entity’s equity holders as a group either (i) lack the direct or indirect ability to make decisions about the entity, (ii) are not obligated to absorb expected losses of the entity or (iii) do not have the right to receive expected residual returns of the entity; or (c) the entity’s equity holders have voting rights that are not proportionate to their economic interests, and the activities of the entity involve or are conducted on behalf of the equity holder with disproportionately few voting rights. Once we consider the sufficiency of equity and voting rights of each legal entity, we then evaluate the characteristics of the equity holders' interests, as a group, to see if they qualify as controlling financial interests. Our real estate joint ventures consist of limited partnerships and limited liability companies. For entities structured as limited partnerships or limited liability companies, our evaluation of whether the equity holders (equity partners other than us in each our joint ventures) lack the characteristics of a controlling financial interest includes the evaluation of whether the limited partners or non-managing members (the noncontrolling equity holders) lack both substantive participating rights and substantive kick-out rights, defined as follows: Participating rights - provide the noncontrolling equity holders the ability to direct significant financial and operational decision made in the ordinary course of business that most significantly influence the entity's economic performance. Kick-out rights - allow the noncontrolling equity holders to remove the general partner or managing member without cause. If we conclude that any of the three characteristics of a VIE are met, including if equity holders lack the characteristics of a controlling financial interest because they lack both substantive participating rights and substantive kick-out rights, we conclude that the entity is a VIE and evaluate it for consolidation under the variable interest model. If an entity is deemed to be a VIE pursuant to ASC 810, the enterprise that has both (i) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (ii) the obligation to absorb the expected losses of the entity or right to receive benefits from the entity that could be potentially significant to the VIE is considered the primary beneficiary and must consolidate the VIE. In accordance with ASC 810, we perform ongoing reassessments of whether an enterprise is the primary beneficiary of a VIE. subsequently resolved. Investments in and Advances to Unconsolidated Joint Ventures We use the equity method to account for investments in homebuilding and land development joint ventures that qualifywhen any of the following situations exist: 1) the joint venture qualifies as VIEs wherea variable interest entity ("VIE") and we are not the primary beneficiary, and other entities that2) we do not control the joint venture but have the ability to exercise significant influence over theits operating and financial policies of the investee. The Company also uses the equity method whenor 3) we function as the managing member or general partner of the joint venture and our joint venture partner has substantive participating rights or where we can be replaced by our venture partnerreplace us as managing member or general partner without cause. Under the equity method, we recognize our proportionate share of earnings and losses generated by the joint venture upon the delivery of lots or homes to third parties. If applicable, ourOur proportionate share of intra-entity profits and losses are eliminated until the related asset has been sold by the unconsolidated joint venture to third parties. Our ownership interests in our unconsolidated joint ventures vary, but are generally less than or equal to 35%. The accounting policies of our joint ventures are consistent with those of the Company. We review real estate inventory held by our unconsolidated joint ventures for impairment on a quarterly basis, consistent with how we review our real estate inventories.inventories as described in more detail above in the section entitled "Real Estate Inventories". We also review our investments in and advances to unconsolidated joint ventures for evidence of other-than-temporary declines in value.value in accordance with ASC 820. To the extent we deem any portion of our investment in and advances to unconsolidated joint ventures as not recoverable, we impair our investment accordingly. Warranty Accrual and Litigation Accruals We offer warranties on our homes that generally cover various defects in workmanship or materials, or structural construction defects for one year. In addition, we generally provide a more limited warranty, which generally ranges from a minimum of two years up to the period covered by the applicable statute of repose, that covers certain defined construction defects. Estimated future direct warranty costs are accrued and charged to cost of sales in the period when the related homebuilding revenues are recognized. Amounts are accrued based upon the Company’s historical claim and expense rates. In addition, the Company has received warranty payments from third party property owners for certain of its fee building projects that have since closed out where the Company has the contractual risk of construction. These payments are recorded as warranty accruals. We assess the adequacy of our warranty accrual on a quarterly basis and adjust the amounts recorded if necessary. Although we consider the warranty accruals reflected in our consolidated balance sheet to be adequate, actual future costs could differ significantly from our currently estimated amounts. 57 Table of Contents While our subcontractors who perform our homebuilding work generally provide us with an indemnity for claims relating to their workmanship and materials, we also purchase general liability insurance that covers development and construction activity at each of our communities. Our subcontractors are usually covered by these programs through an owner-controlled insurance program, or "OCIP." Consultants such as engineers and architects are generally not covered by the OCIP but are required to maintain their own insurance. In general, we maintain insurance, subject to deductibles and self-insured retentions, to protect us against various risks associated with our activities, including, among others, general liability, "all-risk" property, construction defects, workers’ compensation, automobile, and employee fidelity. Our master general liability policies which cover most of our projects allow for our warranty spend to erode our self-insured retention requirements. We establish a separate reserve for warranty and for known and incurred but not reported (“IBNR”) construction defect claims based on our historical claim and expense data. Our warranty accrual and litigation reserves for construction defect claims are presented on a gross basis within accrued expenses and other liabilities in our consolidated financial statements without consideration of insurance recoveries. Expected recoveries from insurance carriers are presented as warranty insurance receivables and insurance receivables within other assets in our consolidated balance sheets and are recorded based on actual insurance claims and amounts determined using our construction defect claim and warranty accrual estimates, our insurance policy coverage limits for the applicable policy years and historical recovery rates. Because of the inherent uncertainty and variability in these assumptions, our actual costs and related insurance recoveries could differ significantly from amounts currently estimated. Income Taxes Income taxes are accounted for in accordance with ASC 740, Income Taxes ("ASC 740"). The consolidated provision for, or benefit from, income taxes is calculated using the asset and liability method under which deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred Each quarter we assess our deferred tax assets are evaluated on a quarterly basisasset to determine if adjustmentswhether all or any portion of the asset is more likely than not (defined as a likelihood of more than 50%) unrealizable under ASC 740. We are required to theestablish a valuation allowance are required.for any portion of the tax asset we conclude is more likely than not unrealizable. In accordance with ASC 740, we assessthe determination of whether a valuation allowance for deferred tax assets is necessary requires an analysis of both positive and negative evidence regarding realization of the deferred tax assets and should be established based on the consideration of all available evidence using a "more likely than not" standardevidence. Our assessment considers, among other things, the nature, frequency and severity of prior cumulative losses, forecasts of future taxable income, the duration of statutory carryforward periods, our utilization experience with respectnet operating losses and tax credit carryforwards and the available tax planning alternatives, to whether deferred tax assets will be realized.the extent these items are applicable, and the availability of net operating loss carrybacks under certain circumstances. The ultimate realization of deferred tax assets depends primarily on the generation of future taxable income during the periods in which the differences become deductible.deductible, as well as the ability to carryback net operating losses in the event that this option becomes available. The value of our deferred tax assets will depend on applicable income tax rates. Judgment is required in determining the future tax consequences of events that have been recognized in our consolidated financial statements and/or tax returns. Differences between anticipated and actual outcomes of these future tax consequences could have a material impact on our consolidated financial statements. Changes in existing tax laws and tax rates also affect actual tax results and the valuation of deferred tax assets over time. ASC 740 defines the methodology for recognizing the benefits of uncertain tax return positions as well as guidance regarding the measurement of the resulting tax benefits.  These provisions require an enterprise to recognize the financial statement effects of a tax position when it is more likely than not, (defined as a likelihood of more than 50%), based on the technical merits, that the position will be sustained upon examination.  In addition, these provisions provide guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.  The evaluation of whether a tax position meets the more-likely-than-not recognition threshold requires a substantial degree of judgment by management based on the individual facts and circumstances.  Changes in the recognition or measurement of uncertain tax positions could result in material increases or decreases in our income tax expense in the period in which we make the change. 58 Stock-Based Compensation We account for share-based awards in accordance with ASC 718, Compensation – Stock Compensation ("ASC 718") and ASC 505-50, Equity – Equity Based Payments to Non-Employees ("ASC 505-50"). ASC 718 requires that the cost resulting from all share-based payment transactions be recognized in a company's financial statements. ASC 718 requires all entities to apply a fair-value-based measurement method in accounting for share-based payment transactions with employees except for equity instruments held by employee share ownership plans. ASC 505-50 requires that if an employee becomes a non-employee and continues to vest in a share-based award pursuant to the award's original terms, the award be treated as an award to a non-employee prospectively, provided the individual is required to continue providing services to the employer (such as consulting services). These awards are to be accounted for prospectively, such that the fair valueTable of the award will be re-measured at each reporting date until the earlier of (a) the performance commitment date or (b) the date the services required under the agreement have been completed. ASC 505-50 requires that compensation cost ultimately recognized in the Company's financial statements be the sum of (a) the compensation cost recognized during the period of time the individual was an employee (based on the grant-date fair value) plus (b) the fair value of the award determined on the measurement date determined in accordance with ASC 505-50 for the pro-rata portion of the vesting period in which the individual was a non-employee. The determination of the fair value of share-based awards at the grant date, or subsequent remeasurement dates under ASC 505-50, requires judgment in developing assumptions and involves a number of variables.  These variables include, but are not limited to:  expected stock-price volatility over the term of the awards and expected stock option exercise behavior.  Additionally, judgment is required in the case of performance share awards in estimating the level of performance that will be achieved and the number of shares that will be earned. If actual results differ significantly from these estimates, stock-based compensation expense and our consolidated results of operations could be significantly impacted. Contents Recently Issued Accounting Standards See Note 1 to the accompanying notes to consolidated financial statementsConsolidated Financial Statements included in this annual report on Form 10-K. JOBS Act We qualify as an "emerging growth company" pursuant to the provisions of the JOBS Act. For as long as we are an "emerging growth company," we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies," including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding advisory "say-on-pay" votes on executive compensation and shareholder advisory votes on golden parachute compensation. In addition, Section 107 of the JOBS Act also provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. An "emerging growth company" can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we have chosen to "opt out" of such extended transition period and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non- emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable. Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risks related to fluctuations in interest rates on our outstanding variable rate debt. We did not utilize swaps, forward or option contracts on interest rates or commodities, or other types of derivative financial instruments as of or during the year ended December 31, 2017.2020. We have not entered into and currently do not hold derivatives for trading or speculative purposes. The table below details the principal amount and the average interest rates for the outstanding debt for each category based upon the expected maturity or disposition dates. The fair value of our senior unsecured notesNotes is derived from quoted market prices. The fair value of our variable rate debt consists of the balance of our senior unsecured revolving credit facility (the "Credit Facility").Credit Facility. Based on the short-term duration of LIBOR rates, the fair value of debt under the Credit Facility approximates the carrying value.   Expected Maturity Date           2018   2019 - 2022   Thereafter   Total   Estimated Fair Value   (Dollars in thousands) Senior Unsecured Notes                   Fixed Rate $ —   $ 325,000   $ —   $ 325,000   $ 336,375 Weighted Average Interest Rate — %   7.25 %   — %   7.25 %   NA                     Senior Unsecured Credit Facility                   Variable rate debt $ —   $ —   $ —   $ —   $ — Weighted Average Interest Rate — %   4.6 %   — %   4.6 %   NA     Expected Maturity Date                       2021       2022 - 2025     Thereafter     Total     Estimated Fair Value       (Dollars in thousands)   Senior Unsecured Notes                                         Fixed Rate(1)   $ —     $ 250,000     $ —     $ 250,000     $ 256,875   Weighted Average Interest Rate     — %     7.25 %     — %     7.25 %   NA                                             Senior Unsecured Credit Facility                                         Variable rate debt   $ —     $ —     $ —     $ —     $ —   Weighted Average Interest Rate     — %     4.40 %     — %     4.40 %   NA   (1) Represents our 2025 Notes due October 15, 2025. We do not believe that the future market rate risks related to the above securities will have a material adverse impact on our financial position, results of operations or liquidity. 59 Table of Contents Item 8. Financial Statements and Supplementary Data The information required by this item is set forth beginning on page 60. page 64. Item 9. Changes in and Disagreements withWith Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified by the SEC's rules and forms, is communicated to the our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure based on the definition of "disclosure controls and procedures" in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching our desired disclosure control objectives. In designing controls and procedures specified in the SEC's rules and forms, and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error and mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of controls. At the end of the period being reported upon, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2017. 2020. Management's Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 20172020 based on the framework established in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission (2013 Framework). Based on this framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2017. This annual report on Form 10-K does not include an attestation report of our2020. KPMG LLP the independent registered public accounting firm becausethat audited the Company's consolidated financial statements included in this annual report, has issued its report on the effectiveness of the Company's internal control over financial reporting as of December 31, 2020. 60 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors The New Home Company Inc.: Opinion on Internal Control Over Financial Reporting We have audited The New Home Company Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2020, the related consolidated statements of operations, equity, and cash flows for the year then ended, and the related notes (collectively, the consolidated financial statements), and our report dated February 11, 2021 expressed an "emerging growth company" underunqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the JOBS Acteffectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our independent registeredaudit. We are a public accounting firm is notregistered with the PCAOB and are required to issuebe independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such an attestation report.other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Irvine, California February 11, 2021 61 Table of Contents Changes in Internal Controls There was no change in the Company’s internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. 62 On February 13, 2018, the Company executed an amendment to that certain consulting agreement dated February 16, 2017 with Mr. Wayne Stelmar, a member Table of the Company’s Board of Directors and former executive officer.  The amendment, among other things, extends the term of Mr. Stelmar’s consulting arrangement to August 17, 2019 and reduces his monthly consulting fee from $16,800 to $6,000.Contents PART III Item 10. Directors, Executive Officers and Corporate Governance Information required by Item 10 of Part III is included in our Proxy Statement relating to our 20182021 Annual Meeting of Shareholders and is incorporated herein by reference. Item 11. Executive Compensation Information required by Item 11 of Part III is included in our Proxy Statement relating to our 20182021 Annual Meeting of Shareholders and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information required by Item 12 of Part III is included in our Proxy Statement relating to our 20182021 Annual Meeting of Shareholders and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence Information required by Item 13 of Part III is included in our Proxy Statement relating to our 20182021 Annual Meeting of Shareholders and is incorporated herein by reference. Item 14. Principal AccountingAccountant Fees and Services Information required by Item 14 of Part III is included in our Proxy Statement relating to our 20182021 Annual Meeting of Shareholders and is incorporated herein by reference. 63 Table of Contents PART IV Item 15. Exhibits and Financial Statement Schedules (a) The following documents are filed as part of this annual report on Form 10-K: (1) (1) Financial Statements: The New Home Company Inc. PAGE ReportReports of Independent Registered Public Accounting Firm 6265 Consolidated Balance Sheets as of December 31, 20172020 and 20162019 6368 Consolidated Statements of Operations for the Years Ended December 31, 2017, 20162020, 2019 and 20152018 6469 Consolidated Statements of Equity for the Years Ended December 31, 2017, 20162020, 2019 and 20152018 6570 Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 20162020, 2019 and 20152018 6671 Notes to Consolidated Financial Statements 6772 (2) TNHC Meridian Investors LLC (our unconsolidated investee) PAGE Report of Independent Auditors 100 Balance Sheets as of December 31, 2017 (unaudited) and 2016 101 Statements of Operations for the Years Ended December 31, 2017 (unaudited), 2016 and 2015 102 Statements of Members' Capital for the Years Ended December 31, 2017 (unaudited), 2016 and 2015 103 Statements of Cash Flows for the Years Ended December 31, 2017 (unaudited), 2016 and 2015 104 Notes to Financial Statements 105 TNHC Newport LLC (our unconsolidated lower tier investee) PAGE Report of Independent Auditors 110 Balance Sheets as of December 31, 2017 and 2016 111 Statements of Operations for the Years Ended December 31, 2017, 2016 and 2015 112 Statements of Members' Capital for the Years Ended December 31, 2017, 2016 and 2015 113 Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015 114 Notes to Financial Statements 115 (2) Financial Statement Schedules All other schedules have been omitted since the required information is presented in the financial statements and the related notes or is not applicable. (3) Exhibits (3) Exhibits The exhibits filed or furnished as part of this annual report on Form 10-K are listed in the Index to Exhibits immediately preceding the signature page, which Index is incorporated in this Item by reference. 64 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The To the Stockholders and the Board of Directors and Stockholders The New Home Company Inc. : Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheetssheet of The New Home Company Inc. and subsidiaries (the "Company")Company) as of December 31, 2017 and 2016,2020, the related consolidated statements of operations, equity, and cash flows for each of the three years in the periodyear then ended, December 31, 2017, and the related notes (collectively, referred to as the "financial statements")consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company atas of December 31, 20172020, and 2016, and the consolidated results of its operations and its cash flows for each of the three years in the periodyear ended December 31, 2017,2020, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 11, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company'sthese consolidated financial statements based on our audits.audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Valuation of Real Estate Inventories As discussed in Notes 1 and 4 to the consolidated financial statements, the real estate inventory balance as of December 31, 2020 was $315 million. Inventory consists of land, land under development, deposits, homes under construction, completed homes and model homes, all of which are stated at cost, unless the carrying amount is determined not to be recoverable, in which case inventory is written down to its fair value. The Company reviews each real estate asset on a quarterly basis or whenever indicators of impairment exist. Indicators of impairment include, but are not limited to, significant decreases in local housing market values and selling prices of comparable homes, significant decreases in gross margins or sales absorption rates, costs significantly in excess of budget and actual or projected cash flow losses. If there are indicators of impairment, the Company will perform an undiscounted cash flow analysis to determine if the asset is impaired. We identified the assessment of real estate inventories for impairment as a critical audit matter. Specifically, evaluating the Company’s identification of potential impairment indicators required subjective auditor judgment. In addition, the significant assumptions regarding selling prices of comparable homes, gross margins, sales absorption rates, and discount rates used in management’s impairment analyses required the application of greater auditor judgment. Changes to these estimates and assumptions could have a significant impact on the Company’s impairment analysis. 65 Table of Contents We performed the following primary audit procedures to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over management’s impairment indicator analysis. This included controls over the gross margin analyses and controls over management’s review of the significant assumptions, identified above, used in the undiscounted and discounted cash flow analyses for projects identified with impairment indicators. We evaluated the gross margin assumptions used by management to identify projects with indicators of impairment by inspecting supporting documentation of actual sales and related costs for real estate inventory sold during the year.  Additionally, to test management’s ability to develop cash flow projections we compared projected selling prices within management's undiscounted cash flow analysis to actual home closings in the current year and investigated variances. For certain projects, we evaluated the reasonableness of the gross margins and absorption rates used in management’s undiscounted cash flow analyses by comparing those assumptions to actual results. We involved valuation professionals with specialized skills or knowledge who assisted in: o assessing the reasonableness of the sales absorption rate used in the company’s cash flow projections by comparing to available market data o assessing the reasonableness of the discount rate used in management’s fair value calculation by comparing to available market data. /s/ KPMG LLP We have served as the Company’s auditor since 2020. Irvine, California February 11, 2021 66 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of The New Home Company Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of The New Home Company Inc. (the Company), as of December 31, 2019, the related consolidated income statements, statements of equity, and cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2019, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We have served as the Company'sCompany’s auditor since 2010.from 2010 to 2020. Irvine, California February 13, 2020 67 Table of Contents   Irvine, California February 14, 2018 THE NEW HOME COMPANY INC. CONSOLIDATED BALANCE SHEETS     December 31,       2020     2019       (Dollars in thousands, except par value amounts)   Assets                 Cash and cash equivalents   $ 107,279     $ 79,314   Restricted cash     180       117   Contracts and accounts receivable     4,924       15,982   Due from affiliates     102       238   Real estate inventories     314,957       433,938   Investment in and advances to unconsolidated joint ventures     2,107       30,217   Deferred tax asset, net     15,447       17,503   Other assets     50,703       25,880   Total assets   $ 495,699     $ 603,189                     Liabilities and equity                 Accounts payable   $ 17,182     $ 25,044   Accrued expenses and other liabilities     36,210       40,554   Senior notes, net     244,865       304,832   Total liabilities     298,257       370,430   Commitments and contingencies (Note 11)                   Equity:                 Stockholders' equity:                 Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares outstanding     0       0   Common stock, $0.01 par value, 500,000,000 shares authorized, 18,122,345 and 20,096,969, shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively     181       201   Additional paid-in capital     191,496       193,862   Retained earnings     5,765       38,584   Total stockholders' equity     197,442       232,647   Non-controlling interest in subsidiary     0       112   Total equity     197,442       232,759   Total liabilities and equity   $ 495,699     $ 603,189     December 31,   2017   2016   (Dollars in thousands, except par value amounts) Assets       Cash and cash equivalents $ 123,546   $ 30,496 Restricted cash 424   585 Contracts and accounts receivable 23,224   27,833 Due from affiliates 1,060   1,138 Real estate inventories 416,143   286,928 Investment in and advances to unconsolidated joint ventures 55,824   50,857 Other assets 24,291   21,299 Total assets $ 644,512   $ 419,136         Liabilities and equity       Accounts payable $ 23,722   $ 33,094 Accrued expenses and other liabilities 38,054   23,418 Unsecured revolving credit facility —   118,000 Senior notes, net 318,656   — Total liabilities 380,432   174,512 Commitments and contingencies (Note 10)   Equity:       Stockholders' equity:       Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares outstanding —   — Common stock, $0.01 par value, 500,000,000 shares authorized, 20,876,837 and 20,712,166, shares issued and outstanding as of December 31, 2017 and December 31, 2016, respectively 209   207 Additional paid-in capital 199,474   197,161 Retained earnings 64,307   47,155 Total stockholders' equity 263,990   244,523 Noncontrolling interest in subsidiary 90   101 Total equity 264,080   244,624 Total liabilities and equity $ 644,512   $ 419,136 See accompanying notes to the consolidated financial statements. 68 Table of Contents THE NEW HOME COMPANY INC. CONSOLIDATED STATEMENTS OF OPERATIONS     Year Ended December 31,       2020     2019     2018       (Dollars in thousands, except per share amounts)   Revenues:                         Home sales   $ 426,251     $ 532,352     $ 504,029   Land sales     157       41,664       —   Fee building, including management fees     81,003       95,333       163,537         507,411       669,349       667,566   Cost of Sales:                         Home sales     367,026       469,557       436,530   Home sales impairments     19,000       8,300       10,000   Land sales     157       43,169       —   Land sales impairment     —       1,900       —   Fee building     79,583       93,281       159,136         465,766       616,207       605,666   Gross Margin:                         Home sales     40,225       54,495       57,499   Land sales     —       (3,405 )     —   Fee building     1,420       2,052       4,401         41,645       53,142       61,900                             Selling and marketing expenses     (30,777 )     (36,357 )     (36,065 ) General and administrative expenses     (26,699 )     (25,723 )     (25,966 ) Equity in net loss of unconsolidated joint ventures     (18,791 )     (3,503 )     (19,653 ) Interest expense     (3,655 )     —       —   Project abandonment costs     (14,098 )     (94 )     (206 ) Gain (loss) on early extinguishment of debt     (7,254 )     1,164       —   Other income (expense), net     173       (445 )     (315 ) Pretax loss     (59,456 )     (11,816 )     (20,305 ) Benefit for income taxes     26,587       3,815       6,075   Net loss     (32,869 )     (8,001 )     (14,230 ) Net (income) loss attributable to non-controlling interest     50       (36 )     14   Net loss attributable to The New Home Company Inc.   $ (32,819 )   $ (8,037 )   $ (14,216 )                           Loss per share attributable to The New Home Company Inc.:                         Basic   $ (1.76 )   $ (0.40 )   $ (0.69 ) Diluted   $ (1.76 )   $ (0.40 )   $ (0.69 )                           Weighted average shares outstanding:                         Basic     18,680,993       20,063,148       20,703,967   Diluted     18,680,993       20,063,148       20,703,967     Year Ended December 31,   2017   2016   2015   (Dollars in thousands, except per share amounts) Revenues:           Home sales $ 560,842   $ 507,949   $ 280,209 Fee building, including management fees from unconsolidated joint ventures of $4,945, $8,202 and $12,426, respectively 190,324   186,507   149,890   751,166   694,456   430,099 Cost of Sales:           Home sales 473,213   433,559   235,232 Home sales impairments 2,200   2,350   — Land sales impairment —   1,150   — Fee building 184,827   178,103   139,677   660,240   615,162   374,909 Gross Margin:           Home sales 85,429   72,040   44,977 Land sales —   (1,150 )   — Fee building 5,497   8,404   10,213   90,926   79,294   55,190             Selling and marketing expenses (32,702 )   (26,744 )   (13,741 ) General and administrative expenses (26,330 )   (25,882 )   (20,278 ) Equity in net income of unconsolidated joint ventures 866   7,691   13,767 Other income (expense), net (229 )   (409 )   (1,027 ) Pretax income 32,531 33,950 33,911 Provision for income taxes (15,390 )   (13,024 )   (12,533 ) Net income 17,141   20,926   21,378 Net loss attributable to noncontrolling interest 11   96   310 Net income attributable to The New Home Company Inc. $ 17,152   $ 21,022   $ 21,688             Earnings per share attributable to The New Home Company Inc.:           Basic $ 0.82   $ 1.02   $ 1.29 Diluted $ 0.82   $ 1.01   $ 1.28 Weighted average shares outstanding:           Basic 20,849,736   20,685,386   16,767,513 Diluted 20,995,498   20,791,445   16,941,088 See accompanying notes to the consolidated financial statements. 69 Table of Contents   THE NEW HOME COMPANY INC. CONSOLIDATED STATEMENTS OF EQUITY     Stockholders’ Equity                       Number of Shares of Common Stock     Common Stock     Additional Paid-in Capital     Retained Earnings     Total Stockholders’ Equity     Non-controlling Interest in Subsidiary     Total Equity       (Dollars in thousands)   Balance at December 31, 2017     20,876,837     $ 209     $ 199,474     $ 64,307     $ 263,990     $ 90     $ 264,080   Adoption of ASC 606 and ASU 2018-07 (see Note 1)     —       0       (18 )     (3,347 )     (3,365 )     0       (3,365 ) Net loss     —       0       0       (14,216 )     (14,216 )     (14 )     (14,230 ) Stock-based compensation expense     —       0       3,090       0       3,090       0       3,090   Shares net settled with the Company to satisfy employee personal income tax liabilities resulting from share based compensation plans     (86,692 )     0       (982 )     0       (982 )     0       (982 ) Shares issued through stock plans     271,875       2       (2 )     0       0       0       0   Repurchase of common stock     (1,003,116 )     (10 )     (8,430 )     (123 )     (8,563 )     0       (8,563 ) Balance at December 31, 2018     20,058,904     $ 201     $ 193,132     $ 46,621     $ 239,954     $ 76     $ 240,030   Net income (loss)     —       0       0       (8,037 )     (8,037 )     36       (8,001 ) Stock-based compensation expense     —       0       2,260       0       2,260       0       2,260   Shares net settled with the Company to satisfy employee personal income tax liabilities resulting from share based compensation plans     (85,420 )     0       (488 )     0       (488 )     0       (488 ) Shares issued through stock plans     277,401       2       (2 )     0       0       0       0   Repurchase of common stock     (153,916 )     (2 )     (1,040 )     0       (1,042 )     0       (1,042 ) Balance at December 31, 2019     20,096,969     $ 201     $ 193,862     $ 38,584     $ 232,647     $ 112     $ 232,759   Net loss     —       0       0       (32,819 )     (32,819 )     (50 )     (32,869 ) Stock-based compensation expense     —       0       2,197       0       2,197       0       2,197   Shares net settled with the Company to satisfy employee personal income tax liabilities resulting from share based compensation plans     (58,644 )     0       (304 )     0       (304 )     0       (304 ) Shares issued through stock plans     244,812       2       (2 )     0       0       0       0   Repurchase of common stock     (2,160,792 )     (22 )     (4,257 )     0       (4,279 )     0       (4,279 ) Non-controlling interest distribution     —       0       0       0       0       (62 )     (62 ) Balance at December 31, 2020     18,122,345     $ 181     $ 191,496     $ 5,765     $ 197,442     $ 0     $ 197,442       Stockholders’ Equity   Noncontrolling Interest in Subsidiary   Total Equity     Number of Shares of Common Stock   Common Stock   Additional Paid-in Capital   Retained Earnings   Total Stockholders’ Equity         (Dollars in thousands) Balance at December 31, 2014   16,448,750   $ 164   $ 143,475   $ 4,445   $ 148,084   $ 2,342   $ 150,426 Net income (loss)   —   —   —   21,688   21,688   (310 )   21,378 Noncontrolling interest contribution   —   —   —   —   —   1,301   1,301 Noncontrolling interest distribution   —   —   —   —   —   (2,411 )   (2,411 ) Stock-based compensation expense   —   —   3,884   —   3,884   —   3,884 Shares net settled with the Company to satisfy minimum employee personal income tax liabilities resulting from share based compensation plans   (17,590 )   —   (248 )   — — (248 )   —   (248 ) Excess tax benefits from stock-based compensation   —   —   97   — — 97   —   97 Shares issued through stock plans   86,970   1   16   — 69,380 17   —   17 Issuance of common stock, net of issuance costs   4,025,000   40   47,213   —   47,253   —   47,253 Balance at December 31, 2015   20,543,130   205   194,437   26,133   220,775   922   221,697 Net income (loss)   —   —   —   21,022   21,022   (96 )   20,926 Noncontrolling interest distribution   —   —   —   —   —   (725 )   (725 ) Stock-based compensation expense   —   —   3,471   —   3,471   —   3,471 Shares net settled with the Company to satisfy minimum employee personal income tax liabilities resulting from share based compensation plans   (62,597 )   —   (648 )   —   (648 )   —   (648 ) Excess tax provision from stock-based compensation   —   —   (97 )   —   (97 )   —   (97 ) Shares issued through stock plans   231,633   2   (2 )   —   —   —   — Balance at December 31, 2016   20,712,166   207   197,161   47,155   244,523   101   244,624 Net income (loss)   —   —   —   17,152   17,152   (11 )   17,141 Stock-based compensation expense   —   —   2,803   —   2,803   —   2,803 Shares net settled with the Company to satisfy minimum employee personal income tax liabilities resulting from share based compensation plans   (56,092 )   —   (590 )   —   (590 )   —   (590 ) Shares issued through stock plans   220,763   2   100   —   102   —   102 Balance at December 31, 2017   20,876,837   $ 209   $ 199,474   $ 64,307   $ 263,990   $ 90   $ 264,080                               See accompanying notes to the consolidated financial statements. 70 Table of Contents THE NEW HOME COMPANY INC. CONSOLIDATED STATEMENTS OF CASH FLOWS     Year Ended December 31,       2020     2019     2018       (Dollars in thousands)   Operating activities:                         Net loss   $ (32,869 )   $ (8,001 )   $ (14,230 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities:                         Deferred taxes     2,056       (3,566 )     (7,620 ) Amortization of stock-based compensation     2,197       2,260       3,090   Distributions of earnings from unconsolidated joint ventures     110       374       715   Inventory impairments     19,000       10,200       10,000   Project abandonment costs     14,098       94       206   Equity in net loss of unconsolidated joint ventures     18,791       3,503       19,653   Deferred profit from unconsolidated joint ventures     0       0       136   Depreciation and amortization     6,721       8,957       6,631   (Gain) loss on early extinguishment of debt     7,254       (1,164 )     0   Net changes in operating assets and liabilities:                         Contracts and accounts receivable     11,058       2,283       4,959   Due from affiliates     136       930       (242 ) Real estate inventories     85,200       123,239       (157,705 ) Other assets     (35,357 )     (2,326 )     (11,642 ) Accounts payable     (7,862 )     (14,347 )     15,669   Accrued expenses and other liabilities     2,549       (1,178 )     (9,305 ) Net cash provided by (used in) operating activities     93,082       121,258       (139,685 ) Investing activities:                         Purchases of property and equipment     (291 )     (41 )     (246 ) Contributions and advances to unconsolidated joint ventures     (4,995 )     (8,826 )     (15,066 ) Distributions of capital and repayment of advances from unconsolidated joint ventures     14,257       9,133       15,436   Interest collected on advances to unconsolidated joint ventures     0       0       178   Net cash provided by investing activities     8,971       266       302   Financing activities:                         Borrowings from credit facility     0       50,000       150,000   Repayments of credit facility     0       (117,500 )     (82,500 ) Proceeds from senior notes     250,000       0       0   Repurchases of senior notes     (312,410 )     (15,605 )     0   Proceeds from note payable     7,036       0       0   Repayments of note payable     (7,036 )     0       0   Payment of debt issuance costs     (6,970 )     0       0   Non-controlling interest distribution     (62 )     0       0   Repurchases of common stock     (4,279 )     (1,042 )     (8,563 ) Tax withholding paid on behalf of employees for stock awards     (304 )     (488 )     (982 ) Net cash (used in) provided by financing activities     (74,025 )     (84,635 )     57,955   Net increase (decrease) in cash, cash equivalents and restricted cash     28,028       36,889       (81,428 ) Cash, cash equivalents and restricted cash – beginning of year     79,431       42,542       123,970   Cash, cash equivalents and restricted cash – end of year   $ 107,459     $ 79,431     $ 42,542     Year Ended December 31,   2017   2016   2015   (Dollars in thousands) Operating activities:           Net income $ 17,141   $ 20,926   $ 21,378 Adjustments to reconcile net income to net cash used in operating activities:           Deferred taxes (1,073 )   (918 )   (1,675 ) Noncash deferred tax asset charge 3,190   —   — Amortization of equity based compensation 2,803   3,471   3,884 Excess income tax provision/(benefit) from stock-based compensation —   97   (97 ) Inventory impairments 2,200   3,500   — Abandoned project costs 383   580   635 Gain from notes payable principal reduction —   (250 )   — Distributions of earnings from unconsolidated joint ventures 1,588   3,742   18,477 Equity in net income of unconsolidated joint ventures (866 )   (7,691 )   (13,767 ) Deferred profit from unconsolidated joint ventures 821   646   (1,603 ) Depreciation and amortization 449   511   473 Net changes in operating assets and liabilities:           Restricted cash 161   396   (97 ) Contracts and accounts receivable 4,670   (3,737 )   (10,796 ) Due from affiliates 18   (344 )   1,683 Real estate inventories (114,930 )   (71,388 )   (65,942 ) Other assets (5,255 )   (756 )   (3,651 ) Accounts payable (9,546 )   6,171   9,790 Accrued expenses and other liabilities 7,544   2,921   8,712 Due to affiliates —   (293 )   293 Net cash used in operating activities (90,702 )   (42,416 )   (32,303 ) Investing activities:           Purchases of property and equipment (195 )   (439 )   (418 ) Cash assumed from joint venture at consolidation 995   2,009   — Contributions and advances to unconsolidated joint ventures (27,479 )   (15,088 )   (15,028 ) Distributions of capital and repayment of advances to unconsolidated joint ventures 15,577   15,307   32,026 Interest collected on advances to unconsolidated joint ventures 552   —   — Net cash provided by (used in) investing activities (10,550 )   1,789   16,580 Financing activities:           Net proceeds from issuance of common stock —   —   47,253 Cash distributions to noncontrolling interest in subsidiary —   (725 )   (2,411 ) Borrowings from credit facility 88,000   223,050   99,450 Repayments of credit facility (206,000 )   (179,974 )   (125,000 ) Proceeds from senior notes 324,465   —   — Borrowings from other notes payable —   343   3,552 Repayments of other notes payable (4,110 )   (15,636 )   (5,171 ) Payment of debt issuance costs (7,565 )   (1,064 )   — Minimum tax withholding paid on behalf of employees for stock awards (590 )   (648 )   (248 ) Excess income tax (provision)/benefit from stock-based compensation —   (97 )   97 Proceeds from exercise of stock options 102   —   17 Net cash provided by financing activities 194,302   25,249   17,539 Net increase (decrease) in cash and cash equivalents 93,050   (15,378 )   1,816 Cash and cash equivalents – beginning of year 30,496   45,874   44,058 Cash and cash equivalents – end of year $ 123,546   $ 30,496   $ 45,874 See accompanying notes to the consolidated financial statements. 71 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 1.    Organization and Summary of Significant Accounting Policies Organization The New Home Company Inc. (the "Company"), a Delaware corporation, and its subsidiaries are primarily engaged in all aspects of residential real estate development, including acquiring land and designing, constructing and selling homes in California and Arizona. Initial Public Based on our public float of $46.0 million at June 30, 2020, we are a smaller reporting company and Follow-On Offerings The Company completed its initial public offering ("IPO") on January 30, 2014. In preparation for the IPO, the Company reorganized from a Delaware limited liability company ("LLC") into a Delaware corporation, issuing 8,636,250 shares of common stockare subject to the former members of the LLCreduced disclosure obligations in the Company's formation transactions,our periodic reports and changed its name to The New Home Company Inc. As a result of the IPO, the Company issued and sold 8,984,375 shares of common stock (including 1,171,875 shares sold pursuant to the underwriters' exercise of their option to purchase additional shares from the Company) at the public offering price of $11.00 per share. In accordance with the terms of the IPO, with net proceeds received from the underwriters' exercise of their option to purchase additional shares, the Company repurchased 1,171,875 shares of its common stock issued to a member of the LLC in connection with the Company's formation transactions. The Company received proceeds of $75.8 million, net of the underwriting discount, offering expenses and the repurchase of shares. Upon the close of the IPO, the Company had 16,448,750 common shares outstanding. On December 9, 2015, the Company completed a follow-on equity offering, issuing and selling 4,025,000 shares of common stock (including 525,000 shares sold pursuant to the underwriter's exercise of their option to purchase additional shares from the Company) at a public offering price of $12.50 per share. The Company received proceeds of $47.3 million, net of the underwriting discount and offering expenses. After the closing of the follow-on offering, the Company had 20,541,546 common shares outstanding. proxy statements. Basis of Presentation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts have been eliminated upon consolidation. The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") as contained within the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"). Unless the context otherwise requires, the terms "we", "us", "our" and "the Company" refer to the Company and its wholly owned subsidiaries, on a consolidated basis. Use of Estimates The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying consolidated financial statements and notes. Accordingly, actual results could differ materially from these estimates. Reclassifications Certain No items in the prior year consolidated financial statements have been reclassified to conform with current year presentation. reclassified.    Segment Reporting Accounting Standards Codification ("ASC") ASC 280,Segment Reporting ("ASC 280") established standards for the manner in which public enterprises report information about operating segments.  The Company's reportable segments are Arizona homebuilding, California homebuilding, and fee building. In accordance with ASC 280, we have determined that our California homebuilding divisionreportable segment aggregates the Southern California and our fee building division are ourNorthern California homebuilding operating segments which are also our reportable segments. based on the similarities in long-term economic characteristics.   Cash and Cash Equivalents We define cash and cash equivalents as cash on hand, demand deposits with financial institutions, and short term liquid investments with a maturity date of less than three months from the date of purchase. Restricted Cash Restricted cash of $0.4$0.2 million and $0.6$0.1 million as of December 31, 2017 2020 and 2016,2019, respectively, is held in accounts for payments of subcontractor costs incurred in connection with various fee building projects. The table below shows the line items and amounts of cash and cash equivalents and restricted cash as reported within the Company's consolidated balance sheets for each period shown that sum to the total of the same such amounts at the end of the periods shown in the accompanying consolidated statements of cash flows. 72 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018     Year Ended December 31,       2020     2019     2018       (Dollars in thousands)   Cash and cash equivalents   $ 107,279     $ 79,314     $ 42,273   Restricted cash     180       117       269   Total cash, cash equivalents, and restricted cash shown in the statements of cash flows   $ 107,459     $ 79,431     $ 42,542   Real Estate Inventories and Cost of Sales We capitalize pre-acquisition, land, development and other allocated costs, including interest, property taxes and indirect construction costs. Pre-acquisition costs, including nonrefundable land deposits, are expensed to other income (expense), netproject abandonment costs if we determine continuation of the prospective project is not probable. Land, development and other common costs are typically allocated to real estate inventories using a methodology that approximates the relative-sales-value method. Home construction costs per production phase are recorded using the specific identification method. Cost of sales for homes closed includes the estimated total construction costs of each home at completion and an allocation of all applicable land acquisition, land development and related common costs (both incurred and estimated to be incurred) based upon the relative-sales-value of the home within each project. Changes in estimated development and common costs are allocated prospectively to remaining homes in the project. In accordance with Accounting Standards Codification ("ASC") ASC 360,Property, Plant and Equipment ("ASC 360"), inventory is stated at cost, unless the carrying amount is determined not to be recoverable, in which case inventory is written down to its fair value. We review each real estate asset on a periodicquarterly basis or whenever indicators of impairment exist. Real estate assets include projects actively selling and projects under development or held for future development. Indicators of impairment include, but are not limited to, significant decreases in local housing market values and selling prices of comparable homes, significant decreases in gross margins or sales absorption rates, costs significantly in excess of budget, and actual or projected cash flow losses. If there are indicators of impairment, we perform a detailed budget and cash flow review of the applicable real estate inventories to determine whether the estimated remainingfuture undiscounted future cash flows of the project are more or less than the asset’s carrying value. If the undiscounted estimated future undiscounted cash flows are more thanexceed the asset’s carrying value, no impairment adjustment is required. However, if the undiscounted estimated future undiscounted cash flows are less than the asset’s carrying value then the asset is reviewed for impairment and ifimpaired. If the asset is deemed impaired, it is written down to its fair value. value in accordance with ASC 820,Fair Value Measurements and Disclosures ("ASC 820"). When estimating undiscounted estimated future cash flows of a project, we make various assumptions, including: (i) expected sales prices and sales incentives to be offered, including the number of homes available, pricing and incentives being offered by us or other builders in other projects, and future sales price adjustments based on market and economic trends; (ii) expected sales pace and cancellation rates based on local housing market conditions, competition and historical trends; (iii) costs expended to date and expected to be incurred including, but not limited to, land and land development costs, home construction costs, interest costs, indirect construction and overhead costs, and selling and marketing costs; (iv) alternative product offerings that may be offered that could have an impact on sales pace, sales price and/or building costs; and (v) alternative uses for the property. Many assumptions are interdependent and a change in one may require a corresponding change to other assumptions. For example, increasing or decreasing sales absorption rates has a direct impact on the estimated per unit sales price of a home and the level of time sensitive costs (such as indirect construction, overhead and carrying costs). Depending on the underlying objective of the project, assumptions could have a significant impact on the projected cash flow analysis. For example, if our objective is to preserve operating margins, our cash flow analysis will be different than if the objective is to increase the velocity of sales. These objectives may vary significantly from project to project and change over time. 73 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 If a real estate assets are consideredasset is deemed impaired, the impairment adjustments areis calculated by determining the amount the asset's carrying value exceeds its fair value.value in accordance with ASC 820. We calculate the fair value of real estate projects usinginventories considering a land residual value analysis orand a discounted cash flow analysis. Under the land residual value analysis, we estimate what a willing buyer would pay and what a willing seller would sell a parcel of land for (other than in a forced liquidation) in order to generate a market rate operating margin and return. Under the discounted cash flow method, the fair value is determined by calculating the present value of future cash flows using a risk adjustedrisk-adjusted discount rate. CriticalSome of the critical assumptions that are included as part of these analysesinvolved with measuring the asset's fair value include estimating future housing revenues, sales absorption rates, land development and construction costs, and related carrying costs (including future capitalized interest), and all direct selling and marketingother applicable project costs. This evaluation and the assumptions used by management to determine future estimated cash flows and fair value require a substantial degree of judgment, especially with respect to real estate projects that have a substantial amount of development to be completed, have not started selling or are in the early stages of sales, or are longer in duration. Actual revenues, costs and time to complete and sell a community could vary from these estimates which could impact the calculation of fair value of the asset and the corresponding amount of impairment that is recorded in our results ofof operations. For the years ended December 31, 2017, 20162020, 2019 and 2015,2018, we recorded impairment chargesinventory impairments of $2.2$19.0 million, $3.5$10.2 million and $0.0$10.0 million, respectively. For additional detail regarding these impairment charges, please see Note 4.   In cases where we decide to abandon a project, we will fully expense all costs capitalized to such project and will expense and accrue any additional costs that we are contractually obligated to incur.  For the years ended December 31, 2020, 2019 and 2018, $14.1 million, $0.1 million, and $0.2 million in project abandonment costs were incurred, respectively.   Capitalization of Interest We follow the practice of capitalizing interest to real estate inventories during the period of development and to investments in unconsolidated joint ventures, when applicable, in accordance with ASC 835,Interest ("ASC 835"). Interest capitalized as a cost component of real estate inventories is included in cost of home sales as related homes or lots are sold. To the extent interest is capitalized to investment in unconsolidated joint ventures, it is included as a reduction of income fromequity in net loss of unconsolidated joint ventures when the related homes or lots are sold to third parties. In instances where the Company purchases land from an unconsolidated joint venture, the pro rata share of interest capitalized to investment in unconsolidated joint ventures is added to the basis of the land acquired and recognized as a cost of sale upon the delivery of the related homes or land to a third-party buyer. To the extent our debt exceeds our qualified assets as defined in ASC 835, we expense a portion of the interest incurred by us. Qualified assets represent projects that are actively selling or under development as well as investments in unconsolidated joint ventures accounted for under the equity method until such equity investees begin their principal operations. Revenue Recognition The Company recognizes revenue in accordance with ASC 606,Revenue from Contracts with Customers ("ASC 606").  Under ASC 606, we recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To do this, the Company performs the following five steps as outlined in ASC 606: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation.   The Company adopted ASC 606 effective January 1, 2018, under the modified retrospective adoption of ASC 606.  The Company recognized the cumulative effect of initially applying the new standard as a $3.4 million, tax-effected decrease to the opening balance of retained earnings as of January 1, 2018.  The adjustment to retained earnings related to a $4.7 million write-down of certain recoverable selling and marketing costs included in other assets that were formerly capitalized under ASC 970, but that no longer qualify for capitalization under the Company's accounting policy reflecting the changes upon the adoption of ASC 606.  As a result of this write-down, the Company's deferred tax asset increased by $1.3 million. Home Sales and Profit Recognition In accordance with ASC 360, revenue from606, home sales and other real estate sales are recorded and a profitrevenue is recognized when our performance obligations within the underlying sales process iscontracts are fulfilled. We consider our obligations fulfilled when closing conditions are complete, undertitle has transferred to the full accrual method. The sales process is considered complete for home sales and other real estate sales when all conditions of escrow are met, including delivery of the home or other real estate asset, title passes, appropriate consideration is receivedhomebuyer, and collection of associated receivables, if any,the purchase price is reasonably assured. Sales incentives are recorded as a reduction of revenues when the respective home is closed. The profit we record is based on the calculation of cost of sales, which is dependent on our allocation of costs, as described in more detail above in the section entitled "Real Estate Inventories and Cost of Sales." When it is determined that the earnings process is not complete, the salerelated revenue and related profit are deferred for recognition in future periods. 74 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 Land Sales and Profit Recognition In accordance with ASC 606, land sales revenue is recognized when our performance obligations within the underlying sales contracts are fulfilled.  The performance obligations in land sales contracts are typically satisfied at the point in time consideration and title is transferred through escrow at closing.  Total revenue is typically recognized simultaneously with transfer of title to the customer.  In instances where material performance obligations may exist after the closing date, a portion of the price is allocated to each performance obligation with revenue recognized as such obligations are completed.  Variable consideration, such as profit participation, may be included within the land sales transaction price based on the terms of a contract.  The Company includes the estimated amount of variable consideration to which it will be entitled only to the extent it is probable that a significant reversal in the amount of cumulative revenue will not occur when any uncertainty associated with the variable consideration is subsequently resolved. Fee Building The Company enters into fee building agreements to provide services whereby it builds homes on behalf of third-partythird-party property owners. The third-partythird-party property owner funds all project costs incurred by the Company to build and sell the homes. The Company primarily enters into cost plus fee contracts where it charges third-partythird-party property owners for all direct and indirect costs plus a management fee. For these types of contracts, the Company recognizes revenue based on the actual total costs it has expended plus the applicable management fee. The management fee is typically a per-unit fixed fee or based on a percentage of the cost or home sales revenue of the project, depending on the terms of the agreement with the third-partythird-party property owner. For these types of contracts, the Company recognizes revenue based on the actual total costs it has incurred plus the applicable fee. In accordance with ASC 605, Revenue Recognition ("ASC 605"), revenues from606, we apply the percentage-of-completion method, using the cost-to-cost approach, as it most accurately measures the progress of our efforts in satisfying our obligations within the fee building services are recognized using a cost-to-cost approach in applying the percentage-of-completion method.agreements. Under this approach, revenue is earned in proportion to total costs incurred divided by total costs expected to be incurred. The total estimated cost plus the management fee represents the total contract value. The Company recognizes revenue based on the actual labor and other direct costs incurred, plus the portion of the management fee it has earned to date. In the course of providing itsfee building services, the Company routinely subcontracts for services and incurs other direct costs on behalf of the property owners. These costs are passed through to the property owners and, in accordance with GAAP, are included in the Company’s revenuerevenues and cost of sales. The Company also enters into fee buildingprovides construction management and management contractscoordination services and sales and marketing services as part of agreements with third parties and its unconsolidated joint ventures where itventures. In certain contracts, the Company also provides construction supervisionproject management and administrative services. For most services provided, the Company fulfills its related obligations as welltime-based measures, according to the input method guidance described in ASC 606. Accordingly, revenue is recognized on a straight-line basis as the Company's efforts are expended evenly throughout the performance period. The Company may also have an obligation to manage the home or lot sales process as part of providing sales and marketing services, and does not bear financial risks for any services provided. In accordanceservices. This obligation is considered fulfilled when related homes or lots close escrow, as these events represent milestones reached according to the output method guidance described in ASC 606. Accordingly, revenue is recognized in the period that the corresponding lots or homes close escrow. Costs associated with ASC 605, revenues from these services are recognized over a proportional performance method or completed performance method. Under ASC 605, revenue is earned as services are provided in proportion to total services expected to be provided to the customer or on a straight line basis if the pattern of performance cannot be determined. Costs are recognized as incurred. Revenue recognition for any portion of the fees earned from these services that are contingent upon a financial threshold or specific event is deferred until the threshold is achieved or the event occurs. The Company’s fee building revenues have historically been concentrated with a small number of customers. For the years ended December 31, 2017, 20162020, 2019 and 2015, 2018, one customer comprised 97%comprised 91%, 96%95% and 92%95% of fee building revenue, respectively. The balance of the fee building revenues primarily represented fee revenuebillings from a separate customernew fee building arrangement and management fees earned from unconsolidated joint ventures.ventures and third-party customers. As of December 31, 2017 2020 and 2016, 2019, one customer comprised 49%35% and 87%65% of contracts and accounts receivable, respectively, and a separate fee building customer comprised 25% and 0% of contracts and accounts receivable, respectively, with the balance of contracts and accounts receivable primarily representing escrow receivables from home sales. Variable Interest Entities The Company accounts for variable interest entities in accordance with ASC 810,Consolidation ("ASC 810"). Under ASC 810, a variable interest entity ("VIE") is created when: (a) the equity investment at risk in the entity is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by other parties, including the equity holders; (b) the entity’s equity holders as a group either (i) lack the direct or indirect ability to make decisions about the entity, (ii) are not obligated to absorb expected losses of the entity or (iii) do not have the right to receive expected residual returns of the entity; or (c) the entity’s equity holders have voting rights that are not proportionate to their economic interests, and the activities of the entity involve or are conducted on behalf of the equity holder with disproportionately few voting rights. Once we consider the sufficiency of equity and voting rights of each legal entity, we then evaluate the characteristics of the equity holders' interests, as a group, to see if they qualify as controlling financial interests. Our real estate joint ventures consist of limited partnerships and limited liability companies. For entities structured as limited partnerships or limited liability companies, our evaluation of whether the equity holders (equity partners other than us in each our joint ventures) lack the characteristics of a controlling financial interest includes the evaluation of whether the limited partners or non-managing members (the noncontrollingnon-controlling equity holders) lack both substantive participating rights and substantive kick-out rights, defined as follows: 75 Table of Contents Participating rights - provide the noncontrolling equity holders the ability to direct significant financial THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and operational decision made in the ordinary course of business that most significantly influence the entity's economic performance.2018 Kick-out rights - allow the noncontrolling equity holders to remove the general partner or managing member without cause. • Participating rights - provide the non-controlling equity holders the ability to direct significant financial and operational decision made in the ordinary course of business that most significantly influence the entity's economic performance. • Kick-out rights - allow the non-controlling equity holders to remove the general partner or managing member without cause. If we conclude that any of the three characteristics of a VIE are met, including if equity holders lack the characteristics of a controlling financial interest because they lack both substantive participating rights and substantive kick-out rights, we conclude that the entity is a VIE and evaluate it for consolidation under the variable interest model. If an entity is deemed to be a VIE pursuant to ASC 810, the enterprise that has both (i) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (ii) the obligation to absorb the expected losses of the entity or right to receive benefits from the entity that could be potentially significant to the VIE is considered the primary beneficiary and must consolidate the VIE. Under ASC 810, a nonrefundable deposit paid to an entity may be deemed to be a variable interest that will absorb some or all of the entity’s expected losses if they occur. Our land purchase and lot option deposits generally represent our maximum exposure to the land seller if we elect not to purchase the optioned property. In some instances, we may also expend funds for due diligence, development and construction activities with respect to optioned land prior to takedown. Such costs are classified as real estate inventories, which we would have to write off should we not exercise the option. Therefore, whenever we enter into a land option or purchase contract with an entity and make a nonrefundable deposit, a VIE may have been created.   At December 31, 2020, the Company had outstanding nonrefundable cash deposits of $8.9 million pertaining to land option contracts and purchase contracts. As of December 31, 2017 2020 and 2016,2019, the Company was not required to consolidate any VIEs. In accordance with ASC 810, we perform ongoing reassessments of whether we are the primary beneficiary of a VIE. Noncontrolling Non-controlling Interest During 2013, the Company entered into a joint venture agreement with a third-partythird-party property owner. In accordance with ASC 810, the Company analyzed this arrangement and determined that it was not a VIE; however, the Company determined it was required to consolidate the joint venture as the Company has a controlling financial interest with the powers to direct the major decisions of the entity.  As of December 31, 2017During 2020, the Company and 2016,its partner dissolved the third-party investor had an equity balance of $0.1 million. joint venture.   Investments in and Advances to Unconsolidated Joint Ventures We use the equity method to account for investments in homebuilding and land development joint ventures that qualifywhen any of the following situations exist: 1) the joint venture qualifies as VIEs wherea VIE and we are not the primary beneficiary, and other entities that2) we do not control the joint venture but have the ability to exercise significant influence over theits operating and financial policies, of the investee. The Company also uses the equity method whenor 3) we function as the managing member or general partner of the joint venture and our joint venture partner has substantive participating rights or where we can be replaced by our venture partnerreplace us as managing member or general partner without cause. As of December 31, 2017,2020, the Company concluded that none of its joint ventures were VIEs and accounted for these entities under the equity method of accounting. Under the equity method, we recognize our proportionate share of earnings and losses generated by the joint venture upon the delivery of lots or homes to third parties. Our proportionate share of intra-entity profits and losses are eliminated until the related asset has been sold by the unconsolidated joint venture to third parties. We classify cash distributions received from equity method investees using the cumulative earnings approach consistent with Accounting Standards Update ("ASU") No. 2016-15, ASC 230,Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments ("ASU 2016-15"("ASC 230"). Under the cumulative earnings approach, distributions received are considered returns on investment and shall beare classified as cash inflows from operating activities unless the cumulative distributions received, less distributions received in prior periods that were determined to be returns of investment, exceed cumulative equity in earnings. When such an excess occurs, the current-period distribution up to this excess is considered a return of investment and shall beis classified as cash inflows from investing activities. Our ownership interests in our unconsolidated joint ventures vary, but are generally less than or equal to 35%. The accounting policies of our joint ventures are consistent with those of the Company. 76 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 We review real estate inventory held by our unconsolidated joint ventures for impairment on a quarterly basis, consistent with how we review our real estate inventories.inventories as described in more detail above in the section entitled "Real Estate Inventories and Cost of Sales." For the years ended December 31, 2020, 2019 and 2018, our unconsolidated joint ventures recorded noncash impairment charges of $0, $70.0 million, and $28.8 million, respectively, of which $0, $3.5 million and $18.9 million, respectively, was allocated to the Company. We also review our investments in and advances to unconsolidated joint ventures for evidence of other-than-temporary declines in value.value in accordance with ASC 820. To the extent we deem any portion of our investment in and advances to unconsolidated joint ventures as not recoverable, we impair our investment accordingly. For the years ended December 31, 2017, 20162020, 2019 and 2015, no impairments2018, the Company recorded other-than-temporary, noncash impairment charges of $22.3 million, $0, and  $1.1 million, respectively, related to our investment in and advances to unconsolidated joint ventures were recorded. ventures. Selling and Marketing Expense Selling Costs incurred for tangible assets directly used in the sales process such as our sales offices, design studios and marketing costs incurred to sell real estate projectsmodel landscaping and furnishings are capitalized to other assets in the accompanying consolidated balance sheets if theyunder ASC 340,Other Assets and Deferred Costs ("ASC 340"). These costs are reasonably expecteddepreciated to be recovered fromselling and marketing expenses generally over the saleshorter of 30 months or the actual estimated life of the project or from incidental operations, and are incurred for tangible assets that are used directly through the selling period to aid in the sale of the project or services that have been performed to obtain regulatory approval of sales. These capitalizablecommunity. All other selling and marketing costs, include, butsuch as commissions and advertising, are not limited to, model home design, model home decorexpensed as incurred. Warranty and landscaping, and sales office/design studio setup. Warranty Accrual Litigation Accruals We offer warranties on our homes that generally cover various defects in workmanship or materials, or structural construction defects for one year. In addition, we generally provide a more limited warranty, which generally ranges from a minimum of two years up to the period covered by the applicable statute of repose, that covers certain defined construction defects. Estimated future direct warranty costs are accrued and charged to cost of sales in the period when the related homebuilding revenues are recognized. Amounts are accrued based upon the Company’s historical claim and expense rates. In addition, the Company has received warranty payments from third-partythird-party property owners for certain of its fee building projects that have since closed-out where the Company has the contractual risk of construction. These payments are recorded as warranty accruals. We assess the adequacy of our warranty accrual on a quarterly basis and adjust the amounts recorded if necessary. Our warranty accrual is included in accrued expenses and other liabilities in the accompanying consolidated balance sheets and adjustments to our warranty accrual are recorded through cost of sales. sales or as an offset to warranty insurance receivables when covered by insurance. While our subcontractors who perform our homebuilding work generally provide us with an indemnity for claims relating to their workmanship and materials, we also purchase general liability insurance that covers development and construction activity at each of our communities. Our subcontractors are usually covered by these programs through an owner-controlled insurance program, or "OCIP." Consultants such as engineers and architects are generally not covered by the OCIP but are required to maintain their own insurance. In general, we maintain insurance, subject to deductibles and self-insured retentions, to protect us against various risks associated with our activities, including, among others, general liability, "all-risk" property, construction defects, workers’ compensation, automobile, and employee fidelity. Our master general liability policies which cover most of our projects allow for our warranty spend to erode our self-insured retention requirements. We establish a separate reserve for warranty and for known and incurred but not reported (“IBNR”) construction defect claims based on our historical claim and expense data. Our warranty accrual and litigation reserves for construction defect claims are presented on a gross basis within accrued expenses and other liabilities in our consolidated financial statements without consideration of insurance recoveries. Expected recoveries from insurance carriers are presented as warranty insurance receivables and insurance receivables within other assets in our consolidated balance sheets and are recorded based on actual insurance claims and amounts determined using our construction defect claim and warranty accrual estimates, our insurance policy coverage limits for the applicable policy years and historical recovery rates.  Contracts and Accounts Receivable Contracts and accounts receivable primarily represent the fees earned, but not collected, and reimbursable project costs incurred in connection with fee building agreements. The Company periodically evaluates the collectability of its contracts receivable, and, if it is determined that a receivable might not be fully collectible, an allowance is recorded for the amount deemed uncollectible. This allowance for doubtful accounts is estimated based on management’s evaluation of the contracts involved and the financial condition of its customers. Factors considered in such evaluations include, but are not limited to: (i) customer type; (ii) historical contract performance; (iii) historical collection and delinquency trends; (iv) customer credit worthiness; and (v) general economic conditions. In addition to contracts receivable, escrow receivables are included in contracts and accounts receivable in the accompanying consolidated balance sheets. As of December 31, 2017 2020 and 2016, 2019, no allowance was recorded related to contracts and accounts receivable. 77 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 Property, Equipment and Equipment Capitalized Selling and Marketing Costs Property, equipment and equipmentcapitalized selling and marketing costs are recorded at cost and included in other assets in the accompanying consolidated balance sheetssheets. Property and equipment are depreciated to general and administrative expenses using the straight-line method over their estimated useful lives ranging from three to five years. Leasehold improvements are stated at cost and are amortized to general and administrative expenses using the straight-line method generally over the shorter of either their estimated useful lives or the term of the lease. Capitalized selling and marketing costs are depreciated using the straight-line method to selling and marketing expenses over the shorter of either 30 months or the actual estimated life of the selling community. For the years ended December 31, 2017, 20162020, 2019 and 2015,2018, the Company incurred depreciation and amortization expense of $0.4$6.7 million, $0.5$9.0 million and $0.5$6.6 million, respectively. Income Taxes Income taxes are accounted for in accordance with ASC 740,Income Taxes ("ASC 740"). The consolidated provision for, or benefit from, income taxes is calculated using the asset and liability method, under which deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred Each quarter we assess our deferred tax assets are evaluated on a quarterly basisasset to determine if adjustmentswhether all or any portion of the asset is more likely than not (defined as a likelihood of more than 50%) unrealizable under ASC 740. We are required to theestablish a valuation allowance are required.for any portion of the tax asset we conclude is more likely than not unrealizable. In accordance with ASC 740, we assess the determination of whether a valuation allowance for deferred tax assets is necessary requires an analysis of both positive and negative evidence regarding realization of the deferred tax assets and should be established based on the consideration of all available evidence using a "more likely than not" standardevidence. Our assessment considers, among other things, the nature, frequency and severity of prior cumulative losses, forecasts of future taxable income, the duration of statutory carryforward periods, our utilization experience with respectnet operating losses and tax credit carryforwards and the available tax planning alternatives, to whether deferred tax assets will be realized.the extent these items are applicable, and the availability of net operating loss carrybacks under certain circumstances. The ultimate realization of deferred tax assets depends primarily on the generation of future taxable income during the periods in which the differences become deductible.deductible, as well as the ability to carryback net operating losses in the event that this option becomes available. The value of our deferred tax assets will depend on applicable income tax rates. Judgment is required in determining the future tax consequences of events that have been recognized in our consolidated financial statements and/or tax returns. Differences between anticipated and actual outcomes of these future tax consequences could have a material impact on our consolidated financial statements. At December 31, 2020, based on our analysis of all available positive and negative evidence, and other relevant factors, we did not establish a valuation allowance, except for $20,000 related to a capital loss, and at December 31, 2019, no valuation allowance was recorded. Please refer to Note 14 for more information. ASC 740 defines the methodology for recognizing the benefits of uncertain tax return positions as well as guidance regarding the measurement of the resulting tax benefits.  These provisions require an enterprise to recognize the financial statement effects of a tax position when it is more likely than not, (defined as a likelihood of more than 50%), based on the technical merits, that the position will be sustained upon examination.  In addition, these provisions provide guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.  The evaluation of whether a tax position meets the more-likely-than-notmore-likely-than-not recognition threshold requires a substantial degree of judgment by management based on the individual facts and circumstances. On At December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. For businesses, the Tax Act reduces the corporate federal tax rate from a maximum of 35% to a flat 21% rate. The rate reduction took effect on January 1, 2018 but was enacted in 2017. Accordingly, with ASC 740,31, 2020, the Company revaluedhas concluded that there were no significant uncertain tax positions requiring recognition in its net deferredfinancial statements. The Company classifies any interest and penalties related to income taxes assessed as part of income tax asset at expense. As of December 31, 2017 for2020, the change in statutory rate and recorded a provisional $3.2 million chargeCompany has not been assessed interest or penalties by any major tax jurisdictions related to reduce the asset's value, which was included in theany open tax provision for 2017. periods. Stock-Based Compensation We account for share-based awards in accordance with ASC 718,Compensation – Stock Compensation ("ASC 718") and ASC 505-50, 505-50,Equity – Equity Based Payments to Non-Employees ("ASC 505-50"505-50"). ASC 718 requires that the cost resulting from all share-based payment transactions be recognized in a company's financial statements. ASC 718 requires all entities to apply a fair-value-based measurement method in accounting for share-based payment transactions with employees except for equity instruments held by employee share ownership plans. On June 26, 2015, the Company entered into an agreement that transitioned Joseph Davis' role within the Company from Chief Investment Officer to a non-employee consultant to the Company. On February 16, 2017, the Company entered into an agreement that transitioned Wayne Stelmar's role within the Company from Chief Investment Officer to a non-employee consultant and non-employee director. Per the agreements, Mr. Davis' andagreement, Mr. Stelmar's outstanding equity awards will continuecontinued to vest in accordance with their original terms. Under ASC 505-50,505-50, if an employee becomes a non-employee and continues to vest in an award pursuant to the award's original terms, that award will be treated as an award to a non-employee prospectively, provided the individual is required to continue providing services to the employer (such as consulting services). 78 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 Based on the terms and conditions of both Mr. Davis' and Mr. Stelmar's consulting agreementsagreement noted above, we accountaccounted for theirhis share-based awards in accordance with ASC 505-50. 505-50 through March 31, 2018. ASC 505-50 requires505-50 required that these awards be accounted for prospectively, such that the fair value of the awards will bewas re-measured at each reporting date until the earlier of (a) the performance commitment date or (b) the date the services required under the transition agreement with Mr. Davis or Mr. Stelmar have been completed. ASC 505-50 requires505-50 required that compensation cost ultimately recognized in the Company's financial statements be the sum of (a) the compensation cost recognized during the period of time the individual was an employee (based on the grant-date fair value) plus (b) the fair value of the award determined on the measurement date determined in accordance with ASC 505-50505-50 for the pro-rata portion of the vesting period in which the individual was a non-employee.  In June of 2018, the FASB issued ASU No.2018-07, Improvements to Nonemployee Share-Based Payment Accounting ("ASU 2018-07") which expanded the scope of ASC 718 to include share-based payments for acquiring goods and services from nonemployees, with certain exceptions. Under ASC 718, the measurement date for equity-classified, share-based awards is generally the grant date of the award. The Company early adopted ASU 2018-07 on April 1, 2018, at which time Mr. Davis' outstanding awards fully vested during January 2017 and were fully expensed. Beginning January 1, 2017,Stelmar's award was the only nonemployee award outstanding. In accordance with the transition guidance, the Company adopted ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvementsassessed Mr. Stelmar's award for which a measurement date had not been established. The outstanding award was re-measured to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 simplifies several aspectsfair value as of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.April 1, 2018 adoption date. The adoption of ASU 2016-09 had no effect2018-07 provided administrative relief by fixing the remaining unamortized expense of the award and eliminating the requirement to quarterly re-measure the Company's one remaining nonemployee award. The Company adopted this standard on beginninga modified retrospective basis booking a cumulative-effect adjustment of an $18,000 increase to retained earnings or any other componentsand equal decrease to additional paid-in capital as of equity or net assets.the beginning of the 2018 fiscal year. Mr. Stelmar's award was fully expensed as of March 31,2019. Share Repurchase and Retirement When shares are retired, the Company’s policy is to allocate the excess of the repurchase price over the par value of shares acquired to both retained earnings and additional paid-in capital. The Company has electedportion allocated to applyadditional paid-in capital is determined by applying a percentage, which is determined by dividing the amendments in ASC 2016-09 relatednumber of shares to be retired by the number of shares issued, to the presentationbalance of excess incomeadditional paid-in capital as of the retirement date. The residual, if any, is allocated to retained earnings as of the retirement date. During the year ended December 31, 2020, the Company repurchased and retired 2,160,792 shares of its common stock at an aggregate purchase price of $4.3 million.  During the year ended December 31, 2019, the Company repurchased and retired 153,916 shares of its common stock at an aggregate purchase price of $1.0 million.  During the year ended December 31, 2018, the Company repurchased and retired 1,003,116 shares of its common stock at an aggregate purchase price of $8.5 million  All repurchased shares were returned to the status of authorized but unissued.  All purchases were made under a previously announced repurchase program that had a remaining authorization of $9.4 million at December 31, 2020.  Tax Benefit Preservation Plan On May 8, 2020, the Company entered into a Tax Benefit Preservation Plan between the Company and American Stock Transfer & Trust Company, LLC, as rights agent (as amended from time to time, the “Tax Plan”) to help preserve the value of certain deferred tax provisionsbenefits, including those generated by net operating losses and certain other tax attributes (collectively, the “Tax Benefits”). The Tax Plan is intended to act as a deterrent to any person or entity acquiring shares of the Company equal to or exceeding 4.95%. The Tax Plan reduces the likelihood that changes in our investor base have the unintended effect of limiting the use of our Tax Benefits. In connection with its adoption of the Tax Plan, the Board declared a dividend of one preferred stock purchase right (individually, a “Right” and collectively, the “Rights”) for each share of Common Stock, par value $0.01 (“Common Stock”) of the Company outstanding at the close of business on May 20, 2020.  As long as the Rights are attached to the Common Stock, the Company will issue one Right (subject to adjustment) with each new share of the Common Stock so that all such shares will have attached Rights.  Each Right has an exercise price of $11.50. Each Right, which is only exercisable if a person or group of affiliated or associated persons acquires beneficial ownership of 4.95% or more of the Common Stock, subject to certain limited exceptions (the “Acquiring Person”), when exercised will entitle the registered holder other than the Acquiring Person the right to acquire 1/1000th of a share of our Series A Junior Participating Preferred Stock.  In addition, in certain circumstances, each registered holder will have the right to receive upon exercise, that number of shares of Common Stock having a market value of two times the $11.50 exercise price of the Right, or, at the election of the Board, to exchange each right for one share of Common Stock, in each case, subject to adjustment. Unless redeemed or exchanged earlier by the Company or terminated, the rights will expire upon the earliest to occur of (i) the close of business on May 7, 2021, (ii) the close of business on the statement of cash flows using a prospective transition method resulting in no adjustment to the classificationeffective date of the prior year excess incomerepeal of Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”) if the Board determines that the Tax Plan is no longer necessary or desirable for the preservation of the Tax Benefits or (iii) the time at which the Board determines that the Tax Benefits are fully utilized or no longer available under Section 382 of the Code or that an ownership change under Section 382 of the Code would not adversely impact in any material respect the time period in which the Company could use the Tax Benefits, or materially impair the amount of the Tax Benefits that could be used by the Company in any particular time period, for applicable tax provision from stock-based compensationpurposes.  79 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 Dividends No dividends were paid on our common stock during the years ended December 31, 2020, 2019 and 2018. We currently intend to retain our future earnings to finance the development and expansion of our business and, therefore, do not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, compliance with Delaware law, restrictions contained in the accompanying consolidated statementany financing instruments, including but not limited to, our unsecured credit facility and senior notes indenture, and such other factors as our board of cash flows.directors deem relevant. Employee Benefit Plan We have a defined contribution plan pursuant to Section 401(k)401(k) of the Internal Revenue Code where each employee maym ay elect to make before-taxbefore-tax or ROTHRoth contributions up to the current tax limits. The Company matches 50% of the employee's contribution on the first 8% of compensation up to a maximum match of $10,800,$11,400, on a discretionary basis. Our contributions to the plan for the years ended December 31, 2017, 20162020, 2019 and 2015 2018were $0.8 $1.0 million, $0.9$1.0 million, and $0.5$1.0 million, respectively. Recently Issued Accounting Standards The Company qualifies as an "emerging growth company" pursuant to the provisions of the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). Section 102 of the JOBS Act provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. As previously disclosed, the Company has chosen, irrevocably, to "opt out" of such extended transition period, and as a result, will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which supersedes existing accounting literature relating to how and when a company recognizes revenue. Under ASU 2014-09, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. Additionally, ASU 2014-09 supersedes existing industry specific accounting literature relating to how a company expenses certain selling and marketing costs. In August 2015, June 2016, the FASB issued ASU No. 2015-14, Revenue fromContracts with Customers2016-13,Financial Instruments - Credit Losses (Topic 606): Deferral326) - Measurement of the Effective DateCredit Losses on Financial Instruments ("ASU 2016-13"), which delayedchanges the effective date ofimpairment model for most financial assets and certain other instruments from an "incurred loss" approach to a new "expected credit loss" methodology. The FASB followed up with ASU 2014-09 by one year. As a public company, 2019-04,Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments in April 2019, ASU 2014-092019-05,Financial Instruments - Credit Losses (Topic 326) in May 2019, ASU 2019-11,Codification Improvements to Topic 326, Financial Instruments - Credit Losses in November 2019, and ASU 2020-02,Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842) in February 2020 to provide further clarification on this topic. The standard is effective for ourannual and interim and annual reporting periods beginning January 1, 2020, and requires full retrospective application upon adoption.  During November 2019, the FASB issued ASU 2019-10,Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842) Effective Dates thatprovides foradditional implementation time for smaller reporting companies with the standard being effective for smaller reporting companies for fiscal years beginning after December 15, 2017. We will2022, including interim periods within those fiscal years.  Early adoption is permitted.  As a smaller reporting company, we did not adopt the requirements of ASU 2016-13 for the new standard in the 2018 first quarter and will use the modified retrospective transition method. Certain revenue streams of the Company are subject to ASU 2014-09, including home sales revenue, fee building revenue and forfeiture of homebuyer deposits. The adoption of ASU 2014-09 will year beginning January 1, 2020, however we do not have anticipate a material impact on the amount, timing or recognition of these revenue streams. Additionally, there will be no changes in the classification of our revenue streams as shown onto our consolidated financial statements as a result of operations. ASU 2014-09 will also affect our accounting policies related to certain capitalized selling and marketing costs we incur to obtain sales contracts from our customers. Prior to the adoption of ASU 2014-09, the Company capitalized to other assets selling and marketing costs incurred to sell real estate projects if they were reasonably expected to be recovered from the sale of the project or incidental operations, and costs incurred for tangible assets that are used directly through the selling period to aid in the sale of the projects. These capitalizable selling and marketing costs included, but were not limited to, model home design, model home decor and landscaping, and sales office/design studio setup. These costs were amortized on a per unit basis to selling and marketing expense as the related homes were delivered. Upon the adoption of ASU 2014-09, the Company will continue to capitalize recoverable selling and marketing costs incurred for tangible assets related to our sales offices and design studios. These costs will be depreciated over the useful lives of our sales offices and design studios at each community. All other selling and marketing costs incurred that were formerly capitalizable will be immediately expensed as incurred to selling and marketing expense. Upon adoption of ASU 2014-09 and in relation to these changes, we will recognize a decrease to retained earnings on January 1,adoption. In August 2018, as part of the modified retrospective transition method, representing the cumulative effect of initially applying the new standard, tax-effected. In February 2016, the FASB issued ASU No. 2016-02, Leases2018-13,Fair Value Measurement (Topic 842) ("820) - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2016-02"2018-13"). The amendments in ASU 2016-02 will require organizations that lease assets (referred2018-13 modify certain disclosure requirements of fair value measurements.  The Company adopted ASU 2018-13 effective January 1, 2020 and experienced no impact to the consolidated financial statements as "lessees"a result of adoption. In December 2019, the FASB issued ASU 2019-12,Income Taxes (Topic 740)-Simplifying the Accounting for Income Taxes ("ASU 2019-12"), which is intended to recognize on the balance sheet the assets and liabilitiessimplify various aspects related to accounting for the rights and obligations created by those leases. Under ASU 2016-02, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Lessor accounting remains substantially similar to current GAAP. In addition, disclosures of leasing activities are to be expanded to include qualitative along with specific quantitative information. ASU 2016-02income taxes. The pronouncement is effective for fiscal years, and for interim and annual reporting periods within those fiscal years, beginning after December 15, 2018.2020, with early adoption permitted.  We did not early-adopt ASU 2016-02 mandates a modified retrospective transition method. The Company's lease contracts primarily consist of rental agreements for office space2019-12 and certain office equipment where we are the lessee. The Company has beguncurrently in the process of evaluating these lease contracts and believes all would be considered operating leases. Upon adoption, we expect to add a right-of-use asset and a lease liability tothe effects on our consolidated balance sheet. The Company will recognize lease expense on a straight-line basis, consistent with our current policy for office rent. financial statements of its adoption. In March 2016, January 2020, the FASB issued ASU No. 2016-07, Investments-2020-01,Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures: SimplifyingVentures (Topic 323), and Derivative and Hedging (Topic 815) ("ASU 2020-01").  ASU 2020-01 clarifies the Transition tointeraction of the Equity Method of Accounting ("ASU 2016-07"), which eliminates the requirement to applyaccounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting retrospectively when a reporting entity obtains significant influence over a previously held investment.  Ourin Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815.  The standard is effective for fiscal years beginning after December 31, 2020, and interim periods within those fiscal years, with early adoption ofpermitted.  The Company is currently evaluating ASU 2016-07 on January 1, 2017 did not have an effect on2020-01 and expects no material impact to our consolidated financial statements. statements as a result of adoption.   In August 2016, March 2020, the FASB issued ASU 2016-15. ASU 2016-15 provides guidanceSecurities and Exchange Commission (SEC) adopted amendments to the financial disclosure requirements applicable to registered debt offerings that include credit enhancements, such as subsidiary guarantees, in Rule 3-10 of Regulation S-X. The amended rule focuses on howproviding material, relevant and decision-useful information regarding guarantees and other credit enhancements, while eliminating certain cash receipts and cash payments areprescriptive requirements. The Company adopted these amendments for the year ended December 31, 2020 with no impact to be presented and classified in the statement of cash flows.  ASU 2016-15 is effective for interim and annual reporting periods beginning after December 15, 2017. We will adopt ASU 2016-15 on January 1, 2018, and expect no effect on our consolidated financial statements and disclosures as we currently classify cash distributions received from equity method investees using the cumulative earnings approach consistent with ASU 2016-15. related disclosures.  In November 2016, October 2020, the FASB issued ASU No. 2016-18, Statement of Cash Flows2020-09,Debt (Topic 230): Restricted Cash 470) - Amendments to SEC Paragraphs Pursuant to SEC Release No.33-10762("ASU 2016-18"2020-09"). ASU 2016-16 requires that a statement to reflect the SEC’s new disclosure rules on guaranteed debt securities.   80 Table of cash flows explain the change during the period in the total of cash, cash equivalents,Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for interim and annual reporting periods beginning after December 15, 2017. Upon adoption of ASU 2016-18 in the first quarter of 2018 our ending restricted cash balance of $0.4 million will be included in our beginning cash balance for purposes of preparing our full-year and interim consolidated statements of cash flows. In January 2017, October 2020, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805), Clarifying2020-10,Codification Improvements ("ASU 2020-10"). The amendments in ASU 2020-10 contain improvements to the DefinitionCodification by including disclosure guidance in appropriate disclosure and ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements is codified in the Disclosure Section of a Business ("ASU 2017-01"). ASU 2017-01 clarifies the definition of a business with the objective of addressing whether transactions involving in-substance nonfinancial assets, held directly or in a subsidiary, should be accounted for as acquisitions or disposals of nonfinancial assets or of businesses. ASU 2017-01 isCodification. The amendments are effective for interim and annual reporting periodspublic entities in fiscal years beginning after December 15, 2017, and early2020, including interim periods within those fiscal years. Early adoption is permitted. We adoptedThe Company is currently evaluating ASU 2017-01 on January 1, 20172020-10 and applied its frameworkexpects no material impact to transactions occurring in 2017. In February 2017, the FASB issued ASU No. 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets ("ASU 2017-05"). ASU 2017-05 clarifies the guidance for derecognition of nonfinancial assets and in-substance nonfinancial assets when the asset does not meet the definition of a business and is not a not-for-profit activity. ASU 2017-05 is effective for interim and annual reporting periods beginning after December 15, 2017. We expect to adopt the new standard under the modified retrospective approach. Under the modified retrospective approach, we will recognize the cumulative effect of initially applying the new standard as an adjustment to the opening balance of retained earnings. We will adopt ASU 2017-05 in the first quarter of 2018 and expect no effect on our consolidated financial statements and disclosures. In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718), Scoperelated disclosures as a result of Modification Accounting ("ASU 2017-09").The guidance provides clarity and reduces diversity in practice and cost and complexity when accounting for a change to the terms or conditions of a share-based payment award. ASU 2017-09 is effective for interim and annual reporting periods beginning after December 15, 2017. We will adopt ASU 2017-09 in the 2018 first quarter and its adoption is not expected to have a material impact on our consolidated financial statements. adoption.    2.    Computation of EarningsLoss Per Share The following table sets forth the components used in the computation of basic and diluted earningsloss per share for the years ended December 31, 2017, 20162020, 2019 and 2015:2018:     Year Ended December 31,       2020     2019     2018       (Dollars in thousands, except per share amounts)   Numerator:                         Net loss attributable to The New Home Company Inc.   $ (32,819 )   $ (8,037 )   $ (14,216 )                           Denominator:                         Basic weighted-average shares outstanding     18,680,993       20,063,148       20,703,967   Effect of dilutive shares:                         Stock options and unvested restricted stock units     0       0       0   Diluted weighted-average shares outstanding     18,680,993       20,063,148       20,703,967                             Basic loss per share attributable to The New Home Company Inc.   $ (1.76 )   $ (0.40 )   $ (0.69 ) Diluted loss per share attributable to The New Home Company Inc.   $ (1.76 )   $ (0.40 )   $ (0.69 )                           Antidilutive stock options and unvested restricted stock units not included in diluted loss per share     1,886,226       1,320,400       1,311,802   81 Table of Contents   Year Ended December 31,   2017   2016   2015   (Dollars in thousands, except per share amounts) Numerator:           Net income attributable to The New Home Company Inc. $ 17,152   $ 21,022   $ 21,688             Denominator:           Basic weighted-average shares outstanding 20,849,736   20,685,386   16,767,513 Effect of dilutive shares:           Stock options and unvested restricted stock units 145,762   106,059   173,575 Diluted weighted-average shares outstanding 20,995,498   20,791,445   16,941,088             Basic earnings per share attributable to The New Home Company Inc. $ 0.82   $ 1.02   $ 1.29 Diluted earnings per share attributable to The New Home Company Inc. $ 0.82   $ 1.01   $ 1.28             Antidilutive stock options and unvested restricted stock units not included in diluted earnings per share 7,074   849,977   7,414 3.    Contracts and Accounts Receivable Contracts and accounts receivable consist of the following:   December 31,   2017   2016   (Dollars in thousands) Contracts receivable:       Costs incurred on fee building projects $ 184,827   $ 178,103 Estimated earnings 5,497   8,404   190,324   186,507 Less: amounts collected during the period (178,704 )   (162,203 ) Contracts receivable $ 11,620   $ 24,304         Contracts receivable:       Billed $ —   $ — Unbilled 11,620   24,304   11,620   24,304 Accounts receivable:       Escrow receivables 11,554   3,385 Other receivables 50   144 Contracts and accounts receivable $ 23,224   $ 27,833     December 31,       2020     2019       (Dollars in thousands)   Contracts receivable:                 Costs incurred on fee building projects   $ 79,583     $ 93,281   Estimated earnings     1,420       2,052         81,003       95,333   Less: amounts collected during the period     (77,861 )     (84,979 ) Contracts receivable   $ 3,142     $ 10,354                     Contracts receivable:                 Billed   $ 0     $ 0   Unbilled     3,142       10,354         3,142       10,354   Accounts receivable:                 Escrow receivables     1,782       5,392   Other receivables     0       236   Contracts and accounts receivable   $ 4,924     $ 15,982   Billed contracts receivable represent amounts billed to customers that have yet to be collected. Unbilled contracts receivable represents the contract revenue recognized but not yet invoiced. All unbilled receivables as of December 31, 2017 2020 and 20162019 are expected to be billed and collected within 30 days. Accounts payable at December 31, 2017 2020 and 20162019 includes $11.3$2.6 million and $22.8$9.6 million, respectively, related to costs incurred under the Company’s fee building contracts. 82 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 4.    Real Estate Inventories and Capitalized Interest Real estate inventories are summarized as follows:   December 31,   2017   2016   (Dollars in thousands) Deposits and pre-acquisition costs $ 35,846   $ 38,723 Land held and land under development 47,757   98,596 Homes completed or under construction 302,884   93,628 Model homes 29,656   55,981   $ 416,143   $ 286,928     December 31,       2020     2019       (Dollars in thousands)   Deposits and pre-acquisition costs   $ 12,202     $ 17,865   Land held and land under development     127,807       180,823   Homes completed or under construction     133,567       183,711   Model homes     41,381       51,539       $ 314,957     $ 433,938   All of our deposits and pre-acquisition costs are nonrefundable, except for refundable deposits of $0.8$0.1 million and $4.1$0.1 million as of December 31, 2017 2020 and 2016,2019, respectively. Land held and land under development includes land costs and costs incurred during site development such as development, indirects, and permits. Homes completed or under construction and model homes include all costs associated with home construction, including allocated land, development, indirects, permits, materials and labor (except for capitalized selling and marketing costs, which are classified in other assets) include all costs associated with home construction, including land, development, indirects, permits, materials and labor. . In accordance with ASC 360,Property, Plant and Equipment ("ASC 360"), inventory is stated at cost, unless the carrying amount is determined not to be recoverable, in which case inventory is written down to its fair value. We review each real estate asset at the community-level on a quarterly basis or whenever indicators of impairment exist. For the years ended December 31, 20172020, 2019 and 2016,2018, the Company recognized real estate-related impairments of $2.2$19.0 million, $10.2 million and $3.5$10.0 million, respectively, in cost of sales resultingsales.  For 2020, these charges resulted in a decreasean increase of $17.8 million and $1.2 million to pretax loss for our California and Arizona homebuilding segments, respectively.  For 2019, these charges resulted in an increase of $3.6 million and $6.6 million to pretax loss for our California and Arizona homebuilding segments, respectively.  For 2018, the $10.0 million in impairment charges resulted in an increase of the same amount to pretax incomeloss for our California homebuilding segment.  Fair value for the homebuilding projects impaired during 20172020, 2019 and 2016 were2018 was calculated using either a land residual value analysis or under a discounted cash flow model. The project cash flows were discounted at an 8%models using discount rate for 2017ranges of 14%-26%, 17%-19%, and rates ranging from 10-14% for 2016.9%-16%, respectively.  Fair value for the land sales project impaired during 20162019 was determined using the land purchase price included in the executed sales agreement, including commissions, less the Company's cost to sell.  The following table summarizes inventory impairments recorded during the years ended December 31, 2017, 20162020, 2019 and 2015:   Year Ended December 31,   2017   2016   2015   (Dollars in Thousands) Inventory impairments:           Home sales $ 2,200   $ 2,350   $ — Land sales —   1,150   — Total inventory impairments $ 2,200   $ 3,500   $ —             Remaining carrying value of inventory impaired at year end $ 5,921   $ 30,225   $ — Number of projects impaired during the year 1   3   — Total number of projects subject to periodic impairment review during the year (1) 26   27   18 2018:     Year Ended December 31,       2020     2019     2018       (Dollars in Thousands)   Inventory impairments:                         Home sales   $ 19,000     $ 8,300     $ 10,000   Land sales     0       1,900       0   Total inventory impairments   $ 19,000     $ 10,200     $ 10,000                             Remaining carrying value of inventory impaired at year end   $ 47,178     $ 81,622     $ 57,845   Number of projects impaired during the year     5       3       2   Total number of projects subject to periodic impairment review during the year (1)     31       27       26   (1) (1) Represents the peak number of real estate projects that we had during each respective year. The number of projects outstanding at the end of each year may be less than the number of projects listed herein. The $17.8 million in California home sales impairments of $2.2 million recorded during 2017in 2020 related to homes completed or under constructionfour homebuilding communities. Of this total, $6.5 million in charges related to a condominium community in the Sacramento Area, $6.2 million in charges related to a townhome community within Southern California's Inland Empire, $4.5 million in charges related to a townhome community in San Diego, and $0.6 million in charges related to a condominium community in Los Angeles.  The $1.2 million in Arizona home sales impairments related to the Company's luxury condominium project in Scottsdale, Arizona.  Each of these projects experienced slower absorptions which resulted in increased sales incentives and holding costs for one active homebuilding community located in Southern California. This community was experiencing a slow monthly sales absorption rate, andthese projects for which the Company determined that additional incentives were required to sell the remaining homes and lots at estimated aggregate sales prices thatfor remaining units at each community would be lower than itstheir previous carrying value.values.  In addition, some of these communities experienced higher direct construction costs than originally underwritten and budgeted. 83 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 The $8.3 million home sales impairments of $2.4 millionimpairment recorded during 20162019 related to land under development and homes completed or under construction for two active homebuilding communities.  These$1.7 million of the impairment charges related to a higher-priced community in the Inland Empire of Southern California and $6.6 million were recorded against the Company's luxury condominium project in Scottsdale, AZ.  In both instances, these communities were experiencing slow slower monthly sales absorption rates and the Company determined that additional incentives were required to sell the remaining homes and lots at estimated aggregate sales prices that would be lower than its previous carrying values. One community is located in Southern California and the other is located in Northern California.value. The $1.9 million land sales impairments of $1.2 millionimpairment recorded in the 2019third quarter related to land the Company had under developmentcontract in Northern California that closed during the Company intendedyear.  The impairment charges represented the loss expected from the sale of the contracted land for less than its carrying value. The home sales impairments of $10.0 million recorded during 2018 related to sell after certain improvementshomes completed or under construction for two, higher-priced active homebuilding communities located in Southern California. These communities were complete. Subsequently, the land sale was not ultimately consummatedexperiencing slower monthly sales absorption rates, and the Company madedetermined additional incentives and pricing adjustments were required to sell the determination during 2017remaining homes and lots at lower estimated aggregate sales prices than the previous carrying value for each project. For more information on fair value measurements, please refer to developNote 10. During the 2020first quarter, the Company terminated its option agreement for a luxury condominium project in Scottsdale, Arizona. Due to the lower demand levels experienced at this community coupled with the substantial investment required to build out the remainder of the project, the Company decided to abandon the future acquisition, development, construction and build homes on this land.sale of future phases of the project that were under option. In accordance with ASC 970-360-40-1, the capitalized costs related to the project are expensed and not allocated to other components of the project that the Company did develop. For the year ended December 31, 2020, the Company recorded an abandonment charge of $14.0 million representing the capitalized costs that have accumulated related to the portion of the project that is being abandoned.  This charge is included within project abandonment costs in the accompanying consolidated statement of operations. 84 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 5.    Capitalized Interest Interest is capitalized to inventory and investment in unconsolidated joint ventures during development and other qualifying activities. Interest capitalized as a cost of inventory is included in cost of sales as related homes and land parcels are closed. Interest capitalized to investment in unconsolidated joint ventures is amortized to equity in net income (loss) of unconsolidated joint ventures as related joint venture homes or lots close.close, or in instances where lots are sold from the unconsolidated joint venture to the Company, the interest is added to the land basis and included in cost of sales when the related lots or homes are sold to third-party buyers.  Interest expense is comprised of interest incurred but not capitalized and is reported as interest expense in our consolidated statements of operations.  For the years ended December 31, 2017, 20162020, 2019 and 20152018 interest incurred, capitalized and expensed was as follows:   Year Ended December 31,   2017   2016   2015   (Dollars in thousands) Interest incurred $ 21,978   $ 7,484   $ 4,722 Interest capitalized to inventory (20,394 )   (7,484 )   (4,722 ) Interest capitalized to investment in unconsolidated joint ventures (1,584 )   —   — Interest expensed $ —   $ —   $ —             Capitalized interest in beginning inventory $ 6,342   $ 4,190   $ 2,328 Interest capitalized as a cost of inventory 20,394   7,484   4,722 Capitalized interest acquired from unconsolidated joint venture at consolidation 738   —   — Contribution to unconsolidated joint ventures —   (1 )   (264 ) Previously capitalized interest included in cost of sales (11,021 )   (5,331 )   (2,511 ) Interest previously capitalized as a cost of inventory, included in other expense —   —   (85 ) Capitalized interest in ending inventory $ 16,453   $ 6,342   $ 4,190             Capitalized interest in beginning investment in unconsolidated joint ventures $ —   $ —   $ — Interest capitalized to investment in unconsolidated joint ventures 1,584   —   — Capitalized interest transferred from investment in unconsolidated joint venture to inventory upon consolidation (76 )   —   — Previously capitalized interest included in equity in net income of consolidated joint ventures (36 )   —   — Capitalized interest in ending investments in unconsolidated joint ventures $ 1,472   $ —   $ — Total capitalized interest in ending inventory and investments in unconsolidated joint ventures $ 17,925   $ 6,342   $ 4,190             Capitalized interest as a percentage of inventory 4.0 %   2.2 %   2.1 % Interest included in cost of sales as a percentage of home sales revenue 2.0 %   1.0 %   0.9 %             Capitalized interest as a percentage of investment in and advances to unconsolidated joint ventures 2.6 %   — %   — % Contribution     Year Ended December 31,       2020     2019     2018       (Dollars in thousands)   Interest incurred   $ 23,936     $ 28,819     $ 28,377   Interest capitalized to inventory     (20,281 )     (28,819 )     (27,393 ) Interest capitalized to investment in unconsolidated joint ventures     0       0       (984 ) Interest expensed   $ 3,655     $ 0     $ 0                             Capitalized interest in beginning inventory   $ 26,397     $ 25,681     $ 16,453   Interest capitalized as a cost of inventory     20,281       28,819       27,393   Capitalized interest transferred from investment in unconsolidated joint ventures to inventory upon lot acquisition     0       31       513   Previously capitalized interest included in cost of home and land sales     (23,864 )     (28,134 )     (18,678 ) Previously capitalized interest included in project abandonment costs     (761 )     0       0   Capitalized interest in ending inventory   $ 22,053     $ 26,397     $ 25,681                             Capitalized interest in beginning investment in unconsolidated joint ventures   $ 541     $ 713     $ 1,472   Interest capitalized to investment in unconsolidated joint ventures     0       0       984   Capitalized interest transferred from investment in unconsolidated joint ventures to inventory upon lot acquisition     0       (31 )     (513 ) Previously capitalized interest included in equity in net loss of unconsolidated joint ventures     (541 )     (141 )     (1,230 ) Capitalized interest in ending investment in unconsolidated joint ventures     0       541       713   Total capitalized interest in ending inventory and investments in unconsolidated joint ventures   $ 22,053     $ 26,938     $ 26,394                             Capitalized interest as a percentage of inventory     7.0 %     6.1 %     4.5 % Interest included in cost of home sales as a percentage of home sales revenue     5.6 %     4.9 %     3.7 %                           Capitalized interest as a percentage of investment in and advances to unconsolidated joint ventures     0 %     1.8 %     2.1 % For the year ended December 31, 2020, the Company expensed $0.8 million in interest previously capitalized due to the abandonment of the future phases of one of its existing homebuilding communities. For the year ended December 31, 2019, the Company expensed $0.9 million in interest previously capitalized to inventory with the land impairment recorded during the year. For more information, please refer to Note 4. For the years ended December 31, 2020, 2019 and 2018, the Company expensed $0.4 million, $0 and $1.1 million, respectively, in interest previously capitalized to investments in unconsolidated joint ventures relatesas the result of other-than-temporary impairments to interest capitalized as a costinvestments in two separate joint ventures. For more information, please refer to Note 6. 85 Table of inventory, which was then contributed by the Company to unconsolidated joint ventures formed in each of 2016Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2015.2018 5. 6.    Investments in and Advances to Unconsolidated Joint Ventures As of December 31, 2017 2020 and 2016,2019, the Company had ownership interests in 10nine and 13,ten, respectively, unconsolidated joint ventures with ownership percentages that generally ranged from 5%10% to 35%. The condensed combined balance sheets for our unconsolidated joint ventures accounted for under the equity method were as follows:   December 31,   2017   2016   (Dollars in thousands) Cash and cash equivalents $ 30,017   $ 33,683 Restricted cash 15,041   8,374 Real estate inventories 396,850   386,487 Other assets 3,942   1,664 Total assets $ 445,850   $ 430,208         Accounts payable and accrued liabilities $ 34,959   $ 28,706 Notes payable 78,341   97,664 Total liabilities 113,300   126,370 The New Home Company's equity 50,523   46,857 Other partners' equity 282,027   256,981 Total equity 332,550   303,838 Total liabilities and equity $ 445,850   $ 430,208 Debt-to-capitalization ratio 19.1 %   24.3 % Debt-to-equity ratio 23.6 %   32.1 % As of December 31, 2017 and 2016, the Company had advances outstanding of approximately $3.8 million and $4.0 million, respectively, to these unconsolidated joint ventures, which were included in the notes payable balances of the unconsolidated joint ventures in the table above. The advances relate to an unsecured promissory note entered into on October 31, 2016 and amended on February 3, 2017 with Encore McKinley Village LLC ("Encore McKinley"), an unconsolidated joint venture of the Company. The note bears interest at 10% per annum and matures on October 31, 2018.     December 31,       2020     2019       (Dollars in thousands)   Cash and cash equivalents   $ 16,709     $ 31,484   Restricted cash     611       13,852   Real estate inventories     3,172       241,416   Other assets     1,834       3,843   Total assets   $ 22,326     $ 290,595                     Accounts payable and accrued liabilities   $ 13,487     $ 16,778   Notes payable     0       28,665   Total liabilities     13,487       45,443   The New Home Company's equity (1)     2,107       27,722   Other partners' equity     6,732       217,430   Total equity     8,839       245,152   Total liabilities and equity   $ 22,326     $ 290,595   Debt-to-capitalization ratio     0 %     10.5 % Debt-to-equity ratio     0 %     11.7 % ___________________ (1) Balance represents the Company's interest, as reflected in the financial records of the respective joint ventures.  At December 31, 2019, this balance differs from the investment in and advances to unconsolidated joint ventures balance reflected in the Company's consolidated balance sheets by $2.5 million due to interest capitalized to the Company's investment in joint ventures and certain other differences in outside basis.  The condensed combined statements of operations for our unconsolidated joint ventures accounted for under the equity method were as follows:     Year Ended December 31,       2020     2019     2018       (Dollars in thousands)   Revenues   $ 137,819     $ 164,038     $ 181,623   Cost of sales and expenses     161,772       230,953       209,527   Net loss of unconsolidated joint ventures   $ (23,953 )   $ (66,915 )   $ (27,904 ) Equity in net loss of unconsolidated joint ventures reflected in the accompanying consolidated statements of operations   $ (18,791 )   $ (3,503 )   $ (19,653 ) 86 Table of Contents THE NEW HOME COMPANY INC.   Year Ended December 31,   2017   2016   2015   (Dollars in thousands) Revenues $ 147,447   $ 233,219   $ 409,881 Cost of sales and expenses 147,976   207,028   344,687 Net (loss) income of unconsolidated joint ventures $ (529 )   $ 26,191   $ 65,194 Equity in net income of unconsolidated joint ventures reflected in the accompanying consolidated statements of operations $ 866   $ 7,691   $ 13,767 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 Included in cost of sales and expenses for our unconsolidated joint ventures for the years ended December 31, 2020, 2019 and 2018, was $0, $70.0 million and $28.8 million in real estate impairment charges, respectively. The Company's allocated share of these charges was $0, $3.5 million and $18.9 million for 2020,2019 and 2018, respectively.  The 2019 impairment related to the assets of a land development joint venture in Southern California while the 2018 impairment related to the assets of a land development joint venture in Northern California. Fair values for the land development projects impaired during 2019 and 2018 were calculated under discounted cash flow models. The table below summarizes inventory impairments recorded by our unconsolidated joint ventures during the years ended December 31, 2020, 2019 and 2018.     Year Ended December 31,       2020     2019     2018       (Dollars in thousands)   Joint venture impairments related to:                         Homebuilding joint ventures   $ 0     $ 0     $ 0   Land development joint ventures     0       70,000       28,776   Total joint venture impairments   $ 0     $ 70,000     $ 28,776   Number of projects impaired during the year     0       1       1   Total number of projects included in unconsolidated joint ventures and reviewed for impairment during the year     10       10       10   The Company reviews its investments in and advances to unconsolidated joint ventures for other-than-temporary declines in value.  To the extent we deem any declines in value of our investment in and advances to unconsolidated joint ventures to be other-than-temporary, we impair our investment accordingly.  For the years ended December 31, 2017, 20162020, 2019 and 2015,2018, the Company recorded other-than-temporary, noncash impairment charges of $22.3 million, $0, and $1.1 million, respectively.  Joint venture impairment charges are included in equity in net loss of unconsolidated joint ventures in the accompanying consolidated statements of operations.    During the 2020second quarter, the Company made the determination to exit from its TNHC Russell Ranch LLC ("Russell Ranch") venture due to low expected financial returns relative to the required future capital contributions and related risks, including the potential impact of COVID-19 on the economy, as well as the Company's opportunity to pursue federal tax loss carryback refund opportunities from the passage of the Coronavirus Relief and Economic Security Act ("CARES Act"). As a result, the Company determined that its investment in the joint venture was not recoverable and recorded a $20.0 million other-than-temporary impairment charge to write off its investment in Russell Ranch and record a liability for its estimated costs to complete the Phase 1 backbone infrastructure costs.  The Company believes that exiting the venture preserves capital, reduces its investment concentration within one geographical location, and allows it to pursue federal tax loss carryback refunds.  The joint venture completed a sale of substantially all of its underlying assets to a third-party during the 2020fourth quarter that resulted in a the Company recording income of $4.5 million to equity in income (loss) of unconsolidated joint ventures, partially offsetting the other-than-temporary impairment recorded during the 2020second quarter.  The remaining 2020 other-than-temporary impairment charge of $2.3 million occurred in the 2020first quarter and related to our investment in the Arantine Hills Holdings LP ("Bedford") joint venture.  The Company agreed to sell its interest in this joint venture to our partner for less than our current carrying value. This transaction closed during the 2020third quarter.  Pursuant to our agreement to sell our interest, the purchase price was $5.1 million for the sale of our partnership interest and we have an option to purchase at market up to 30% of the lots from the masterplan community.  The $1.1 million other-than-temporary charge recorded during 2018 related to the Company's investment Russell Ranch.  Joint venture impairment charges are included in equity in net loss of unconsolidated joint ventures in the accompanying consolidated statements of operations.    87 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 As a smaller reporting company, the Company is subject to the provisions of Rule 8-03(b)(3) of Regulation S-X which requires the disclosure of certain financial information for equity investees that constitute 20% or more of the Company's consolidated net income (loss). For the years ended December 31, 2020 and 2018, the loss allocation from one of the Company's unconsolidated joint ventures in Northern California accounted for under the equity method exceeded 20% of the Company's consolidated net loss. For the year ended December 31, 2019, the loss allocation from one of the Company's unconsolidated joint ventures in Southern California accounted for under the equity method exceeded 20% of the Company's consolidated net loss.  The table below presents select combined financial information for both of these unconsolidated joint ventures for the years ended December 31, 2020, 2019 and 2018:       Year Ended December 31,       2020     2019     2018       (Dollars in thousands)   Revenues   $ 55,517     $ 33,144     $ 38,789   Cost of sales:                         Land sales     74,279       31,103       36,676   Inventory impairments     0       70,000       28,776   Gross margin     (18,762 )     (67,959 )     (26,663)   Expenses     (2,742 )     (2,879 )     (3,289 ) Net loss   $ (21,504 )   $ (70,838 )   $ (29,952 ) Equity in net loss of unconsolidated joint ventures reflected in the accompanying consolidated statements of operations (1)   $ (17,744 )   $ (3,656 )   $ (20,283 ) (1) Balance represents equity in net loss of unconsolidated joint ventures included in the statements of operations related to the Company's investment in these two unconsolidated joint ventures. The balance may differ from the amount of profit or loss allocated to the Company as reflected in each joint venture's financial records primarily due to basis differences such as other-than-temporary impairment charges, interest capitalized to the Company's investment in joint ventures, and/or profit deferral from lot sales from the joint ventures to the Company. In the above table, the Company's equity in net losses from these two unconsolidated joint ventures for the years ended December 31, 2020, 2019 and 2018 include $22.3 million, $0, and $1.1 million, of other-than-temporary impairment charges, respectively.  For the years ended December 31, 2020, 2019 and 2018, the Company earned $4.9$0.9 million, $8.2$1.9 million, and $12.4$3.4 million, respectively, in management fees from its unconsolidated joint ventures. For additional detail regarding management fees, please see Note 11 to the consolidated financial statements.12. 88 Table of Contents THE NEW HOME COMPANY INC. Subsequent to NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017, the Company entered into a land option agreement with one of its unconsolidated joint ventures. Please refer to Note 11 - "Related Party Transactions" for a discussion of this transaction.2020, 2019 and 2018 On October 23, 2017, the Company acquired the remaining outside equity interest of our TNHC Tidelands LLC (Tidelands) unconsolidated joint venture. TNHC Tidelands LLC is the owner of an actively selling project in Northern California (the "Tidelands Project"). The Company paid $13.6 million to our joint venture partner for its interest and paid off the $4.1 million remaining balance on the joint venture's construction loan. Following the purchase, the Company was required to consolidate this entity as it is now a wholly owned subsidiary of the Company, and the Tidelands Project became a wholly owned active selling community of the Company. The purchase consideration and the cost basis of our previous investment in unconsolidated joint ventures related to this joint venture, are included in real estate inventories as of December 31, 2017. In August 2017, we acquired the remaining outside equity interest of our DMB/TNHC LLC (Sterling at Silverleaf) unconsolidated joint venture. The Company paid $2.6 million to our joint venture partner and upon the change of control was required to consolidate this venture as it is now a wholly owned subsidiary of the Company. The purchase consideration and the cost basis of our previous investment in unconsolidated joint ventures related to this joint venture, are included in real estate inventories as of December 31, 2017. During the 2017 second quarter, our Larkspur Land 8 Investors LLC unconsolidated joint venture (Larkspur) allocated $0.1 million of income to the Company from a reduction in cost to complete reserves, which was included in equity in net income of unconsolidated joint ventures in the accompanying consolidated statements of operations, and our outside equity partner exited the joint venture. Upon the change in control, we were required to consolidate this venture as a wholly owned subsidiary and the Company assumed the cash, other assets, and accrued liabilities, including warranty and the remaining costs to complete reserves, of the joint venture. As part of this transaction, the Company also recognized a gain of $0.3 million, which was included in equity in net income of unconsolidated joint ventures in the accompanying consolidated statements of operations, due to the purchase of our JV partner's interest for less than its carrying value. During June 2016, our LR8 Investors LLC unconsolidated joint venture (LR8) made its final distributions, allocated $0.5 million of income to the Company from a reduction in warranty reserves, which was included in equity in net income of unconsolidated joint ventures in the accompanying consolidated statements of operations, and our outside equity partner exited the joint venture. Upon the change in control, we were required to consolidate this venture as a wholly owned subsidiary and the Company assumed the cash, accounts receivable, accounts payable, and accrued liabilities, including the remaining warranty reserve, of the joint venture. As part of this transaction, the Company also recognized a gain of $1.1 million, which was included in equity in net income of unconsolidated joint ventures in the accompanying consolidated statements of operations, due to the purchase of our JV partner's interest for less than its carrying value. On January 15, 2016, the Company entered into an assignment and assumption of membership interest agreement (the "Buyout Agreement") for its partner's interest in the TNHC San Juan LLC unconsolidated joint venture. Per the terms of the Buyout Agreement, the Company contributed $20.6 million to the joint venture, and the joint venture made a liquidating cash distribution to our partner for the same amount in exchange for its membership interest. Prior to the buyout, the Company accounted for its investment in TNHC San Juan LLC as an equity method investment. After the buyout, TNHC San Juan LLC is now a wholly owned subsidiary of the Company. 6. 7.    Other Assets Other assets consist of the following:   December 31,   2017   2016   (Dollars in thousands) Capitalized selling and marketing costs(1) $ 11,232   $ 10,101 Deferred tax asset, net 6,317   8,434 Property and equipment, net of accumulated depreciation and amortization 603   857 Warranty insurance receivable(2) 1,202   — Prepaid expenses 4,937   1,907   $ 24,291   $ 21,299     December 31,       2020     2019       (Dollars in thousands)                     Capitalized selling and marketing costs, net(1)   $ 5,895     $ 7,148   Prepaid income taxes(2)     27,866       1,032   Insurance receivable(3)     4,816       10,900   Warranty insurance receivable(4)     2,480       1,852   Prepaid expenses     6,331       2,729   Right-of-use lease assets     2,997       1,988   Other     318       231       $ 50,703     $ 25,880   (1) (1) Capitalized selling and marketing costs includes costs incurred for tangible assets directly used in the sales process such as our sales offices, design studios and model furnishings, and also includes model landscaping costs, which were $2.2 million and $2.6 million as of December 31, 2020 and 2019, respectively.  The Company amortized $11.3 million, $9.2depreciated $6.5 million and $4.8$8.7 million, of capitalized selling and marketing project costs to selling and marketing expenses during the years ended December 31, 2017, 2016 2020 and 2015,2019, respectively. (2) The amount at December 31, 2020 includes approximately $27.4 million of expected federal income tax refunds due to the recent enactment of the CARES Act signed into law on March 27, 2020 which allows net operating losses generated from 2018 – 2020 to be carried back five years. (2) (3) Of The Company recorded insurance receivables of $10.9 million in connection with $10.9 million of litigation reserves recorded as of December 31, 2019.  During 2020, $4.7 million was paid by our insurance carrier directly to claimants related to two claims, and the Company reduced its insurance receivable estimate by $0.2 million for one claim and adjusted the incurred but not reported ("IBNR") litigation reserve by $1.2 million, addedresulting in the current year, approximately $0.6an insurance receivable balance of $4.8 million relatedat December 31, 2020 with a corresponding decrease recorded within litigation reserves and $0.2 million charged to prior year estimatedcost of sales.  For more information, please refer to Note 8. (4) The Company adjusted its warranty insurance recoveries. For further discussion, please see Note 7receivable upward by $1.2 million during 2020 to our consolidated financial statements.true-up the receivable to its estimate of qualifying reimbursable expenditures which resulted in pretax income of $0.3 million for the year ended December 31, 2020.  The Company adjusted its warranty insurance receivable upward by $1.4 million during 2019 to true-up the receivable to its estimate of qualifying reimbursable expenditures which resulted in pretax income of the same amount for the year ended December 31, 2019. 7. 8.    Accrued Expenses and Other Liabilities Accrued expenses and other liabilities consist of the following:   December 31,   2017   2016   (Dollars in thousands)  Warranty accrual(1) $ 6,859   $ 4,931  Accrued compensation and benefits 9,164   6,786  Accrued interest 6,217   648  Completion reserve 5,792   1,355  Income taxes payable 6,368   7,147  Deferred profit from unconsolidated joint ventures 136   957  Other accrued expenses 3,518   1,594   $ 38,054   $ 23,418     December 31,       2020     2019       (Dollars in thousands)   Warranty accrual(1)   $ 7,276     $ 7,223   Litigation reserves(2)     5,641       10,900   Accrued interest     3,172       5,796   Accrued compensation and benefits     7,106       5,350   Completion reserve     5,683       3,167   Customer deposits     2,898       3,574   Lease liabilities     3,180       2,243   Other accrued expenses     1,254       2,301       $ 36,210     $ 40,554   (1) (1) Included in thisthe amount for 2017at December 31, 2020 and 2019 is approximately $1.2approximately $2.5 million and $1.9 million, respectively, of additional warranty liabilities estimated to be coveredrecovered by our insurance policies that were adjusted to present the warrantypolicies. (2) During 2019, we recorded litigation reserves and related estimated warranty insurance receivable on a gross basis at December 31, 2017. Of the $1.2 million adjusted in the current year, approximately $0.6totaling $5.9 million related to prior year estimated warranty insurance recoveries. For further details, see Note 6ordinary course litigation which developed and became probable and estimable within the 2019fourth quarter. Further, as a result of the development of the construction defect related claims within the litigation reserve and their impact to our consolidated financial statements.     Changes in our warranty accrual are detailed in the table set forth below:   Year Ended December 31,   2017   2016   2015   (Dollars in thousands) Beginning warranty accrual for homebuilding projects $ 4,608   $ 3,846   $ 1,277 Warranty provision for homebuilding projects 1,825   1,921   2,802 Warranty assumed from joint ventures at consolidation 781   469   — Warranty payments for homebuilding projects (989 )   (563 )   (233 ) Adjustment to warranty accrual(1) 409   (1,065 )   — Ending warranty accrual for homebuilding projects 6,634   4,608   3,846             Beginning warranty accrual for fee building projects 323   335   301 Warranty provision for fee building projects —   —   57 Warranty efforts for fee building projects (3 )   (12 )   (23 ) Adjustment to warranty accrual for fee building projects (95 )   —   — Ending warranty accrual for fee building projects 225   323   335 Total ending warranty accrual $ 6,859   $ 4,931   $ 4,181 (1) Included in this amountthe Company’s litigation reserve estimates for 2017 is approximately $1.2IBNR future construction defect claims, we recorded an additional $5.0 million of additional warranty liabilities estimatedIBNR construction defect claim reserves resulting in aggregate litigation reserves totaling $10.9 million as of December 31, 2019.  Because the self-insured retention deductibles had been met for each claim covered by the $5.9 million reserve, and the self-insured retention deductibles are expected to be covered met for the $5.0 million IBNR construction defect claim reserves, the Company recorded estimated insurance receivables of $10.9 million offsetting the litigation reserves as of December 31, 2019.  During the year ended December 31,2020, $4.7 million was paid by our insurance policies that were adjustedcarrier directly to presentclaimants related totwo claims, and the warranty reservesCompany decreased its litigation reserve estimate by $0.2 million for one claim and related estimated warrantydecreased the IBNR litigation reserve by a net $0.4 million ($1.0 million corresponding decrease in insurance receivable onreceivables, and a gross basis$0.6 million increase in cost of sales) resulting in a litigation reserve balance of $5.6 million at December 31, 2017. Of the $1.2 million adjusted in the current year, approximately $0.6 million related to prior year estimated warranty insurance recoveries. For further details, see Note 6. Netted against this amount is a warranty accrual adjustment recorded in 2017 of $0.8 million related to a lower experience rate of expected warranty expenditures.2020.  89 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 We maintain general liability insurance designed to protect us against a portion of our risk of loss from construction-related warranty and construction defect claims. Our master general liability policies which cover most of our projects allow for our warranty spend to erode our self-insured retention requirements. We establish and track separately our warranty accrual and litigation reserves for both known and IBNR construction defect claims. Our warranty accrual and litigation reserves for construction defect claims are presented on a gross basis within accrued expenses and other liabilities in the accompanying consolidated balance sheets without consideration of insurance recoveries. Expected recoveries from insurance carriers are tracked separately between warranty insurance receivables and insurance receivables related to litigated claims and are presented within other assets in the accompanying balance sheets. Our warranty accrual and related estimated insurance recoveries are based on historical warranty claim and expense data, and expected recoveries from insurance carriers are recorded based on actual insurance claims and amounts determined using our warranty accrual estimates, our insurance policy coverage limits for the applicable policy years and historical recovery rates. Our litigation reserves for both known and IBNR future construction defect claims based on historical claim and expense data, and expected recoveries from insurance carriers are recorded based on actual insurance claims and amounts determined using our construction defect claim accrual estimates, our insurance policy coverage limits for the applicable policy years and historical recovery rates. Because of the inherent uncertainty and variability in these assumptions, our actual costs and related insurance recoveries could differ significantly from amounts currently estimated. During 2017 and 2016, we recorded adjustments of $0.9 million and $1.1 million, respectively, to Changes in our warranty accrual due to a lower experience rate of expected warranty expenditures. In 2017, $0.8 million is included in "Adjustment to warranty accrual" and $63,000 is included in "Adjustment to warranty accrual for fee building projects" above. In 2016, $1.1 million is included in "Adjustment to warranty accrual" above. These adjustments resulted in a corresponding reduction of cost of homes sales and reduction of cost of fee building sales, respectively,are detailed in the consolidated statementstable set forth below:     Year Ended December 31,       2020     2019     2018       (Dollars in thousands)   Beginning warranty accrual for homebuilding projects   $ 7,195     $ 6,681     $ 6,634   Warranty provision for homebuilding projects     1,789       2,363       2,330   Warranty payments for homebuilding projects     (2,576 )     (2,341 )     (2,006 ) Adjustment to warranty accrual(1)     861       492       (277 ) Ending warranty accrual for homebuilding projects     7,269       7,195       6,681                             Beginning warranty accrual for fee building projects     28       217       225   Warranty provision for fee building projects     0       9       0   Warranty efforts for fee building projects     0       (67 )     (70 ) Adjustment to warranty accrual for fee building projects(2)     (21 )     (131 )     62   Ending warranty accrual for fee building projects     7       28       217   Total ending warranty accrual   $ 7,276     $ 7,223     $ 6,898   (1) During 2020the Company recorded an adjustment of $0.9 million to increase its warranty accrual for homebuilding projects based on the expected warranty experience rates which resulted in a corresponding increase of $1.2 million to warranty insurance recoveries included in other assets in the accompany consolidated balance sheets and a $0.3 million credit to cost of sales in the accompanying consolidated statement of operations.  During 2019, the Company recorded a warranty accrual adjustment of $0.5 million due to higher expected warranty expenditures which resulted in an increase of the same amount to cost of home sales in the accompanying consolidated statement of operations.   During 2018, the estimated amount to be covered by our insurance policies was reduced by $0.3 million.  Netted against the amount recorded in 2018 is a warranty accrual adjustment of $43,000 related to higher expected warranty expenditures which resulted in an increase of $43,000 to cost of home sales in the accompanying consolidated statement of operations.  (2) During 2020, the Company recorded an adjustment of $21,000 to decrease its warranty accrual for fee building projects based on the expected warranty experience rates which resulted in a corresponding decrease to fee building cost of sales in the accompanying consolidated statement of operations.  In 2019,the Company recorded an adjustment of $0.1 million due to a lower experience rate of expected warranty expenditures for fee building projects which resulted in a reduction of the same amount to fee cost of sales in the accompanying consolidated statement of operations.  During 2018, the warranty reserve and corresponding warranty insurance recoveries balances were increased by approximately $32,000, and the warranty reserve accrual was further adjusted by approximately $30,000 related to higher expected warranty expenditures which resulted in an increase to fee cost of sales of the same amount in the accompanying consolidated statement of operations.  90 Table of operation.Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. December 31, 2020, 2019 and 2018 9.    Senior Notes and Unsecured Revolving Credit Facility Notes payable Indebtedness consisted of the following:   December 31,   2017   2016   (Dollars in thousands) 7.25% Senior Notes due 2022, net $ 318,656   $ — Unsecured revolving credit facility —   118,000 Total Notes Payable $ 318,656   $ 118,000 The carrying amount of our senior notes listed above is net of the unamortized discount of $2.2 million, unamortized premium of $1.8 million, and $5.9 million of unamortized debt issuance costs that are amortized to interest costs on a straight-line basis over the respective terms of the notes, which approximates the effective interest method.     December 31,       2020     2019       (Dollars in thousands)   7.25% Senior Notes due 2025, net   $ 244,865     $ 0   7.25% Senior Notes due 2022, net     0       304,832   Unsecured revolving credit facility     0       0   Total Indebtedness   $ 244,865     $ 304,832   2022 Notes On March 17,2017, the Company completed the sale of $250 million in aggregate principal amount of 7.25% Senior Notes due 2022 (the "Existing Notes"), in a private placement..  The Existing Notes were issued at an offering price of 98.961% of their face amount, which representsrepresented a yield to maturity of 7.50%. On May 4, 2017, the Company completed a tack-on private placement offering through the sale of an additional $75 million in aggregate principal amount of the 7.25% Senior Notes due 2022 ("Additional Notes" and, together with the Existing Notes, the "2022 Notes"). The Additional Notes were issued at an offering price of 102.75% of their face amount plus accrued interest since March 17, 2017, which represented a yield to maturity of 6.438%. The carrying amount of the 2022 Notes listed above at December 31, 2019, is net of the unamortized discount of $1.1 million, unamortized premium of $0.9 million, and unamortized debt issuance costs of $3.0 million, each of which were amortized and capitalized to interest costs on a straight-line basis over the respective term of the 2022 Notes which approximated the effective interest method.  During 2020, the Company repurchased and retired approximately $15.7 million in face value of the 2022 Notes for a cash payment of approximately $14.8 million.  The Company recognized a total gain on early extinguishment of debt of $0.8 million and wrote off approximately $0.1 million of unamortized discount, premium and debt issuance costs associated with the 2022 Notes retired.  During 2019, the Company repurchased and retired approximately $17.0 million in face value of the 2022 Notes for a cash payment of approximately $15.6 million. The Company recognized a total gain on early extinguishment of debt of $1.2 million and wrote off approximately $0.2 million of unamortized discount, premium and debt issuance costs associated with the 2022 Notes retired.     As discussed below, the 2022 Notes were redeemed in full on November 12, 2020.  As a result of the redemption, the Company recognized an $8.0 million loss included in gain (loss) on early extinguishment of debt in the accompanying consolidated statements of operations.  Included in this loss is $0.8 million of interest paid for the period of time between the issuance of the 2025 Notes on October 28, 2020 and the redemption of 2022 Notes on November 12, 2020.   2025 Notes On October 28, 2020, the Company completed the sale of $250 million in aggregate principal amount of 7.25% Senior Notes due 2025 (the “2025 Notes”), in a private placement to “qualified institutional buyers” as defined in Rule 144A under the Securities Act and outside the United States in reliance on Regulation S under the Securities Act. The 2025 Notes were issued at an offering price of 100% of their face amount, which represents a yield to maturity of 7.25%.  Net proceeds from the Existingoffering of the 2025 Notes, together with cash on hand, were used to repayredeem all borrowingsof the outstanding2022 Notes at a redemption price of 101.813% of the principal amount thereof, plus accrued and unpaid interest to the redemption date.  The carrying amount of the 2025 Notes listed above at December 31, 2020, is net of the unamortized debt issuance costs of $5.1 million which are amortized and capitalized to interest costs using the effective interest method. The 2025 Notes have not been registered under the Company’s senior unsecured revolving credit facility withSecurities Act or any state securities laws and may not be offered or sold in the remainder to be used for general corporate purposes. Net proceedsUnited States absent registration or an applicable exemption from the Additional Notes are used for working capital, land acquisitionregistration requirements of the Securities Act and general corporate purposes. Interestany applicable state securities laws.  Pursuant to the Indenture, interest on the Existing2025 Notes and the Additional Notes (together the "Original Notes") will be paid semiannually in arrears on April 115 and October 1, which commenced October 1, 2017 and15 of each year, commencing on April 15, 2021. The 2025 Notes will mature on April 1, 2022. In accordance with its obligations under two registration rights agreements executed in connection with the private placementsOctober 15, 2025. 91 Table of the Original Notes, on September 8, 2017, the Company completed an exchange offer of the Original Notes for an equal principal amount of 7.25% Senior Notes due 2022 (the "Notes") which terms are identical in all material respects to the Original Notes except that the Notes are registered under the Securities Act of 1933, as amended (the "Securities Act")Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and are freely tradeable in accordance with applicable law.2018 The2025 Notes are general senior unsecured obligations that rank equally in right of payment to all existing and future senior indebtedness, including borrowings under the Company's senior unsecured revolving credit facility. The2025 Notes contain certain restrictive covenants, including a limitation on additional indebtedness and a limitation on restricted payments. Restricted payments include, among other things, dividends, investments in unconsolidated entities, and stock repurchases. Under the limitation on incurring or guaranteeing additional indebtedness, we are permitted to incur specified categories of indebtedness but are prohibited, aside from those exceptions, from incurring further indebtedness if we do not satisfy either a leverage condition or an interest coverage condition. Exceptions to the limitation include, among other things, (1) borrowings of up to $260the greater of (i) $100 million and (ii) 20% of our consolidated tangible assets under existing or future bank credit facilities, (2) non-recourse indebtedness, and (3) indebtedness incurred for the purpose of refinancing or repaying certain existing indebtedness. Under the limitation on restricted payments, we are also prohibited from making restricted payments, aside from certain exceptions, if we do not satisfy either the leverage condition or interest coverage condition. In addition, the amount of restricted payments that we can make is subject to an overall basket limitation, which builds based on, among other things, 50% of consolidated net income from January 1, 20172021 forward and 100% of the net cash proceeds from qualified equity offerings. Exceptions to the foregoing limitations on our ability to make restricted payments include, among other things, investments in joint ventures and other investments up to 15% of our consolidated tangible net assets and a general basket of up to the greater of $15 million.million and 3% of our consolidated tangible assets. The2025 Notes are guaranteed, on an unsecured basis, jointly and severally, by all of the Company's 100% owned subsidiaries. See Note 1718 for information about the guaranteesguarantees.  The Indenture contains certain other covenants, among other things, the ability of the Company and supplemental financial statement information about our guarantorits restricted subsidiaries groupto issue certain equity interests, make payments in respect of subordinated indebtedness, make certain investments, sell assets, incur liens, create certain restrictions on the ability of restricted subsidiaries to pay dividends or to transfer assets, enter into transactions with affiliates, create unrestricted subsidiaries, and non-guarantor subsidiaries group. consolidate, merge or sell all or substantially all of its assets. These covenants are subject to a number of exceptions and qualifications as set forth in the Indenture. On or after October 15, 2022, the Company may redeem all or a portion of the 2025 Notes upon not less than 15 nor more than 60 days’ notice, at the redemption prices (expressed as percentages of the principal amount on the redemption date) set forth below plus accrued and unpaid interest, if any, to the applicable redemption date, if redeemed during the 12-month period, as applicable, commencing on October 15 of the years as set forth below:       Year                Redemption Price              2022    103.625% 2023    101.813% 2024    100.000% In addition, any time prior to October 15, 2022, the Company may, at its option on one or more occasions, redeem the 2025 Notes (including any additional notes that may be issued in the future under the Indenture) in an aggregate principal amount not to exceed 40% of the aggregate principal amount of the 2025 Notes (including any additional notes that may be issued in the future under the Indenture) issued prior to such date at a redemption price (expressed as a percentage of principal amount) of 107.25%, plus accrued and unpaid interest, if any, to the redemption date, with an amount equal to the net cash proceeds from one or more equity offerings by the Company. If the Company experiences a change of control triggering event (as described in the Indenture), holders of the 2025 Notes will have the right to require the Company to repurchase all or a portion of the 2025 Notes at 101% of their principal amount thereof on the date of repurchase, plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).  The Company'sIndenture also provides for events of default, which, if any of them occurs, would permit or require the principal of and accrued interest on such 2025 Notes to be declared due and payable. In addition, if the 2025 Notes are assigned an investment grade rating by certain rating agencies and no default or event of default has occurred or is continuing, certain covenants related to the 2025 Notes would be suspended. If the rating on the 2025 Notes should subsequently decline to below investment grade, the suspended covenants would be reinstated. Credit Facilities The Company had an unsecured revolving credit facility ("Credit Facility") is with a bank group. group (the "existing facility") which, as amended on June 26, 2020, provided for a maturity date ofSeptember 30, 2021 and total commitments under the facility of $60 million and an accordion feature allowing up to $150 million of borrowings, subject to certain financial conditions, including the availability of bank commitments.  The existing facility, as amended in June 2020, also provided a $10.0 million sublimit for letters of credit, subject to conditions set forth in the agreement. As of December 31, 2019, the Company had no outstanding letters of credit issued under the existing facility.  Debt issuance costs for the existing unsecured revolving credit facility, which totaled $0.5 million as of December 31, 2019 were included in other assets and amortized and capitalized to interest costs on a straight-line basis over the term of the agreement. The existing facility was terminated in connection with the Company's execution of the New Credit Agreement discussed below. 92 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 On September 27, 2017, October 30, 2020, the Company entered into a ModificationCredit Agreement (the "Modification"“New Credit Agreement” or “Credit Facility”) to itswith JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto. The New Credit Facility. The Modification, among other things, (i) extends the maturity date of theAgreement provides for a $60 million unsecured revolving credit facility, to September 1, 2020, (ii) decreases (A) the total commitmentsmaturing April 30, 2023. The New Credit Agreement also provides that, under the facility to $200 million from $260 million (B) the accordion feature to $300 million from $350 million,  (iii) revises certain financial covenants, including the tangible net worth, minimum liquidity, and interest coverage tests, in addition to providing relief on compliance with the interest coverage test so long ascircumstances, the Company maintains cash equalmay increase the aggregate principal amount of revolving commitments up to not less thanan aggregate of $100 million.  Concurrently with entering into the trailing twelve month consolidated interest incurred,New Credit Agreement, the Company repaid in full and (iv) adds certain wholly owned subsidiaries as guarantors. terminated the existing credit facility.  As of December 31, 2017, 2020, we had no0 outstanding borrowings under the credit facility. Interest is payable monthly and is chargedCredit Facility. Amounts outstanding under the New Credit Agreement accrue interest at a rate of 1-monthequal to either, at the Company’s election, LIBOR plus a margin ranging from 2.25%of 3.50% to 3.00%4.50% per annum, or base rate plus a margin of 2.50% to 3.50%, in each case depending on the Company’s leverage ratio as calculated at the end of each fiscal quarter.ratio.  As of December 31, 2017, 2020, the interest rate under the facility was 4.56%. Pursuant to the Credit Facility for the Company is requiredLIBOR-based rate was 4.40%  The covenants of the New Credit Agreement include customary negative covenants that, among other things, restrict the Company’s ability to maintainincur secured indebtedness, grant liens, repurchase or retire its senior unsecured notes, and make certain acquisitions, investments, asset dispositions and restricted payments, including stock repurchases. In addition, the New Credit Agreement contains certain financial covenants, as defined inincluding requiring that the Credit Facility, includingCompany to maintain (i) a minimumconsolidated tangible net worth; (ii) maximumworth not less than $150 million plus 50% of the cumulative consolidated net income for each fiscal quarter commencing on or after June 30, 2020, (ii) a net leverage ratios;ratio not greater than 60%, (iii) a minimum liquidity covenant;of at least $10 million, and (iv) a minimum fixed chargean interest coverage ratio based on EBITDA (as detailed inless than 1.75 to 1 or, if this test is not met, to maintain unrestricted cash equal to not less than the Credit Facility) totrailing 12 month consolidated interest incurred. The New Credit Agreement includes customary events of default, and customary rights and remedies upon the occurrence of any event of default thereunder, including rights to accelerate the loans and terminate the commitments thereunder.  As of December 31, 2017, 2020, the Company was in compliance with all financial covenants. In The Credit Facility also provides for a $30.0 million sublimit for letters of credit, subject to conditions set forth in the New Credit Agreement.  As of December 2016, 31, 2020 the Company retired a term loan with a land seller. The loan was secured by real estate, and bore interest at 7.0% per annum. Immediately prior to payoff,had no outstanding letters of credit issued under the land seller reduced the principal balance of $4.0 million by $0.3 million in exchangeCredit Facility.  Debt issuance costs for the immediate payoffCredit Facility, which totaled $1.5 million as of December 31, 2020 are included in other assets and amortized and capitalized to interest costs on a straight-line basis over the term of the note.agreement.   On April 15, 2020, TNHC Realty and Construction, Inc., a wholly-owned operating subsidiary of the Company, received approval and funding pursuant to a promissory note evidencing an unsecured loan in the amount of approximately $7.0 million (the "Loan") under the Paycheck Protection Program (the "PPP").  The PPP was established under the CARES Act and is administered by the U.S. Small Business Administration ("SBA").  The Company paid offintended to use the Loan for qualifying expenses in accordance with the terms of the CARES Act.  On April 23, 2020, the SBA, in consultation with the Department of Treasury, issued new principal balanceguidance that created uncertainty regarding the qualification requirements for a PPP loan.  On April 24, 2020, out of $3.75 millionan abundance of caution, the Company elected to repay the Loan and recognizedinitiated a repayment of the $0.3 million principal reduction as a gain in other expense, net, infull amount of the accompanying consolidated statements of operations. Loan to the lender. Notes payable have stated maturities as follows for the years ending December 31 (dollars in thousands): 2021   $ 0   2022     0   2023     0   2024     0   2025     250,000       $ 250,000   2018 $ — 2019 — 2020 — 2021 — 2022 325,000   $ 325,000 9. 10.    Fair Value Disclosures ASC 820Fair Value Measurements and Disclosures, defines fair value as the price that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at measurement date and requires assets and liabilities carried at fair value to be classified and disclosed in the following three categories: • Level 1 – Quoted prices for identical instruments in active markets • • Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are inactive; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets at measurement date • • Level 3 – Valuations derived from techniques where one or more significant inputs or significant value drivers are unobservable in active markets at measurement date 93 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 Fair Value of Financial Instruments The following table presents an estimated fair value of the Company's senior notes2025 Notes and 2022 Notes.  The 2025 Notes and unsecured revolving credit facility. The estimated value of the senior notes is based on2022 Notes are classified as Level 2 inputs, which and primarily reflect estimated prices for our Notes obtained from outside pricing sources. The Company determined that the fair value estimate of its unsecured revolving credit facility is classified as Level 3 within the fair value hierarchy, and the fair value of the outstanding revolving credit facility balance at December 31, 2016 approximated the carrying value due to the short-term nature of LIBOR contracts.   December 31, 2017   December 31, 2016   Carrying Amount   Fair Value   Carrying Amount   Fair Value   (dollars in thousands) 7.25% Senior Notes due 2022, net (1) $ 318,656   $ 336,375   $ —   $ — Unsecured revolving credit facility $ —   $ —   $ 118,000   $ 118,000     December 31, 2020     December 31, 2019       Carrying Amount     Fair Value     Carrying Amount     Fair Value       (Dollars in thousands)   7.25% Senior Notes due 2025, net (1)   $ 244,865     $ 256,875     $ 0     $ 0   7.25% Senior Notes due 2022, net (2)   $ 0     $ 0     $ 304,832     $ 298,775   (1) The carrying value for the 2025 Notes, as presented at December 31, 2020, is net of the unamortized unamortized debt issuance costs of $5.1 million.  The unamortized debt issuance costs are not factored into the estimated fair value. (2) The carrying value of the 2022 Notes, as presented at December 31, 2019, is net of the unamortized discount of $1.1 million, unamortized premium of $0.9 million, and unamortized debt issuance costs of $3.0 million. The unamortized discount, unamortized premium and debt issuance costs are not factored into the estimated fair value. (1) The carrying value for the Senior Notes, as presented, is net of the unamortized discount of $2.2 million, unamortized premium of $1.8 million, and $5.9 million of debt issuance costs. The unamortized discount, unamortized premium and debt issuance costs are not factored into the estimated fair value.     The Company determined that the fair value estimate of its unsecured revolving credit facility is classified as Level 3 within the fair value hierarchy. The Company had no outstanding balance on the revolving credit facility at December 31, 2017, and the estimated fair value of the outstanding revolving credit facility balance at December 31, 2016 approximated the carrying value due to the short-term nature of LIBOR contracts. The Company considers the carrying value of cash and cash equivalents, restricted cash, contracts and accounts receivable, accounts payable, and accrued expenses and other liabilities to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. The fair value of amounts due from affiliates is not determinable due to the related party nature of such amounts. Non-Recurring Fair Value Adjustments Nonfinancial assets and liabilities include items such as real estate inventory and long-lived assets that are measured at cost when acquired and adjusted for impairment to fair value, if deemed necessary. For the yearyears ended December 31, 2017,2020, 2019 and 2018, the Company recognized real estate-related impairment adjustments of $2.2$19.0 million, related to one homebuilding community.$10.2 million and $10.0 million, respectively.  For the year ended December 31, 2016, 2020, the Company recognized real-estate related impairments of $3.5 million. Of this amount, $2.4 million related to five homebuilding communities.  For the year ended December 31, 2019, $8.3 million of the impairment charges related to two active homebuilding communities and $1.2$1.9 million related to land under contract to sell that closed during the Company had under development and intended2019fourth quarter.  For the year ended December 31, 2018, the impairment charges related to sell.two homebuilding communities.  The impairment adjustments for 2017 and 2016 were made using Level 3 inputs and assumptions, and the remaining carrying value of the real estate inventories subject to the 2017impairment adjustments was $47.2 million and $81.6 million at December 31, 2020 and 2019, respectively. For more information on real estate impairments, please refer to Note 4. For the years ended December 31, 2020, 2019 and 2018, the Company recognized other-than-temporary impairments to its investment in unconsolidated joint ventures of $22.3 million, $0 and $1.1 million, respectively. During 2020, impairment charges of $20.0 million were recorded in the second quarter related to the Company's intent to exit from its interest in its Russell Ranch joint venture whereby the investment balance was written off, and in the 2020first quarter, the Company recorded an impairment charge of $2.3 million related to the Company's agreement to sell its interest in the Bedford joint venture to its partner for less than its current carrying value. The Bedford transaction closed during the 2020third quarter and the Russell Ranch joint venture liquidated substantially all of its underlying assets in the 2020fourth quarter.  The 2020 impairment adjustments were made using Level 2 and Level 3 inputs and assumptions.  The 2018 impairment also related to Russell Ranch and was $5.9 million at made using Level 3 inputs and assumptions. For more information on the investment in unconsolidated joint ventures impairments, please refer to Note 6. 94 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 20172020, 2019 and the carrying value of the real estate inventories subject to the 2016 impairment adjustments was $30.2 million at December 31, 2016.2018 During the year ended December 31, 2015, the Company did not record any fair value adjustments to those nonfinancial assets and liabilities remeasured at fair value on a nonrecurring basis. 10. 11.    Commitments and Contingencies From time-to-time, the Company is involved in various legal matters arising in the ordinary course of business. These claims and legal proceedings are of a nature that we believe are normal and incidental to a homebuilder. We make provisions for loss contingencies when they are probable and the amount of the loss can be reasonably estimated. Such provisions are assessed at least quarterly and adjusted to reflect the impact of any settlement negotiations, judicial and administrative rulings, advice of legal counsel, and other information and events pertaining to a particular case. During 2019, we recorded litigation reserves totaling $5.9 million related to ordinary course litigation which developed and became probable and estimable within the 2019fourth quarter. Further, as a result of the development of the construction defect related claims within the litigation reserve and their impact to the Company’s litigation reserve estimates for IBNR future construction defect claims, we recorded an additional $5.0 million of IBNR construction defect claim reserves resulting in aggregate litigation reserves totaling $10.9 million as of December 31, 2019. Because the self-insured retention deductibles had been met for each claim covered by the $5.9 million reserve, and the self-insured retention deductibles are expected to be met for the $5.0 million IBNR construction defect claim reserves, the Company recorded estimated insurance receivables of $10.9 million offsetting the related litigation reserves as of December 31, 2019.  During 2020, $4.7 million was paid by our insurance carrier directly to claimants related totwo claims, and the Company reduced its litigation reserve estimate by $0.2 million for one claim and reduced its IBNR litigation reserve by a net $0.4 million, resulting in a litigation reserve balance of $5.6 million at December 31, 2020.  The net $0.4 million adjustment was comprised of a decrease in $1.0 million to the reserve, partially offset by $0.6 million in expense recorded related to additional self-insured retention deductibles for certain projects.  The litigation insurance receivable decreased during 2020 due to $4.7 million paid by our insurance carrier directly to claimants related to two claims, and the Company reduced its insurance receivable estimate by $0.2 million for one claim and adjusted its IBNR litigation reserve by $1.2 million, resulting in an insurance receivable balance of $4.8 million at December 31, 2020. Due to the inherent uncertainty and judgement used in these assumptions, our actual costs and related insurance recoveries could differ significantly from amounts currently estimated. Please refer to Note 1, Note 7 and Note 8 for more information on litigation reserves for construction defect claims and related insurance recoveries. In view of the inherent unpredictability of litigation, we generally cannot predict their ultimate resolution, related timing or eventual loss. At this time, we do not believe that our loss contingencies individually or in the aggregate, are material to our consolidated financial statements. As an owner and developer of real estate, the Company is subject to various environmental laws of federal, state and local governments. The Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of real estate in the vicinity of the Company’s real estate and other environmental conditions of which the Company is unaware with respect to the real estate could result in future environmental liabilities. The Company has provided credit enhancements in connection with certain joint venture borrowings in the form of LTVloan-to-value ("LTV") maintenance agreements in order to secure the joint venture's performance under the loans and maintenance of certain LTV ratios.  TheFor unconsolidated joint ventures where the Company provided LTV enhancements, the Company has also entered into agreements with its partners in eachsome of theits unconsolidated joint venturesventure partners whereby the Company and its partners are apportioned liability under the LTV maintenance agreements according to their respective capital interest. In addition, thethese agreements provide the Company, to the extent its partner has an unpaid liability under such LTV credit enhancements, the right to receive distributions from the unconsolidated joint venture that would otherwise be made to the partner. However, there is no guarantee that such distributions will be made or will be sufficient to cover the Company's liability under such LTV maintenance agreements. The loans underlying the LTV maintenance agreements compriseinclude acquisition and development loans, construction revolvers and model home loans, and the agreements remain in force until the loans are satisfied. Due to the nature of the loans, the outstanding balance at any given time is subject to a number of factors including the status of site improvements, the mix of horizontal and vertical development underway, the timing of phase build outs, and the period necessary to complete the escrow process for homebuyers. As of December 31, 2017 2020 and 2016, $38.6 million2019, $0 and $56.0$28.6 million, respectively, was outstanding under loans that are credit enhanced by the Company through LTV maintenance agreements. Under the terms of the joint venture agreements, the Company's proportionate share of LTV maintenance agreement liabilities was $6.7 million$0 and $8.6$5.8 million, respectively, as of December 31, 2017 2020 and 2016. 2019. In addition, the Company has provided completion agreements regarding specific performance for certain joint venture projects whereby the Company is required to complete the given project with funds provided by the beneficiary of the agreement. If there are not adequate funds available under the specific project loans, the Company would then be subject to financial liability under such completion agreements. Typically, under such terms of the joint venture agreements, the Company has the right to apportion the respective share of any costs funded under such completion agreements to its partners. However, there is no guarantee that we will be able to recover against our partners for such amounts owed to us under the terms of such joint venture agreements. In connection with joint venture borrowings, the Company also selectively provides (a) an environmental indemnity provided to the lender that holds the lender harmless from and against losses arising from the discharge of hazardous materials from the property and non-compliance with applicable environmental laws; and (b) indemnification of the lender from "bad boy acts" of the unconsolidated entity such as fraud, misrepresentation, misapplication or non-payment of rents, profits, insurance, and condemnation proceeds, waste and mechanic liens, and bankruptcy. 95 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 We obtain surety bonds in the normal course of business to ensure completion of certain infrastructure improvements of our projects. As of December 31, 2017 2020 and 2016,2019, the Company had outstanding surety bonds totaling $52.1totaling $44.0 million and $44.0$47.6 million, respectively. The estimated remaining costs to complete of such improvements as of December 31, 2017 2020 and 20162019 were $24.4 million $16.3 million and $15.7$29.1 million, respectively. The beneficiaries of the bonds are various municipalities, homeowners' associations, and other organizations. In the event that any such surety bond issued by a third party is called because the required improvements are not completed, the Company could be obligated to reimburse the issuer of the bond. On May 6, 2015, The Company accounts for contracts deemed to contain a lease under ASC 842,Leases. At the Company entered intoinception of a letterlease, or if a lease is subsequently modified, we determine whether the lease is an operating or financing lease. Our lease population is fully comprised of credit facility agreementoperating leases and includes leases for certain office space and equipment for use in our operations. For all leases with an expected term that allowsexceeds one year, right-of-use lease assets and lease liabilities are recorded within our consolidated balance sheets. The depreciable lives of right-of-use lease assets are limited to the Companyexpected term which would include any renewal options we expect to exercise. The exercise of lease renewal options is generally at our discretion and certain affiliated unconsolidated joint ventureswe expect that in the normal course of business, leases that expire will be renewed or replaced by other leases. Our lease agreements do not contain any residual value guarantees or material restrictive covenants.  Variable lease payments consist of non-lease services related to issue up to $5.0the lease.  Variable lease payments are excluded from the right-of-use lease assets and lease liabilities and are expensed as incurred.  Right-of-use lease assets are included in other assets and totaled $3.0 million in letters of credit. The agreement includes an option to increase this amount to $7.5and $2.0 million subject to certain conditions. As of at December 31, 2017,2020 and 2019, respectively.  Lease liabilities are recorded in accrued expenses and other liabilities and totaled $3.2 million and $2.2 million at December 31, 2020 and 2019, respectively.     For the years ended December 31, 2020 and 2019 lease costs and cash flow information for leases with terms in excess of one year was as follows:     Year Ended December 31,       2020     2019   Lease cost:                 Lease costs included in general and administrative expenses   $ 1,234     $ 1,226   Lease costs included in real estate inventories     344       503   Lease costs included in selling and marketing expenses     188       202   Net lease cost   $ 1,766     $ 1,931                     Other Information:                 Lease cash flows (included in operating cash flows)(1)   $ 1,889     $ 2,056   (1) Amount does not include the cost of short-term leases with terms of less than one year which totaled approximately $0.2 million and $0.8 million for the years ended December 31, 2020 and 2019, respectively, or the benefit from a sublease agreement of one of our office spaces which totaled approximately $0.2 million and $0.2 million for the years ended December 31, 2020 and 2019, respectively. Future lease payments under our affiliated unconsolidated joint ventures had $1.8 millionoperating leases are as follows (dollars in outstanding lettersthousands): 2021   $ 1,031   2022     703   2023     631   2024     588   2025     478   Thereafter     0   Total lease payments (1)   $ 3,431   Less: Interest (2)     251   Present value of lease liabilities (3)   $ 3,180   (1) Lease payments include options to extend lease terms that are reasonably certain of being exercised. (2) Our leases do not provide a readily determinable implicit rate. Therefore, we utilized our incremental borrowing rate for such leases to determine the present value of lease payments at the lease commencement date.  There were no legally binding minimum lease payments for leases signed but not yet commenced at December 31, 2020 and 2019. (3) The weighted average remaining lease term and weighted average incremental borrowing rate used in calculating our lease liabilities were 4.2 years and 3.7%, respectively, at December 31, 2020 and 1.9 years and 4.4%, respectively, at December 31, 2019. 96 Table of credit issued under this facilityContents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and the Company had no obligations associated with such outstanding JV letters of credit.2018 During the 2017 third quarter, the Company amended a joint venture agreement pursuant to which it, among other things, agreed to acquire approximately 400 lots in Phase 1 of the joint venture project and posted a $5.1 million nonrefundable deposit for the acquisition of such lots. The agreement allows for the Company to enter the property in advance of the closing date to perform certain improvements, which it expects to begin in the 2018 second quarter. If the Company does not acquire the lots, it is obligated to reimburse the joint venture for these improvement costs. At this time, the Company estimates that the total cost for these improvements will be $17.0 million. We lease our corporate headquarters in Aliso Viejo,Irvine, California. The lease on this facility consists of approximately 18,70013,000 square feet and expires in November 2020. December 2025. In addition, we lease divisional offices in Southern California, Northern California and Arizona totaling approximately 18,00019,500 square feet (of which approximately 5,8007,700 square feet is sublet) expiring at various times through 2021.2025. As of December 31, 2017,2020, the future minimum lease payments under non-cancelable operating leases, primarily associated with our office facilities, are as follows (dollars in thousands): 2018 $ 1,202 2019 1,224 2020 1,120 2021 285 2022 — Thereafter —   $ 3,831 2021   $ 782   2022     534   2023     556   2024     578   2025     479   Thereafter     0       $ 2,929   For the years ended December 31, 2017, 20162020, 2019 and 2015,2018, rent expense was $1.2 million, $1.2 million and $1.1 million, $1.1 million, and $0.9 million, respectively, and is included in general and administrative expenses.respectively. 11. 12.    Related Party Transactions During the years ended December 31, 2017, 20162020, 2019 and 2015,2018, the Company incurred construction-related costs on behalf of its unconsolidated joint ventures totaling $7.3$2.9 million, $9.4$5.5 million, and $11.3$6.4 million, respectively. As of December 31, 2017 2020 and 2016,2019, $0.1 million and $0.2 million, respectively, are included in due from affiliates in the accompanying consolidated balance sheets related to such costs. The Company has entered into agreements with its unconsolidated joint ventures to provide management services related to the underlying projects (collectively referred to as the "Management Agreements"). Pursuant to the Management Agreements, the Company receives a management fee based on each project’s revenues. During the years ended December 31, 2017, 20162020, 2019 and 2015,2018, the Company earned $4.9$0.9 million, $8.2$1.9 million, and $12.4$3.4 million, respectively, in management fees, which have been recorded as fee building revenue in the accompanying consolidated statements of operations. As of December 31, 2017 2020 and 2016, $0.3 million2019, $36,000 and $0.6 million,$0, respectively, of management fees are included in due from affiliates in the accompanying consolidated balance sheets. One member of the Company's board of directors beneficially owns more than 10% of the Company's outstanding common stock through an affiliated entity, IHP Capital Partners VI, LLC ("IHP"), and is also affiliated with an entityentities that hashave investments in two of the Company's unconsolidated joint ventures. A separate memberventures, TNHC Meridian Investors LLC (which is owner of the Company's board of directors is also affiliated with ananother entity, that has investments in three of the Company's unconsolidated joint ventures. As of December 31, 2017, theTNHC Newport LLC, which entity owned our "Meridian" project) and Russell Ranch.  The Company's investment in these five unconsolidatedtwo joint ventures totaled $34.5 million. was $0.1 million and $13.7 million at December 31, 2020 and 2019, respectively.   During the 2017 second quarter, one of these joint venture agreements was amended to increase the Company's funding obligation by $4.0 million over the existing contribution cap. During the 2017 third quarter, the Company amended another one of thesethe Russell Ranch joint venture agreementsagreement pursuant to which it, among other things, agreed to acquire approximately 400 lots in Phase 1 of the project. At project which were taken down in July 2018 for a purchase price of $34.0 million (the "Phase 1 Purchase"). During the 2019second quarter, each party had reached its maximum capital contribution and the Company entered into a second amendment pursuant to which the parties agreed to fund additional required capital in the aggregate amount of approximately $26 million for certain remaining backbone improvements for the Project (the “Phase 1 Backbone Improvements”) 50% by IHP and 50% by the Company (“Amendment Additional Capital”). Such Amendment Additional Capital was to be returned to IHP and the Company ahead of any other contributed capital; provided that none of the Amendment Additional Capital accrued a preferred return that base capital contributions were generally afforded under the joint venture agreement. As discussed in Note 6, in connection with its 2020second quarter decision to exit the Russell Ranch joint venture due to the low expected financial returns relative to future capital requirements and related risks, the Company determined the value of its investment in Russell Ranch declined beyond its current carrying value and recorded a $20.0 million other-than-temporary impairment charge to write off its investment balance and record its estimated remaining costs to complete.  The joint venture completed the sale of Phases 2 and 3, its remaining developable lots, to a third-party purchaser during the 2020fourth quarter that resulted in the Company recording income of $4.5 million to equity in income (loss) of unconsolidated joint ventures, partially offsetting the other-than-temporary impairment recorded during the 2020second quarter.  The members agreed upon and distributed proceeds from the sale to the members less a reserve amount which is maintained by the joint venture to address close out matters, such as warranty, contingent liabilities, remaining Phase 1 infrastructure improvements, and common amenity operations until turnover to homeowners’ association. Due to the joint venture's close out status, the members confirmed that no further preferred return would accrue or be payable and future distributions would be made 50% to IHP and 50% to TNHC. 97 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2017, the Company had a $5.1 million nonrefundable deposit outstanding related to this purchase.2020, 2019 and 2018 TL Fab LP, an affiliate of one of the Company's non-employee directors, was engaged by the Company and some of its unconsolidated jointjoint ventures as a trade contractor to provide metal fabrication services. For the years ended December 31, 2017, 20162020, 2019 and 2015,2018, the Company incurred $0.6 million, $0.3$13,000, $0.2 million, and $0.1$0.3 million, respectively, for these services. TheFor the same periods, the Company's unconsolidated joint ventures incurred $0.9 million, $0.6 million$0, $0, and $0.8$0.4 million, respectively, for these services. Of these costs, $10,700 and $33,000$0 was due to TL Fab LP from the Company at December 31, 2017 2020 and 2016, respectively,2019, and $0 and $14,000 was due to TL Fab LP from the Company's unconsolidated joint ventures at December 31, 2017 2020 and 2016, respectively. 2019. In its ordinary course of business, the Company enters into agreements to purchase lots from unconsolidated land development joint ventures of which it is a member. For the year ended December 31, 2016, the Company purchased $6.5 million of land from unconsolidated land development joint ventures. In accordance with ASC 360-20, 360-20,Property Plant and Equipment - Real Estate Sales ("ASC 360-20"), the Company defers its portion of the underlying gain from the joint venture's sale of these lots.lots to the Company. When the Company purchases lots directly from the joint venture, the deferred gain is recorded as a reduction to the Company's land basis on the purchased lots. In certain instances, a third party may purchase lots from our unconsolidated joint ventures with the intent to finish the lots. Then, the Company has an option to acquire these finished lots from the third party. In these instances, the Company defers its portion of the underlying gain and records the deferred gain as deferred profit from unconsolidated joint ventures included in accrued expenses and other liabilities in the accompanying consolidated balance sheets. Once the lot is purchased by the Company, the pro-rata share of the previously deferred profit is recorded as a reduction to the Company's land basis in the purchased lots. In both instances,this instance, the gain is ultimately recognized when the Company delivers lots to third-partythird-party home buyers at the time of the home closing.  In the instance where the Company no longer has an interest in the unconsolidated joint venture, the deferred gain related to lots purchased from the joint venture is recognized upon the Company's exit of the venture.  At December 31, 2017 and 2016, $0.12020, $0.1 million and $0.6 million, respectively, of deferred gain from lot sale transactions is included in accrued expenses and other liabilities inwith the accompanying consolidated balance sheets as deferred profit fromTNHC-HW Cannery LLC (the "Cannery") unconsolidated joint ventures. In addition, at December 31, 2017 and 2016, $0.5 million and $0.7 million, respectively, of deferred gain from lot sale transactionsventure remained unrecognized and included as a reduction to land basis in the accompanying consolidated balance sheets.   At December 31, 2019, $0.2 million of deferred gain from lot transactions with the Cannery and Bedford unconsolidated joint ventures remained unrecognized and included as a reduction to land basis in the accompanying consolidated balance sheets. The Company’s land purchase agreement with onethe Cannery provides for reimbursements of its unconsolidated joint ventures, TNHC-HW Cannery LLC ("TNHC-HW Cannery"), requires profit participation payments due upon the closing of each home.  Payment amounts are calculated based upon a percentage of estimated net profits and are due every 90 days after the first home closing.  During the year ended December 31, 2017, thecertain fee credits.  The Company was refunded $0.2reimbursed $15,000, $0.1 million from TNHC-HW Cannery for profit participation overpayments from prior periods due to a modification of the underlying calculation related to profit participation, and as of December 31, 2017, no profit participation was due to TNHC-HW Cannery. Also per the purchase agreement, the Company is due $0.1 million in fee credits from TNHC-HWthe Cannery LLC at during 2020, 2019 and 2018, respectively. As of December 31, 20172020 and 2019, $0 and $15,000, respectively, in fee credits was due to the Company from the Cannery, which is included in due from affiliates in the accompanying consolidated balance sheets. As of December 31, 2016, $0.2 million of profit participation overpayments and $0.1 million in fee credits was due to the Company from TNHC-HW Cannery LLC, which is included in due from affiliates in the accompanying consolidated balance sheets. On June 18, 2015, the Company entered into an agreement that effectively transitioned Joseph Davis' role within the Company from that of Chief Investment Officer to that of a non-employee consultant to the Company effective June 26, 2015 ("("Transition Date"). As of the Transition Date, Mr. Davis ceased being an employee of the Company and became an independent contractor performing consulting services. For his services, he isMr. Davis was compensated $5,000 per month through June 26, 2019 when his contract was amended to extend its term one year and reduce his scope of services and compensation to $1,000 per month.  His current agreement terminatesMr. Davis' contract was amended on JulyJune 26, 2018 with the option 2020 to extend the agreement term one year if mutually consented to by the parties. Either party may terminate the agreement at any time for any or no reason.with monthly compensation remaining $1,000 per month.  At December 31, 2017, 2020 and 2019, no fees were due to Mr. Davis for his consulting services. Additionally, the Company entered into a construction agreement effective September 7, 2017, with The Joseph and Terri Davis Family Trust Dated August 25, 1999 ("("Davis Family Trust") of which Joseph Davis is a trustee. The agreement iswas a fee building contract pursuant to which the Company will actacted in the capacity of a general contractor to build a single family detached home on land owned by the Davis Family Trust.  Construction of the home was completed during the 2019first quarter.  For its services, the Company will receivereceived a contractor's fee and the Davis Family Trust will reimbursereimbursed the Company's field overhead costs. As of During the years ended December 31, 2017,2020, 2019 and 2018, the Company is duebilled the Davis Family Trust $0, $0.5 million and $3.0 million, respectively, including reimbursable construction costs and the Company's contractor's fees which are included in fee building revenues in the accompanying consolidated statements of operations. Contractor's fees comprised $0, $15,000 and $83,000 of the total billings for the years ended  December 31, 2020, 2019 and 2018, respectively. The Company recorded $0, $0.5 million and $2.9 million for the years ended December 31, 2020, 2019 and 2018, respectively, for the cost of this fee building revenue which is included in fee building cost of sales in the accompanying consolidated statements of operations. At December 31, 2020 and 2019, the Company was due $0 from the Davis Family Trust for construction draws, which is included in due from affiliates in the accompanying consolidated balance sheets. draws.  On February 17, 2017, (the "Transition Date"), the Company entered into a consulting agreement that transitioned Mr.Wayne Stelmar's role from that of Chief Investment Officer to a non-employee consultant to the Company. While an employee of the Company, Mr. Stelmar served as an employee director of the Company's Board of Directors. The agreement also providesprovided that effective upon Mr. Stelmar's termination of employment, he shall becomebecame a non-employee director and shall receivereceived the compensation and bewas subject to the requirements of a non-employee director pursuant to the Company's policies. For his consulting services, Mr. Stelmar will bewas compensated $16,800 per month$0, $48,000 and $90,000 for a term of one year from the Transition Date with the option to extend the agreement one year on each anniversary of the Transition Date if mutually consented to by the parties. Either party may terminate the agreement at any time for any or no reason.years ended December 31, 2020, 2019 and 2018, respectively.  Additionally, Mr. Stelmar's outstanding restricted stock unit equity award will continuegranted in 2016 continued to vest in accordance with its original terms based on his continued provision of consulting services rather than continued employment.employment and fully vested during the 2019first quarter.  Mr. Stelmar's vested stock options remain outstanding based on Mr. Stelmar's continued service as a Board member.  The consulting contract expired in August 2019 and was not extended.   On February 14, 2019, the Company entered into a consulting agreement that transitioned Thomas Redwitz's role from that of Chief Investment Officer to a non-employee consultant to the Company effective March 1, 2019. For his consulting services, Mr. Redwitz was compensated $10,000 per month. The agreement was originally set to expire on March 1, 2020 and was extended upon mutual consent of the parties on a month to month basis to a reduced consulting fee of $5,000 per month.  At December 31, 2017, 2020, no fees were due to Mr. StelmarRedwitz for his consulting services. Mr. Stelmar's consulting agreement was amended on February 13, 2018, to extend the term until August 17, 2019, and reduce monthly compensation to $6,000. 98 Table of Contents On June 29, 2015, the Company formed a new unconsolidated joint venture (TNHC Tidelands LLC) and received capital credit in excess of our contributed land basis. As a result, the Company recognized $1.6 million in equity in net income of unconsolidated joint ventures and deferred $0.4 million in profit from unconsolidated joint ventures related to this transaction for the year ended THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2015. 2020, 2019 and 2018 During the years ended December 31, 2017 and 2016, $0.2 million and $0.1 million, respectively, of the previously deferred revenue was recognized as equity in net income of unconsolidated joint ventures. During the third quarter of 2017, the Company acquired the remaining outside equity interest of this joint venture (described in more detail below). As part of this transaction, the remaining $0.1 million of deferred profit was written off. As a result, at December 31, 2017 no deferred profit remained and at December 31, 2016, $0.3 million remained unrecognized and included in accrued expenses and other liabilities in the accompanying consolidated balance sheets. On October 23, 2017, the Company acquired the remaining outside equity interest of our TNHC Tidelands LLC (Tidelands) unconsolidated joint venture. TNHC Tidelands LLC is the owner of an actively selling project in Northern California (the "Tidelands Project"). The Company paid $13.6 million to our joint venture partner for its interest and paid off the $4.1 million remaining balance on the joint venture's construction loan. Following the purchase, the Company was required to consolidate this entity as it is now wholly owned subsidiary of the Company, and the Tidelands Project became a wholly owned active selling community of the Company. The purchase consideration and the cost basis of our previous investment in unconsolidated joint ventures related to this joint venture are included in real estate inventories as of December 31, 2017. On January 15, 2016, the Company entered into an assignment and assumption of membership interest agreement (the "Buyout Agreement") for its partner's interest in the TNHC San Juan LLC unconsolidated joint venture. Per the terms of the Buyout Agreement, the Company contributed $20.6 million to the joint venture, and the joint venture made a liquidating cash distribution to our partner for the same amount in exchange for its membership interest. Prior to the buyout, the Company accounted for its investment in TNHC San Juan LLC as an equity method investment. After the buyout, TNHC San Juan LLC is now a wholly owned subsidiary of the Company. During June 2016, our LR8 Investors LLC unconsolidated joint venture (LR8) made its final distributions, allocated $0.5 million of income to the Company from a reduction in warranty reserves, which was included in equity in net income of unconsolidated joint ventures in the accompanying consolidated statements of operations, and our outside equity partner exited the joint venture. Upon the change in control, we were required to consolidate this venture as a wholly owned subsidiary, and the Company assumed the cash, accounts receivable, accounts payable, and accrued liabilities, including the remaining warranty reserve, of the joint venture. As part of this transaction, the Company also recognized a gain of $1.1 million, which was included in equity in net income of unconsolidated joint ventures in the accompanying consolidated statement of operations, due to the purchase of our JV partner's interest for less than its carrying value. As of December 31, 2017 and 2016, 2018,the Company had advancesan advance outstanding of approximately $3.8 million and $4.0 million, respectively, to an unconsolidated joint venture, Encore McKinley Village.Village LLC. The note bearsbore interest at 10% per annum and matures on October 31, 2018.was fully repaid during the 2018second quarter. For the year ended December 31, 2017, 2018, the Company earned $0.5$0.1 million in interest income on the unsecured promissory note which is included in equity in net incomeloss of unconsolidated joint ventures in the accompanying consolidated statements of operations. As of December 31, 2017 The Company entered into agreements during 2018 and 2016, $34,000 and $44,000 of interest income was due2017 to the Company and included in duepurchase land from affiliates in the accompanying consolidated balance sheets. of IHP.  Certain land takedowns pursuant to these agreements occurred during 2020,2019 and 2018. Descriptions of these agreements and relevant takedown activity are described below.  During the 2017, second quarter, our Larkspur Land 8 Investors LLC unconsolidated joint venture (Larkspur) allocated $0.1 million of income to the Company from a reduction in cost to complete reserves, which was included in equity in net income of unconsolidated joint ventures in the accompanying consolidated statements of operations, and our outside equity partner exited the joint venture. Upon the change in control, we were required to consolidate this venture as a wholly owned subsidiary and the Company assumed the cash, other assets, and accrued liabilities, including warranty and the remaining costs to complete reserves, of the joint venture. As part of this transaction, the Company also recognized a gain of $0.3 million, which was included in equity in net income of unconsolidated joint ventures in the accompanying consolidated statements of operations, due to the purchase of our JV partner's interest for less than its carrying value. During 2017, the Company entered into two agreementsan agreement with an IHP affiliate to purchase land from an affiliate of an entity that owns more than 10% of the Company's outstanding common stock and is affiliated with one member of the Company's board of directors. The first agreement allows the Company the option to purchase approximately 92 lots in Northern California in a phased takedown for a totalgross purchase price of $16.1 million.million with profit participation and master marketing fees due to the seller as outlined in the contract. As of December 31, 2017, 2019, the Company had taken down all of the lots and IHP was no longer affiliated with this development.  The Company took down approximately 34% and 34% of the option lots in the years ended December 31, 2019 and 2018, respectively, and at December 31, 2020, the Company has taken down 30 lots and has a $0.6paid $0.5 million nonrefundable deposit outstanding on the remaining lots. The second agreement allowsin master marketing fees.  During 2017 the Company the optionalso contracted to purchase approximately 418finished lots in Northern California for afrom an IHP affiliate, which agreement included customary profit participation, and was structured as an optioned takedown. The total purchase price, including the cost for the finished lot development and the option, was expected to be approximately $56.3 million, dependent on the timing of $53.4 million.takedowns, as well as our obligation to pay certain fees and costs during the option maintenance period.  The Company took down 26% and 8% of the lots pursuant to this agreement during the years ended December 31, 2019 and 2018, respectively.  During the 2019second quarter, an unrelated third party entered into agreements to purchase from the IHP affiliate some of the lots under the Company's option.  The Company in turn entered into an arrangement pursuant to which it agreed to purchase such lots on a rolling take down basis from such unrelated third party. The unrelated third party purchased 67% of the lots originally under contract with the IHP affiliate. Following the purchase of the lots by the unrelated third party in 2019, the Company had no remaining lots to purchase from the IHP affiliate. As of December 31, 2017, 2020, the Company (i) had no nonrefundable deposits with the IHP affiliate to be applied to the Company's takedown of lots from the unrelated third party and (ii) has paid (A) $0.2 million for fees and costs, (B) $3.0 million in option payments, and (C) $18.0 million for the purchase of lots directly from the IHP affiliate. During 2018, the Company agreed to purchase finished lots in Northern California from an IHP affiliate for a gross purchase price of $8.0 million with additional profit participation, marketing fees and certain reimbursements due to the seller as outlined in the agreement. The Company took down all the lots pursuant to this contract during 2018 and as of December 31, 2019, IHP was no longer affiliated with this development.  At December 31, 2020, the Company has made apaid $0.3 million refundable deposit for this projectin master marketing fees and has not taken down any lots. In August 2017, we acquiredreimbursed the remaining outside equity interest of our DMB/TNHC LLC (Sterling at Silverleaf) unconsolidated joint venture. The Company paid $2.6land seller $0.2 million to our joint venture partner and upon the change of control was required to consolidate this venture as it is now a wholly-owned subsidiary of the Company. The purchase consideration and the cost basis of our previous investment in unconsolidated joint venturesin costs related to this joint venture are includedcontract. Also during 2018, the Company agreed to purchase land in real estate inventoriesa master-plan community in Arizona for an estimated purchase price of $3.8 million plus profit participation and marketing fees pursuant to contract terms.  The Company began taking down these lots during 2020 whereby it took down approximately 38% of total contracted lots. As of December 31, 2020 and 2019, the Company had an outstanding, nonrefundable deposit of $0.2 million and $0.3 million, respectively, related to this contract.  As of December 31, 2020, the Company has paid $22,000 in master marketing fees, and as of December 31, 2017. Subsequent to December 31, 2017,2019, IHP was no longer affiliated with this development. In the first quarter 2018, the Company entered into an option agreement to purchase lots in phased takedowns with its Bedford joint venture.  At the time of the initial agreement in 2018, the Bedford joint venture was affiliated with a former member of the Company's board of directors, and subsequently, during the 2020third quarter, the Company sold its interest in this partnership to its joint venture partner.  The gross purchase price of the land was $10.0 million with profit participation and master marketing fees due to seller as outlined in the contract. During the 2019third quarter, the Company entered into an amendment to this agreement to reduce the gross purchase price of the land to $9.3 million.  The Company took down 46% and 54% of the lots underlying this contract during the years ended December 31, 2019 and 2018, respectively.  At December 31, 2019, the Company had taken down all contracted lots and the Company's $1.5 million nonrefundable deposit made as consideration for this option had been fully applied to the purchase price with no deposit remaining.  At December 31, 2020, the Company has paid $0.2 million in master marketing fees related to this project.  During the fourth quarter 2018, the Company entered into a second option agreement with one of its unconsolidatedthe Bedford joint ventures for the optionventure to purchase 41 lots in Corona, CA, in phased takedowns. The company hasCompany made a $0.1$1.4 million nonrefundable deposit as consideration for thisthe option, and a portion of the deposit will bewas applied to the purchase price across the phases. The gross purchase price of the land is $10.0was $10.5 million with profit participation and master marketing fees due to the seller as outlinedpursuant to the agreement. The Company took down approximately 8% and 92% of the lots underlying this agreement during the years ended December 31, 2020 and 2019, respectively.  At  December 31, 2020, all lots were taken down and the Company had paid $0.3 million in master marketing fees, and at December 31, 2020 and 2019,nodeposit remained outstanding.    99 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 The Company sold its interest in the contract. Bedford joint venture to its partner during the 2020third quarter.  Pursuant to the agreement, the purchase price was $5.1 million for the sale of the Company's partnership interest. During the year ended December 31, 2020, the Company recorded a $2.3 million other-than-temporary impairment charge to its investment in the Bedford joint venture reflecting the sale of its joint venture investment for less than its current carrying value.  The sale agreement, among other things, allowed for a continuation of the Company's option to purchase at market up to 30% of the remaining lots from the joint venture. FMR LLC beneficially owned over 10% of the Company's common stock during 2018, and an affiliate of FMR LLC ("Fidelity") provides investment management and record keeping services to the Company’s 401(k) Plan. For the year ended December 31, 2018, the Company paid Fidelity approximately $14,000 for 401(k) Plan record keeping and investment management services. The participants in the Company's 401(k) Plan paid Fidelity approximately $6,000 during the year ended December 31, 2018 for record keeping and investment management services.  For the years ended December 31, 2020 and 2019, FMR LLC owned less than 10% of the Company's common stock. The Company planshas provided credit enhancements in connection with joint venture borrowings in the form of LTV maintenance agreements in order to takedownsecure the first phasejoint venture's performance under the loans and maintenance of lots in May 2018.certain LTV ratios. In addition, the Company has provided completion agreements regarding specific performance for certain projects whereby the Company is required to complete the given project with funds provided by the beneficiary of the agreement.  No LTV maintenance agreements remain at December 31, 2020.  For more information regarding these agreements please refer to Note 11. 12. 13.    Stock-Based Compensation The Company's 2014 Long-Term Incentive Plan (the "2014"2014 Incentive Plan"), was adopted by our board of directors in January 2014. The 2014 Incentive Plan provides for the grant of equity-based awards, including options to purchase shares of common stock, stock appreciation rights, restricted and unrestricted stock awards, restricted stock units and performance awards. The 2014 Incentive Plan will automatically expire on the tenth anniversary of its effective date. The number of shares of our common stock that are authorized to be issued under the 2014 Incentive Plan is 1,644,875 shares. To the extent that shares of the Company's common stock subject to an outstanding option, stock appreciation right, stock award or performance award granted under the 2014 Incentive Plan or any predecessor plan are not issued or delivered by reason of the expiration, termination, cancellation or forfeiture of such award or the settlement of such award in cash, then such shares of common stock generally shall again be available under the 2014 Incentive Plan. At our 2016 Annual Meeting of Shareholders on May 24, 2016, our shareholders approved the Company's 2016 Incentive Award Plan (the "2016"2016 Incentive Plan"). The 2016 Incentive Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units and other stock- or cash-based awards. Non-employee directors of the Company and employees and consultants of the Company, or any of its subsidiaries, are eligible to receive awards under the 2016 Incentive Plan. The On May 22, 2018, our shareholders approved the amended and restated 2016 Incentive Plan authorizeswhich increased the number of shares authorized for issuance ofunder the plan from 800,000 shares of common stock, subject to certain limitations.2,100,000 shares. The amended and restated 2016 Incentive Plan will expire on February 23, 2026. April 4, 2028. The Company has issued stock optionoptions and restricted stock unit awards under the 2014 Incentive Plan and stock options, restricted stock unit awards and performance share unit awards under the 2016 Incentive Plan. As of December 31, 2017, 46,4052020, 70,244 shares remain available for grant under the 2014 Incentive Plan and 470,524415,592 shares remain available for grant under the 2016 Incentive Plan. The exercise price of stock-basedstock option awards may not be less than the market value of the Company's common stock on the date of grant. The fair value for stock options is established at the date of grant using the Black-Scholes model for time-based vesting awards. The Company's stock optionoptions, restricted stock unit awards, and restricted stockperformance share unit awards typically vest over a one year to three year years period and the stock options expire ten years from the date of grant. 100 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 A summary of the Company’s common stock option activity as of and for the years ended December 31, 2017, 20162020, 2019 and 20152018 is presented below:   Year Ended December 31,   2017   2016   2015   Number of Shares Weighted-Average Exercise Price per Share   Number of Shares   Weighted-Average Exercise Price per Share   Number of Shares   Weighted-Average Exercise Price per Share Outstanding Stock Option Activity                       Outstanding, beginning of period 835,786   $ 11.00   840,298   $ 11.00   846,874   $ 11.00 Granted —   $ —   —   $ —   —   $ — Exercised (9,288 )   $ 11.00   —   $ —   (1,584 )   $ 11.00 Forfeited —   $ —   (4,512 )   $ 11.00   (4,992 )   $ 11.00 Outstanding, end of period 826,498   $ 11.00   835,786   $ 11.00   840,298   $ 11.00 Exercisable, end of period 826,498   $ 11.00   42,042   $ 11.00   23,133   $ 11.00     Year Ended December 31,       2020     2019     2018       Number of Shares     Weighted-Average Exercise Price per Share     Number of Shares     Weighted-Average Exercise Price per Share     Number of Shares     Weighted-Average Exercise Price per Share   Outstanding Stock Option Activity                                                 Outstanding, beginning of period     1,068,017     $ 9.78       821,470     $ 11.00       826,498     $ 11.00   Granted     161,479     $ 5.36       249,283     $ 5.76       0     $ 0   Exercised     0     $ 0       0     $ 0       0     $ 0   Forfeited     (8,801 )   $ 11.00       (2,736 )   $ 11.00       (5,028 )   $ 11.00   Outstanding, end of period     1,220,695     $ 9.18       1,068,017     $ 9.78       821,470     $ 11.00   Exercisable, end of period     893,028     $ 10.51       818,734     $ 11.00       821,470     $ 11.00   A summary of the Company’s restricted stock unit activity as of and for the years ended December 31, 2017, 20162020, 2019 and 20152018 is presented below:     Year Ended December 31,       2020     2019     2018       Number of Shares     Weighted-Average Grant-Date Fair Value per Share     Number of Shares     Weighted-Average Grant-Date Fair Value per Share     Number of Shares     Weighted-Average Grant-Date Fair Value per Share   Restricted Stock Unit Activity                                                 Outstanding, beginning of period     592,116     $ 6.36       469,227     $ 10.75       562,082     $ 10.72   Granted     358,869     $ 4.78       448,468     $ 4.82       179,268     $ 11.24   Vested     (244,812 )   $ 7.61       (277,401 )   $ 10.50       (271,875 )   $ 11.02   Forfeited     (1,283 )   $ 11.68       (48,178 )   $ 10.91       (248 )   $ 10.05   Outstanding, end of period     704,890     $ 5.11       592,116     $ 6.36       469,227     $ 10.75   A summary of the Company’s performance share unit activity as of and for the years ended December 31, 2020, 2019 and 2018 is presented below:     Years Ended December 31,       2020     2019     2018       Number of Shares     Weighted-Average Grant-Date Fair Value per Share     Number of Shares     Weighted-Average Grant-Date Fair Value per Share     Number of Shares     Weighted-Average Grant-Date Fair Value per Share   Performance Share Unit Activity                                                 Outstanding, beginning of period     0     $ 0       125,422     $ 11.68       0     $ 0   Granted (at target)     0     $ 0       0     $ 0       125,422     $ 11.68   Vested     0     $ 0       0     $ 0       0     $ 0   Forfeited     0     $ 0       (125,422 )   $ 11.68       0     $ 0   Outstanding, end of period (at target)     0     $ 0       0     $ 0       125,422     $ 11.68   101 Table of Contents THE NEW HOME COMPANY INC.   Year Ended December 31,   2017   2016   2015   Number of Shares   Weighted-Average Grant-Date Fair Value per Share   Number of Shares   Weighted-Average Grant-Date Fair Value per Share   Number of Shares   Weighted-Average Grant-Date Fair Value per Share Restricted Stock Unit Activity                       Outstanding, beginning of period 474,989   $ 10.66   308,386   $ 14.20   112,233   $ 11.36 Granted 343,933   $ 10.84   414,045   $ 10.05   294,355   $ 14.46 Vested (211,475 )   $ 10.76   (231,633 )   $ 14.22   (85,386 )   $ 11.48 Forfeited (45,365 )   $ 10.79   (15,809 )   $ 11.62   (12,816 )   $ 13.44 Outstanding, end of period 562,082   $ 10.72   474,989   $ 10.66   308,386   $ 14.20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 The expense related to the Company's stock-based compensation programs, included in general and administrative expense in the accompanying consolidated statements of operations, was as follows:   Year Ended December 31,   2017   2016   2015   (Dollars in thousands) Expense related to:           Stock options $ 11   $ 1,054   $ 1,184 Restricted stock units 2,792   2,417   2,700   $ 2,803   $ 3,471   $ 3,884 The Company granted stock options on January 30, 2014 that fully vested on January 30, 2017. Assumptions used to calculate the weighted-average grant date fair value of the common stock options included an expected term of 4.3 years, expected volatility of 49.0%, a risk-free interest rate of 1.2% and no expected dividends. Based on these inputs, the weighted-average grant date fair value per share equaled $4.43.     Year Ended December 31,       2020     2019     2018       (Dollars in thousands)   Expense related to:                         Stock options   $ 307     $ 174     $ 0   Restricted stock units and performance share units     1,890       2,086       3,090       $ 2,197     $ 2,260     $ 3,090   The following table presents details of the assumptions used to calculate the re-measurementweighted-average grant date fair value of common stock options granted to Mr. Davis by the Company in accordance with ASC 505-50 as discussed in Note 1. Mr Davis' stock options fully vested on January 30, 2017 and were fully expensed. The below reflects fair value assumptions at January 30, 2017.   Period Ended January 30,   Year Ended December 31,   2017   2016   2015 Expected term (in years) 1.0   1.1   2.1 Expected volatility 34.9 %   36.7 %   28.2 % Risk-free interest rate 0.8 %   0.9 %   1.1 % Expected dividends —   —   — Re-measurement date fair value per share $ 1.32   $ 2.14   $ 3.21 each year:     Year Ended December 31,       2020     2019     2018   Expected term (in years)     6.0       6.0       —   Expected volatility     41.8 %     39.9 %     0   Risk-free interest rate     1.4 %     2.5 %     0   Expected dividends     0       0       0   Weighted-average grant date fair value per share   $ 2.24     $ 2.43       0   We used the "simplified method" to establish the expected term of the common stock options granted by the Company. Our restricted stock unit awards and performance share unit awards are valued based on the closing price of our common stock on the date of grant. At The number of performance share units that would vest ranged from 50%-150% of the target amount awarded based on actual cumulative earnings per share and return on equity growth from 2018-2019, subject to initial achievement of minimum thresholds. We evaluated the probability of achieving the performance targets established under each of the outstanding performance share unit awards quarterly during 2018 and 2019 and estimated the number of underlying units that were probable of being issued. Compensation expense for restricted stock unit and performance share unit awards was being recognized using the straight-line method over the requisite service period, subject to cumulative catch-up adjustments required as a result of changes in the number shares probable of being issued for performance share unit awards.  Forfeitures are recognized in compensation cost during the period that the award forfeiture occurs.  For the years ended December 31, 2017,2020, 2019 and 2018,no expense was recognized for our performance share units.  At December 31, 2019, the performance targets associated with the outstanding performance share unit awards were not met and all outstanding awards were forfeited.   At December 31, 2020, the amount of unearned stock-based compensation currently estimated to be expensed through 2020 2023is $3.7 million.$2.4 million. The weighted-average period over which the unearned stock-based compensation is expected to be recognized is 1.7 years. 1.6 years. If there are any modifications or cancellations of the underlying unvested awards, the Company may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense. 102 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. December 31, 2020, 2019 and 2018 14.     Income Taxes The provisionbenefit for income taxes includes the following:   Year Ended December 31,   2017   2016   2015   (Dollars in thousands) Current provision for income taxes:           Federal $ 10,243   $ 10,321   $ 10,822 State 3,030   3,375   3,386   13,273   13,696   14,208 Deferred provision (benefit) for income taxes:           Federal 2,341   (506 )   (1,522 ) State (224 )   (166 )   (153 )   2,117   (672 )   (1,675 ) Provision for income taxes $ 15,390   $ 13,024   $ 12,533     Year Ended December 31,       2020     2019     2018       (Dollars in thousands)   Current provision (benefit) for income taxes:                         Federal   $ (28,644 )   $ (203 )   $ (67 ) State     1       (101 )     304         (28,643 )     (304 )     237   Deferred provision (benefit) for income taxes:                         Federal     6,837       (2,933 )     (4,208 ) State     (4,781 )     (578 )     (2,104 )       2,056       (3,511 )     (6,312 ) Benefit for income taxes   $ (26,587 )   $ (3,815 )   $ (6,075 ) The effective tax rate differs from the federal statutory rate of 35%21% for the years ended December 31, 2020, 2019 and 2018 due to the following items:     Year Ended December 31,       2020     2019     2018       (Dollars in thousands)   Loss before taxes of taxable entities   $ (59,456 )   $ (11,816 )   $ (20,305 ) Benefit for income taxes at federal statutory rate   $ 12,485     $ 2,481     $ 4,264   (Increases) decreases in tax resulting from:                         Provisional rate adjustment - tax reform     0       0       148   NOL carryback rate differential     9,574       0       0   State income taxes, net of federal benefit     3,980       781       1,396   Tax credits     1,509       1,238       346   Stock compensation     (276 )     (389 )     (12 ) Non-deductible expenses related to Section 162(m)     (48 )     (163 )     0   Other     (637 )     (133 )     (67 ) Benefit for income taxes   $ 26,587     $ 3,815     $ 6,075   Effective tax rate     44.7 %     32.3 %     29.9 % 103 Table of Contents   Year Ended December 31,   2017   2016   2015   (Dollars in thousands) Income before taxes of taxable entities $ 32,531   $ 33,950   $ 33,911 Provision for income taxes at federal statutory rate $ (11,386 )   $ (11,883 )   $ (11,869 ) (Increases) decreases in tax resulting from:           Provisional rate adjustment - tax reform (3,190 )   —   — State income taxes, net of federal benefit (1,860 )   (1,977 )   (1,979 ) Manufacturing deduction 958   1,142   1,274 Other 88   (306 )   41 Provision for income taxes $ (15,390 )   $ (13,024 )   $ (12,533 ) Effective tax rate 47.3 %   38.4 %   37.0 % THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 The Company's effective tax rate for 2020 includes the benefit associated with net operating loss carrybacks to years when the Company was subject to a 35% federal tax rate as permitted by the CARES Act.  The CARES Act was signed into law on March 27, 2020 and allows companies to carry back net operating losses generated in 2018 through 2020 for five years.   With the enactment of the Tax Cuts and Jobs Act (the "Tax Act"), the corporate federal income tax rate dropped from a maximum of 35% to a flat 21% rate effective January 1, 2018.  The SEC staff issued Staff Accounting Bulletin 118 ("SAB 118"), which provides guidance on accounting for the tax effects of the Tax Act and provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.  If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. As of December 31, 2017, we have completed the majority of our accounting for the tax effects of the Tax Act. As a result of the rate change, the Company was required to revalue its net deferred tax asset at December 31, 2017 2018 and recorded a provisional adjustment to reduce its value by $3.2 million, which is included in the tax provision for 2017.million. The provisional amount recorded is subject to revisions as we complete our analysis of the Tax Act, collect and prepare necessary data, and interpret any additional guidance issued by the U.S. Treasury Department, Internal Revenue Service ("IRS"), FASB, and other standard-setting and regulatory bodies. OurCompany completed its accounting for the tax effects of the Tax Act will be completed duringin 2018, within the one-yearone-year measurement period.     The Company accounts for income taxes in accordance with ASC 740, which requires an assetperiod prescribed by the SEC, and liability approach for measuring deferred taxes based on temporary differences betweenrecorded a $0.1 million adjustment to the financial statements and tax bases of assets and liabilities existing at each balance sheet date using enacted tax rates for the years in which taxes are expected to be paid or recovered. provisional amount. The components of our deferred income tax asset, net are as follows:   December 31,   2017   2016   (Dollars in thousands) State taxes $ 633   $ 1,229 Reserves and accruals 1,893   2,407 Intangible assets 207   359 Share based compensation 1,585   2,118 Inventory 627   1,150 Investments in joint ventures 1,411   1,290 Depreciation and amortization (39 )   (119 ) Deferred tax asset, net $ 6,317   $ 8,434 Each quarter we assess our     December 31,       2020     2019       (Dollars in thousands)   Net operating loss carryforwards   $ 5,808     $ 2,227   Tax credit carryforwards     2,401       1,621   Reserves and accruals     2,870       2,563   Share based compensation     1,441       1,392   Inventory     3,142       3,536   Investments in joint ventures     1,226       7,080   Other     26       27   Depreciation and amortization     (653 )     (393 ) Right-of-use lease asset     (814 )     (550 ) Deferred tax asset, net   $ 15,447     $ 17,503   At December 31, 2020, the $5.8 million deferred tax asset for net operating losses consisted solely of state net operating loss carryforwards. Our state net operating losses may be carried forward 20 years for both California and Arizona, and will begin to determine whether all or any portion of theexpire in 2039, unless previously utilized. The $2.2 million deferred tax asset is more likely than not unrealizable under ASC 740. We are required to establish a valuation allowance for any portion of the asset we conclude is more likely than not unrealizable. As of at December 31, 2017, no valuation allowance was recorded. Our assessment considers, among other things, the nature, frequency2019 included 2019 and severity of prior cumulative2018 federal net operating losses, forecasts of future taxable income, the duration of statutory carryforward periods, our utilization experience with operating loss and tax credit carryforwards and the planning alternatives,which were fully carried back during 2020 pursuant to the extent these items are applicable. five year carry back permitted by the CARES Act.    At December 31, 2020 the Company had federal tax credits of approximately $2.3 million related to tax credits for energy efficient homes sold during 2019 and 2020.  At December 31, 2019, the Company had federal tax credits of approximately $1.6 million related to tax credits for energy efficient homes sold during 2019 and 2018.  The energy credits will begin to expire in 2039, unless previously utilized.  The Company classifies any interest and penalties related to income taxes assessed as part of income tax expense.provision. The Company has concluded that there were no significant uncertain tax positions requiring recognition in its financial statements, nor has the Company been assessed interest or penalties by any major tax jurisdictions related to any open tax periods. We are subject to U.S. federal income tax examination for calendar tax years ending 20142017 through 20172019 and various state income tax examinations for 20142016 through 20172019 calendar tax years. 104 Table of Contents THE NEW HOME COMPANY INC. 14. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018 15.    Segment Information The Company’s operations are organized into twothree reportable segments: twohomebuilding segments (Arizona and California) and fee building.  In determining the most appropriate reportable segments, we considered similar economic and other characteristics, including product types, average selling prices, gross margins, production processes, suppliers, subcontractors, regulatory environments, land acquisition results,position, and underlying demand and supply in accordance with ASC Topic 280, Segment Reporting. 280.  Our California homebuilding reportable segment aggregates the Southern California and Northern California homebuilding operating segments Our homebuilding operations acquire and develop land and construct and sell single-family attached and detached homes.homes and may sell land. Our fee building operations build homes and manage construction and sales related activities on behalf of third-partythird-party property owners and our joint ventures.  In addition,While our Corporatecorporate operations conduct no independent construction, development, sales or land acquisition activities, our corporate operations develop and implement strategic initiatives and support our operating segments by centralizing key administrative functions such as accounting, finance and treasury, information technology, insurance and risk management, litigation, marketing and human resources.  A portion of the expenses incurred by Corporatecorporate are allocated to the fee building segment primarily based on its respective percentage of revenues. The assets of our fee buildingrevenues and to each homebuilding segment primarily consist of cash, restricted cashbased on its respective investment in and accounts receivable.advances to unconsolidated joint ventures and real estate inventories balances.  The majority of our Corporatecorporate personnel and resources are primarily dedicated to activities relating to our homebuilding segment, and, therefore, the balance of any unallocated Corporatecorporate expenses and assets are included inallocated within our homebuilding segment. reportable segments. Corporate unallocated assets consists primarily of cash, prepaid taxes and our deferred tax asset.  For cash management efficiency and yield maximization reasons, cash is held at the corporate level.  All cash is held for the benefit of the subsidiaries that comprise the homebuilding and fee building segments, and all operating cash flow is generated by these subsidiaries.  The majority of our prepaid taxes and deferred tax asset are recorded at the corporate level as The New Home Company Inc. is the tax-filing entity for the subsidiaries structured as pass-through entities.  Taxable income or loss and the resulting payment of income taxes is driven by the activities of the Company's subsidiaries.  All other corporate assets comprise less than 3% of the Company's consolidated total assets.  The assets of our fee building segment primarily consist of cash, restricted cash and contracts and accounts receivable. The reportable segments follow the same accounting policies as our consolidated financial statements described in Note 1. Operational results of each reportable segment are not necessarily indicative of the results that would have been achieved had the reportable segment been an independent, stand-alone entity during the periods presented. Financial information relating to reportable segments was as follows:     Year Ended December 31,       2020     2019     2018       (Dollars in thousands)   Homebuilding revenues:                         California home sales   $ 383,536     $ 472,242     $ 504,029   California land sales     157       41,664       0   Arizona home sales     42,715       60,110       0   Total homebuilding revenues     426,408       574,016       504,029   Fee building revenues, including management fees     81,003       95,333       163,537   Total revenues   $ 507,411     $ 669,349     $ 667,566                             Homebuilding pretax loss:                         California   $ (35,609 )   $ (5,724 )   $ (19,594 ) Arizona     (25,267 )     (8,144 )     (5,112 ) Total homebuilding pretax loss     (60,876 )     (13,868 )     (24,706 ) Fee building pretax income, including management fees     1,420       2,052       4,401   Total pretax loss   $ (59,456 )   $ (11,816 )   $ (20,305 )     December 31,       2020     2019       (Dollars in thousands)   Homebuilding assets:                 California   $ 295,340     $ 416,179   Arizona     70,457       82,234   Total homebuilding assets     365,797       498,413   Fee building assets     3,756       11,193   Corporate unallocated assets     126,146       93,583   Total assets   $ 495,699     $ 603,189   105 Table of Contents THE NEW HOME COMPANY INC.   Year Ended December 31,   2017   2016   2015   (Dollars in thousands) Revenues:           Homebuilding $ 560,842   $ 507,949   $ 280,209 Fee building, including management fees 190,324   186,507   149,890 Total $ 751,166   $ 694,456   $ 430,099             Pretax income:           Homebuilding $ 27,034   $ 25,546   $ 23,698 Fee building, including management fees 5,497   8,404   10,213 Total $ 32,531   $ 33,950   $ 33,911 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020, 2019 and 2018   December 31,   2017   2016   (Dollars in thousands) Assets:       Homebuilding $ 631,087   $ 393,095 Fee building 13,425   26,041 Total $ 644,512   $ 419,136 15. 16.    Results of Quarterly Operations (Unaudited) The following table presents our unaudited quarterly financial data. In our opinion, this information has been prepared on a basis consistent with that of our audited consolidated financial statements and all necessary material adjustments, consisting of normal recurring accruals and adjustments, have been included to present fairly the unaudited quarterly financial data. Our quarterly results of operations for these periods are not necessarily indicative of future results of operations.   First Quarter   Second Quarter   Third Quarter   Fourth Quarter   Total   (Dollars in thousands, except per share amounts) 2017                   Home sales revenue $ 69,406   $ 96,929   $ 114,622   $ 279,885   $ 560,842 Cost of home sales 60,065   82,488   95,992   234,668   473,213 Home sales impairments —   1,300   —   900   2,200 Homebuilding gross margin $ 9,341   $ 13,141   $ 18,630   $ 44,317   $ 85,429 Fee building revenue $ 55,617   $ 47,181   $ 43,309   $ 44,217   $ 190,324 Cost of fee building 53,926   45,899   41,808   43,194   184,827 Fee building gross margin $ 1,691   $ 1,282   $ 1,501   $ 1,023   $ 5,497 Pretax income $ 1,360   $ 2,505   $ 6,974   $ 21,692   $ 32,531 Net income attributable to The New Home Company Inc. $ 846   $ 1,517   $ 4,318   $ 10,471   $ 17,152 Basic earnings per share attributable to The New Home Company Inc.(1) $ 0.04   $ 0.07   $ 0.21   $ 0.50   $ 0.82 Diluted earnings per share attributable to The New Home Company Inc.(1) $ 0.04   $ 0.07   $ 0.21   $ 0.50   $ 0.82                     2016                   Home sales revenue $ 42,303   $ 78,836   $ 125,142   $ 261,668   $ 507,949 Cost of home sales 36,670   69,390   105,799   221,700   433,559 Home sales impairments —   —   —   2,350   2,350 Homebuilding gross margin $ 5,633   $ 9,446   $ 19,343   $ 37,618   $ 72,040 Land sale impairment $ —   $ —   $ —   $ 1,150   $ 1,150 Land sales gross margin $ —   $ —   $ —   $ (1,150 )   $ (1,150 ) Fee building revenue $ 42,937   $ 30,028   $ 52,761   $ 60,781   $ 186,507 Cost of fee building 40,914   28,317   50,832   58,040   178,103 Fee building gross margin $ 2,023   $ 1,711   $ 1,929   $ 2,741   $ 8,404 Pretax (loss) income $ (1,111 )   $ 3,939   $ 9,042   $ 22,080   $ 33,950 Net (loss) income attributable to The New Home Company Inc. $ (814 )   $ 2,509   $ 5,547   $ 13,780   $ 21,022 Basic (loss) earnings per share attributable to The New Home Company Inc. (1) $ (0.04 )   $ 0.12   $ 0.27   $ 0.67   $ 1.02 Diluted (loss) earnings per share attributable to The New Home Company Inc. (1) $ (0.04 )   $ 0.12   $ 0.27   $ 0.66   $ 1.01     First Quarter     Second Quarter     Third Quarter     Fourth Quarter     Total       (Dollars in thousands, except per share amounts)   2020                                         Home sales revenue   $ 95,659     $ 77,757     $ 117,426     $ 135,409     $ 426,251   Cost of home sales     84,722       66,216       100,775       115,313       367,026   Home sales impairments     —       19,000       —       —       19,000   Homebuilding gross margin   $ 10,937     $ (7,459 )   $ 16,651     $ 20,096     $ 40,225   Land sales revenue   $ 147     $ 10     $ —     $ —     $ 157   Cost of land sales     147       10       —       —       157   Land sales impairments     —       —       —       —       —   Land sales gross margin   $ —     $ —     $ —     $ —     $ —   Fee building revenue   $ 36,227     $ 21,193     $ 13,418     $ 10,165     $ 81,003   Cost of fee building     35,497       20,985       13,150       9,951       79,583   Fee building gross margin   $ 730     $ 208     $ 268     $ 214     $ 1,420   Pretax income (loss)   $ (18,413 )   $ (41,222 )   $ 1,528     $ (1,349 )   $ (59,456 ) Net income (loss) attributable to The New Home Company Inc.   $ (8,476 )   $ (24,293 )   $ 1,188     $ (1,238 )   $ (32,819 ) Basic earnings (loss) per share attributable to The New Home Company Inc.(1)   $ (0.42 )   $ (1.32 )   $ 0.07     $ (0.07 )   $ (1.76 ) Diluted earnings (loss) per share attributable to The New Home Company Inc.(1)   $ (0.42 )   $ (1.32 )   $ 0.06     $ (0.07 )   $ (1.76 )                                           2019                                         Home sales revenue   $ 99,186     $ 140,464     $ 118,781     $ 173,921     $ 532,352   Cost of home sales     86,569       123,525       105,763       153,700       469,557   Home sales impairments     —       —       1,700       6,600       8,300   Homebuilding gross margin   $ 12,617     $ 16,939     $ 11,318     $ 13,621     $ 54,495   Land sales revenue   $ —     $ —     $ 24,573     $ 17,091     $ 41,664   Cost of land sales     —       —       26,078       17,091       43,169   Land sales impairments     —       —       1,900       —       1,900   Land sales gross margin   $ —     $ —     $ (3,405 )   $ —     $ (3,405 ) Fee building revenue   $ 19,662     $ 22,285     $ 22,262     $ 31,124     $ 95,333   Cost of fee building     19,268       21,770       21,615       30,628       93,281   Fee building gross margin   $ 394     $ 515     $ 647     $ 496     $ 2,052   Pretax income (loss)   $ (2,651 )   $ 2,565     $ (4,778 )   $ (6,952 )   $ (11,816 ) Net income (loss) attributable to The New Home Company Inc.   $ (1,987 )   $ 1,572     $ (4,624 )   $ (2,998 )   $ (8,037 ) Basic earnings (loss) per share attributable to The New Home Company Inc.(1)   $ (0.10 )   $ 0.08     $ (0.23 )   $ (0.15 )   $ (0.40 ) Diluted earnings (loss) per share attributable to The New Home Company Inc.(1)   $ (0.10 )   $ 0.08     $ (0.23 )   $ (0.15 )   $ (0.40 ) (1) (1) Some amounts do not add to our full year results presented on our consolidated statement of operations due to rounding differences in quarterly and annual weighted average share calculations. 106 Table of Contents THE NEW HOME COMPANY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 16. December 31, 2020, 2019 and 2018 17. Supplemental Disclosure of Cash Flow Information The following table presents certain supplemental cash flow information:     Year Ended December 31,       2020     2019     2018       (Dollars in thousands)   Supplemental disclosures of cash flow information                         Interest paid, net of amounts capitalized   $ 5,246     $ 0     $ 0   Income taxes paid   $ 0     $ 270     $ 7,110     Year Ended December 31,   2017   2016   2015   (Dollars in thousands) Supplemental disclosures of cash flow information           Interest paid, net of amounts capitalized $ —   $ —   $ — Income taxes paid $ 14,050   $ 13,670   $ 11,261 Supplemental disclosures of noncash transactions           Purchase of real estate with notes payable to affiliate $ —   $ —   $ 747 Contribution of real estate to unconsolidated joint ventures $ —   $ 798   $ 18,828 Contribution of real estate from noncontrolling interest in subsidiary $ —   $ —   $ 1,301 Assets assumed from unconsolidated joint ventures $ 26,613   $ 46,811   $ — Liabilities and equity assumed from unconsolidated joint ventures $ 27,608   $ 47,197   $ — 17. 18. Supplemental Guarantor Information The 2025 Notes and the guarantees are the Company’s and the Guarantor’s senior unsecured obligations. The 2025 Notes and the guarantees rank equally in right of payment with all of the Company’s and the Guarantors’ existing and future unsecured senior debt, including borrowings under the Company's 7.25% SeniorCredit Facility, and senior in right of payment to all of the Company’s and the Guarantors’ existing and future subordinated debt. The 2025 Notes due 2022 (the "Notes")and the guarantees will be effectively subordinated to any of the Company’s and the Guarantors’ existing and future secured debt. The 2025 Notes are guaranteed, on an unsecured basis, jointly and severally, by all of the Company's 100%wholly owned subsidiaries (collectively, the "Guarantors"). The guarantees are full and unconditional. The Indenture governing the 2025Notes provides that the guaranteesguarantee of a Guarantor will be automatically and unconditionally released and discharged: (1)(1) upon any sale, transfer, exchange or other disposition (by merger, consolidation or otherwise) of all of the equity interests of such Guarantor after which the applicable Guarantor is no longer a "Restricted Subsidiary" (as defined in the Indenture), which sale, transfer, exchange or other disposition is made in compliance with applicable provisions of the Indenture; (2)(2) upon the proper designation of such Guarantor as an "Unrestricted Subsidiary" (as defined in the Indenture), in accordance with the Indenture; (3)(3) upon request of the Company and certification in an officers’ certificate provided to the trustee that the applicable Guarantor has become an "Immaterial Subsidiary" (as defined in the indenture)Indenture), so long as such Guarantor would not otherwise be required to provide a guarantee pursuant to the Indenture; provided that, if immediately after giving effect to such release the consolidated tangible assets of all Immaterial Subsidiaries that are not Guarantors would exceed 5.0%5% of consolidated tangible assets, no such release shall occur, (4)(4) if the Company exercises its legal defeasance option or covenant defeasance option under the Indenture or if the obligations of the Company and the Guarantors are discharged in compliance with applicable provisions of the Indenture, upon such exercise or discharge; (5)Indenture; (5) unless a default has occurred and is continuing, upon the release or discharge of such Guarantor from its guarantee of any indebtedness for borrowed money of the Company and the Guarantorsor any other Guarantor so long as such Guarantor would not then otherwise be required to provide a guarantee pursuant to the Indenture; or (6)(6) upon the full satisfaction of the Company’s obligations under the Indenture; provided that in each case if such Guarantor has incurred any indebtedness in reliance on its status as a Guarantor in compliance with applicable provisions of the Indenture, such Guarantor’s obligations under such indebtedness, as the case may be, so incurred are satisfied in full and discharged or are otherwise permitted to be incurred by a Restricted Subsidiary (other than a Guarantor) in compliance with applicable provisions of the Indenture. The Company has determined that separate, full financial statements of the Guarantors would not be material to investors and, accordingly, supplemental financial information for the guarantors is presented. As the guarantees were made in connection with the first and second quarter 2017 offering of notes, the Guarantors’ condensed financial information is presented as if the guarantees existed during the period presented. If any subsidiaries are released from the guarantees in future periods, the changes are reflected prospectively. SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS   December 31, 2017   NWHM Inc.   Guarantor Subsidiaries   Non-Guarantor Subsidiaries   Consolidating Adjustments   Consolidated NWHM   (Dollars in thousands) Assets                   Cash and cash equivalents $ 99,586   $ 23,772   $ 188   $ —   $ 123,546 Restricted cash —   424   —   —   424 Contracts and accounts receivable 10   24,238   —   (1,024 )   23,224 Intercompany receivables 129,414   —   —   (129,414 )   — Due from affiliates —   1,060   —   —   1,060 Real estate inventories —   416,143   —   —   416,143 Investment in and advances to unconsolidated joint ventures —   55,824   —   —   55,824 Investment in subsidiaries 356,443   —   —   (356,443 )   — Other assets 8,464   15,827   —   —   24,291 Total assets $ 593,917   $ 537,288   $ 188   $ (486,881 )   $ 644,512                     Liabilities and equity                   Accounts payable $ 237   $ 23,479   $ 6   $ —   $ 23,722 Accrued expenses and other liabilities 11,034   27,954   80   (1,014 )   38,054 Intercompany payables —   129,414   —   (129,414 )   — Due to affiliates —   10   —   (10 )   — Senior notes, net 318,656   —   —   —   318,656 Total liabilities 329,927   180,857   86   (130,438 )   380,432 Stockholders' equity 263,990   356,431   12   (356,443 )   263,990 Noncontrolling interest in subsidiary —   —   90   —   90 Total equity 263,990   356,431   102   (356,443 )   264,080 Total liabilities and equity $ 593,917   $ 537,288   $ 188   $ (486,881 )   $ 644,512   December 31, 2016   NWHM Inc.   Guarantor Subsidiaries   Non-Guarantor Subsidiaries   Consolidating Adjustments   Consolidated NWHM   (Dollars in thousands) Assets                   Cash and cash equivalents $ 16,385   $ 13,842   $ 269   $ —   $ 30,496 Restricted cash —   585   —   —   585 Contracts and accounts receivable 30   29,774   —   (1,971 )   27,833 Intercompany receivables 73,972   —   —   (73,972 )   — Due from affiliates —   1,138   —   —   1,138 Real estate inventories —   286,928   —   —   286,928 Investment in and advances to unconsolidated joint ventures —   50,857   —   —   50,857 Investment in subsidiaries 268,411   —   —   (268,411 )   — Other assets 9,381   11,918   —   —   21,299 Total assets $ 368,179   $ 395,042   $ 269   $ (344,354 )   $ 419,136                     Liabilities and equity                   Accounts payable $ 167   $ 32,900   $ 27   $ —   $ 33,094 Accrued expenses and other liabilities 5,489   19,763   108   (1,942 )   23,418 Intercompany payables —   73,972   —   (73,972 )   — Due to affiliates —   29   —   (29 )   — Unsecured revolving credit facility 118,000   —   —   —   118,000 Total liabilities 123,656   126,664   135   (75,943 )   174,512 Stockholders' equity 244,523   268,378   33   (268,411 )   244,523 Noncontrolling interest in subsidiary —   —   101   —   101 Total equity 244,523   268,378   $ 134   (268,411 )   244,624 Total liabilities and equity $ 368,179   $ 395,042   $ 269   $ (344,354 )   $ 419,136 SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS   Year Ended December 31, 2017   NWHM Inc.   Guarantor Subsidiaries   Non-Guarantor Subsidiaries   Consolidating Adjustments   Consolidated NWHM   (Dollars in thousands) Revenues:                   Home sales $ —   $ 560,842   $ —   $ —   $ 560,842 Fee building —   190,324   —   —   190,324   —   751,166   —   —   751,166 Cost of Sales:                   Home sales —   473,181   32   —   473,213 Home sales impairments —   2,200   —   —   2,200 Fee building —   184,827   —   —   184,827   —   660,208   32   —   660,240                     Gross Margin:                   Home sales —   85,461   (32 )   —   85,429 Fee building —   5,497   —   —   5,497   —   90,958   (32 )   —   90,926 Selling and marketing expenses —   (32,702 )   —   —   (32,702 ) General and administrative expenses (2,403 )   (23,927 )   —   —   (26,330 ) Equity in net income of unconsolidated joint ventures —   866   —   —   866 Equity in net income of subsidiaries 21,773   —   —   (21,773 )   — Other income (expense), net 107   (336 )   —   —   (229 ) Pretax income (loss) 19,477   34,859   (32 )   (21,773 )   32,531 Provision for income taxes (2,325 )   (13,065 )   —   —   (15,390 ) Net income (loss) 17,152   21,794   (32 )   (21,773 )   17,141 Net loss attributable to noncontrolling interest in subsidiary —   —   11   —   11 Net income (loss) attributable to The New Home Company Inc. $ 17,152   $ 21,794   $ (21 )   $ (21,773 )   $ 17,152   Year Ended December 31, 2016   NWHM Inc.   Guarantor Subsidiaries   Non-Guarantor Subsidiaries   Consolidating Adjustments   Consolidated NWHM   (Dollars in thousands) Revenues:                   Home sales $ —   $ 502,792   $ 5,157   $ —   $ 507,949 Fee building —   186,662   —   (155 )   186,507   —   689,454   5,157   (155 )   694,456 Cost of Sales:                   Home sales —   428,881   4,678   —   433,559 Home sales impairments —   2,350   —   —   2,350 Land sales impairment —   1,150   —   —   1,150 Fee building 2,240   175,863   —   —   178,103   2,240   608,244   4,678   —   615,162                     Gross Margin:                   Home sales —   71,561   479   —   72,040 Land sales —   (1,150 )   —   —   (1,150 ) Fee building (2,240 )   10,799   —   (155 )   8,404   (2,240 )   81,210   479   (155 )   79,294 Selling and marketing expenses —   (26,058 )   (686 )   —   (26,744 ) General and administrative expenses (14,719 )   (11,163 )   —   —   (25,882 ) Equity in net income of unconsolidated joint ventures —   7,691   —   —   7,691 Equity in net income of subsidiaries 32,091   —   —   (32,091 )   — Other income (expense), net (119 )   (303 )   (142 )   155   (409 ) Pretax income (loss) 15,013   51,377   (349 )   (32,091 )   33,950 Benefit (provision) for income taxes 6,009   (19,033 )   —   —   (13,024 ) Net income (loss) 21,022   32,344   (349 )   (32,091 )   20,926 Net loss attributable to noncontrolling interest in subsidiary —   —   96   —   96 Net income (loss) attributable to The New Home Company Inc. $ 21,022   $ 32,344   $ (253 )   $ (32,091 )   $ 21,022   Year Ended December 31, 2015   NWHM Inc.   Guarantor Subsidiaries   Non-Guarantor Subsidiaries   Consolidating Adjustments   Consolidated NWHM   (Dollars in thousands) Revenues:                   Home sales $ —   $ 269,225   $ 10,984   $ —   $ 280,209 Fee building —   150,220   —   (330 )   149,890   —   419,445   10,984   (330 )   430,099 Cost of Sales:                   Home sales —   225,379   9,853   —   235,232 Fee building 1,735   137,942   —   —   139,677   1,735   363,321   9,853   —   374,909                     Gross Margin:                   Home sales —   43,846   1,131   —   44,977 Fee building (1,735 )   12,278   —   (330 )   10,213   (1,735 )   56,124   1,131   (330 )   55,190 Selling and marketing expenses —   (12,378 )   (1,363 )   —   (13,741 ) General and administrative expenses (13,602 )   (6,676 )   —   —   (20,278 ) Equity in net income of unconsolidated joint ventures —   13,767   —   —   13,767 Equity in net income of subsidiaries 31,423   —   —   (31,423 )   — Other income (expense), net (301 )   (414 )   (642 )   330   (1,027 ) Pretax income (loss) 15,785   50,423   (874 )   (31,423 )   33,911 Benefit (provision) for income taxes 5,903   (18,436 )   —   —   (12,533 ) Net income (loss) 21,688   31,987   (874 )   (31,423 )   21,378 Net loss attributable to noncontrolling interest in subsidiary —   —   310   —   310 Net income (loss) attributable to The New Home Company Inc. $ 21,688   $ 31,987   $ (564 )   $ (31,423 )   $ 21,688 SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS   Year Ended December 31, 2017   NWHM Inc.   Guarantor Subsidiaries   Non-Guarantor Subsidiaries   Consolidating Adjustments   Consolidated NWHM   (Dollars in thousands) Net cash used in operating activities $ (31,824 )   $ (41,739 )   $ (81 )   $ (17,058 )   $ (90,702 ) Investing activities:                   Purchases of property and equipment (71 )   (124 )   —   —   (195 ) Cash assumed from joint venture at consolidation —   995   —   —   995 Contributions and advances to unconsolidated joint ventures —   (27,479 )   —   —   (27,479 ) Contributions to subsidiaries from corporate (275,794 )   —   —   275,794   — Distributions of capital from subsidiaries 192,478   —   —   (192,478 )   — Distributions of capital and repayment of advances to unconsolidated joint ventures —   15,577   —   —   15,577 Interest collected on advances to unconsolidated joint ventures —   552   —   —   552 Net cash used in investing activities $ (83,387 )   $ (10,479 )   $ —   $ 83,316   $ (10,550 ) Financing activities:                   Borrowings from credit facility 88,000   —   —   —   88,000 Repayments of credit facility (206,000 )   —   —   —   (206,000 ) Proceeds from senior notes 324,465   —   —   —   324,465 Repayments of other notes payable —   (4,110 )   —   —   (4,110 ) Payment of debt issuance costs (7,565 )   —   —   —   (7,565 ) Contributions to subsidiaries from corporate —   275,794   —   (275,794 )   — Distributions to corporate from subsidiaries —   (209,536 )   —   209,536   — Minimum tax withholding paid on behalf of employees for stock awards (590 )   —   —   —   (590 ) Proceeds from exercise of stock options 102   —   —   —   102 Net cash provided by financing activities $ 198,412   $ 62,148   $ —   $ (66,258 )   $ 194,302 Net increase (decrease) in cash and cash equivalents 83,201   9,930   (81 )   —   93,050 Cash and cash equivalents – beginning of period 16,385   13,842   269   —   30,496 Cash and cash equivalents – end of period $ 99,586   $ 23,772   $ 188   $ —   $ 123,546   Year Ended December 31, 2016   NWHM Inc.   Guarantor Subsidiaries   Non-Guarantor Subsidiaries   Consolidating Adjustments   Consolidated NWHM   (Dollars in thousands) Net cash (used in) provided by operating activities $ (7,041 )   $ (11,753 )   $ 3,272   $ (26,894 )   $ (42,416 ) Investing activities:                   Purchases of property and equipment (193 )   (246 )   —   —   (439 ) Cash assumed from joint venture at consolidation —   2,009   —   —   2,009 Contributions and advances to unconsolidated joint ventures —   (15,088 )   —   —   (15,088 ) Contributions to subsidiaries from corporate (225,169 )   —   —   225,169   — Distributions of capital from subsidiaries 189,392   725   —   (190,117 )   — Distributions of capital from unconsolidated joint ventures —   15,307   —   —   15,307 Net cash (used in) provided by investing activities $ (35,970 )   $ 2,707   $ —   $ 35,052   $ 1,789 Financing activities:                   Borrowings from credit facility 223,050   —   —   —   223,050 Repayments of credit facility (179,974 )   —   —   —   (179,974 ) Borrowings from other notes payable —   —   343   —   343 Repayments of other notes payable —   (13,135 )   (2,501 )   —   (15,636 ) Payment of debt issuance costs (1,064 )   —   —   —   (1,064 ) Cash distributions to noncontrolling interest in subsidiary —   —   (725 )   —   (725 ) Contributions to subsidiaries from corporate —   225,169   —   (225,169 )   — Distributions to corporate from subsidiaries —   (216,286 )   (725 )   217,011   — Minimum tax withholding paid on behalf of employees for stock awards (648 )   —   —   —   (648 ) Excess income tax provision from stock-based compensation (97 )   —   —   —   (97 ) Net cash provided by (used in) financing activities $ 41,267   $ (4,252 )   $ (3,608 )   $ (8,158 )   $ 25,249 Net decrease in cash and cash equivalents (1,744 )   (13,298 )   (336 )   —   (15,378 ) Cash and cash equivalents – beginning of period 18,129   27,140   605   —   45,874 Cash and cash equivalents – end of period $ 16,385   $ 13,842   $ 269   $ —   $ 30,496   Year Ended December 31, 2015   NWHM Inc.   Guarantor Subsidiaries   Non-Guarantor Subsidiaries   Consolidating Adjustments   Consolidated NWHM   (Dollars in thousands) Net cash (used in) provided by operating activities $ (1,902 )   $ (10,211 )   $ 5,282   $ (25,472 )   $ (32,303 ) Investing activities:                   Purchases of property and equipment (259 )   (159 )   —   —   (418 ) Contributions and advances to unconsolidated joint ventures —   (13,028 )   —   (2,000 )   (15,028 ) Contributions to subsidiaries from corporate (131,778 )   —   —   131,778   — Distributions of capital from subsidiaries 104,695   647   —   (105,342 )   — Distributions of capital and repayment of advances to unconsolidated joint ventures —   32,026   —   —   32,026 Net cash (used in) provided by investing activities $ (27,342 )   $ 19,486   $ —   $ 24,436   $ 16,580 Financing activities:                   Net proceeds from issuance of common stock 47,253   —   —   —   47,253 Borrowings from credit facility 99,450   —   —   —   99,450 Repayments of credit facility (125,000 )   —   —   —   (125,000 ) Borrowings from other notes payable —   —   3,552   —   3,552 Repayments of other notes payable —   —   (5,171 )   —   (5,171 ) Cash distributions to noncontrolling interest in subsidiary —   —   (2,411 )   —   (2,411 ) Contributions to subsidiaries from corporate —   131,778   —   (131,778 )   — Distributions to corporate from subsidiaries —   (132,167 )   (647 )   132,814   — Minimum tax withholding paid on behalf of employees for stock awards (248 )   —   —   —   (248 ) Excess income tax benefit from stock-based compensation 97   —   —   —   97 Tax valuation adjustment from stock-based compensation 17   —   —   —   17 Net cash provided by (used in) financing activities $ 21,569   $ (389 )   $ (4,677 )   $ 1,036   $ 17,539 Net (decrease) increase in cash and cash equivalents (7,675 )   8,886   605   —   1,816 Cash and cash equivalents – beginning of period 25,804   18,254   —   —   44,058 Cash and cash equivalents – end of period $ 18,129   $ 27,140   $ 605   $ —   $ 45,874 Report of Independent Auditors The Members TNHC Meridian Investors LLC We have audited the accompanying financial statements of TNHC Meridian Investors LLC, which comprise the balance sheet as of December 31, 2016, and the related statements of operations, members’ capital, and cash flows for two year period ended December 31, 2016, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of TNHC Meridian Investors LLC at December 31, 2016, and the results of its operations and its cash flows for the two year period ended December 31, 2016 in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Irvine, California February 22, 2017  TNHC Meridian Investors LLC  (A Delaware Limited Liability Company)        Balance Sheets         December 31   2017 2016   (Unaudited)   Assets     Cash $ 41,549 $ 9,255 Investment in unconsolidated joint venture 800,880 826,072 Total assets $ 842,429 $ 835,327             Liabilities and members’ capital     Accounts payable $ — $ 13,000       Commitments and contingencies (Note 3)           Members’ capital 842,429 822,327 Total liabilities and members’ capital $ 842,429 $ 835,327          See accompanying notes.      TNHC Meridian Investors LLC  (A Delaware Limited Liability Company)      Statements of Operations               Year Ended December 31     2017 2016 2015     (Unaudited)     Revenues:         Management fee revenues from affiliates (Note 2) $ — $ 79,166 $ 4,071,046           Expenses:         Overhead fees to the Members (Note 2) — 79,166 4,071,046   General and administrative expenses 4,706 31,922 58,777     4,706 111,088 4,129,823           Net operating loss (4,706 ) (31,922 ) (58,777 )           Equity in net income (loss) of unconsolidated joint venture 24,808 (459,073 ) 16,319,542 Net income (loss) $ 20,102 $ (490,995 ) $ 16,260,765                See accompanying notes.        TNHC Meridian Investors LLC  (A Delaware Limited Liability Company)         Statements of Members' Capital         Years Ended December 31, 2017 (Unaudited), 2016 and 2015           The New Home       Company IHP     Southern Meridian     California LLC LLC Total         Balance at December 31, 2014 $ 7,610,495 $ 12,958,412 $ 20,568,907 Distributions (13,326,079 ) (18,974,661 ) (32,300,740 ) Net income 7,980,050 8,280,715 16,260,765 Balance at December 31, 2015 2,264,466 2,264,466 4,528,932 Distributions (1,480,121 ) (1,492,852 ) (2,972,973 ) Net loss (251,863 ) (239,132 ) (490,995 ) TNHC basis adjustment (242,637 ) — (242,637 ) Balance at December 31, 2016 289,845 532,482 822,327 Net income 10,051 10,051 20,102 Balance at December 31, 2017 (Unaudited) $ 299,896 $ 542,533 $ 842,429            See accompanying notes.        TNHC Meridian Investors LLC  (A Delaware Limited Liability Company)              Statements of Cash Flows                   Year Ended December 31       2017 2016 2015       (Unaudited)     Operating activities       Net income (loss) $ 20,102 $ (490,995 ) $ 16,260,765 Adjustments to reconcile net income (loss) to net cash provided by operating activities:         Distributions of earnings from unconsolidated joint venture Distributions of earnings from unconsolidated joint venture 50,000 2,972,973 14,500,860   Equity in net income (loss) of unconsolidated joint venture Equity in net income (loss) of unconsolidated joint venture (24,808 ) 459,073 (16,319,542 )   Net changes in operating assets and liabilities:           Accounts payable (13,000 ) (13,000 ) 26,000     Due to affiliates —                    – (75,198 ) Net cash provided by operating activities 32,294 2,928,051 14,392,885                Investing activities       Distributions of equity from unconsolidated joint venture — — 16,800,000 Net cash provided by investing activities — — 16,800,000             Financing activities       Members’ capital distributions — (2,972,973 ) (32,300,740 ) Net cash used in financing activities — (2,972,973 ) (32,300,740 )          Net increase (decrease) in cash 32,294 (44,922 ) (1,107,855 ) Cash at beginning of year 9,255 54,177 1,162,032 Cash at end of year $ 41,549 $ 9,255 $ 54,177             Supplemental disclosures of cash flow information       Interest paid, net of amounts capitalized $ — $ — $ —         See accompanying notes.       TNHC Meridian Investors LLC (A Delaware Limited Liability Company) Notes to Financial Statements December 31, 2017 (Unaudited), 2016 and 2015 1. Organization and Summary of Significant Accounting Policies TNHC Meridian Investors LLC, a Delaware limited liability company (the "Company"), was formed with an effective date of February 20, 2013. The Company was initially capitalized through cash and asset contributions by The New Home Company Southern California LLC ("TNHC"). Effective August 20, 2013, TNHC Meridian Investors LLC amended and restated its limited liability agreement and concurrently admitted IHP Meridian LLC ("IHP")Inc. operates as a member (TNHC and IHP, collectively, are referred to herein as the "Members"). The Company holds an interest in one unconsolidated joint venture, TNHC Newport LLC (the "Unconsolidated Joint Venture"). Subject to the operating agreement, distributions of net cash flow to the Members shall be in the following order of priority: 1) To the Members in proportion and up to the difference between their respective aggregate Special Preferred Return, as defined, and the aggregate amounts distributed previously; then 2) To the Members in proportion to their respective Unreturned Special Capital Contributions, as defined; then 3) To the Members in proportion and up to the difference between their respective aggregate Preferred Return, as defined, and the aggregate amounts distributed previously; then 4) If there is a Controllable Cost Overrun, as defined, and a Profit Shortfall, as defined, an amount equal to 50% of the lesser of such Controllable Cost Overrun or such Profit Shortfall shall be distributed to the Members in the following proportion: 75% to IHP and 25% to TNHC; then 5) To the Members in proportion and up to each Member’s Unreturned Capital Contribution, as defined; then 6) To the Members in proportion to their respective Percentage Interests, as defined (TNHC 50% and IHP 50%). Subject to the operating agreement, income and losses are allocated to the Members generally in the same manner as distributions of net cash flow. Pursuant to the operating agreement, the Special Preferred Return on Unreturned Special Capital Contributions, as defined, for both Members is 20% per annum, compounded monthly. The preferred return on Unreturned Capital Contributions for both Members is 12% per annum, compounded monthly. During 2015, the Unreturned Capital Contributionsholding company and all associated preferred return have been returned toof its homebuilding construction, fee building, development and sales activities are conducted through its subsidiaries.  Since the partners, as such, no additional preferred return distributions are expected as of December 31, 2017. The following is a summaryissuance of the preferred returns for the Members as of December 31, 2017 (Unaudited):   TNHC IHP Total         Cumulative Special Preferred Return $ — $ — $ — Cumulative Special Preferred distributions — — — Cumulative Preferred Return 1,772,031 3,017,243 4,789,274 Cumulative Preferred distributions (1,772,031 ) (3,017,243 ) (4,789,274 ) Remaining undistributed preferred return $ — $ — $ — Basis of Presentation The accompanying financial statements have been prepared2022 Notes in accordance with U.S. generally accepted accounting principles ("GAAP") as contained within the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"). This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of its liabilities in the normal course of business. Management believes2017, the Company has sufficient cashhad only one subsidiary, a consolidated joint venture, that was not a Guarantor.  During the 2020third quarter, and accessprior to capital to fund its operations. Use of Estimates The preparationthe issuance of the Company’s financial statements in conformity with GAAP requires management to make estimates2025 Notes, this entity was dissolved.   At December 31, 2020, all of the Company's subsidiaries were 100% owned subsidiaries and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of commitments and contingencies. Actual results could differ materially from those estimates. Cash The Company considers all highly-liquid investments that are readily convertible to cash, with original maturity dates of three months or less, to be cash and cash equivalents. Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash deposited with financial institutions in excess of amounts insured by the Federal Deposit Insurance Corporation.Guarantors.  The Company has not experienced any losses related to uninsured cash balances. Variable Interest Entities The Company accounts for variable interest entities in accordance with ASC 810, Consolidation. Under ASC 810, a variable interest entity ("VIE") is created when: (a) the equity investment at risk in the entity is not sufficient to permit the entity to finance its activities without additional subordinated provided condensed consolidated financial support provided by other parties, including the equity holders; (b) the entity’s equity holders as a group either (i) lack the direct or indirect ability to make decisions about the entity, (ii) are not obligated to absorb expected lossesinformation of the entityGuarantors because the parent company, The New Home Company Inc. has no independent assets or (iii) do not have the right to receive expected residual returns of the entity; or (c) the entity’s equity holders have voting rights that are not proportionate to their economic interests,operations and the activities of the entity involve or are conducted on behalf of the equity holder with disproportionately few voting rights. If an entity is deemed to be a VIE pursuant to ASC 810, the enterprise that has both (i) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (ii) the obligation to absorb the expected losses of the entity or right to receive benefits from the entity that could be potentially significant to the VIE is considered the primary beneficiary and must consolidate the VIE. As of December 31, 2017 (Unaudited), 2016, and 2015, the Company was not required to consolidate any VIEs. In accordance with ASC 810, the Company performs ongoing reassessments of whether it is the primary beneficiary of a VIE. The Company first analyzes the Unconsolidated Joint Venture to determine if it is a variable interest entity under the provisions of ASC 810 (as discussed above) when determining whether the entity should be consolidated. Investment in Unconsolidated Joint Venture We use the equity method to account for investments in homebuilding and land development joint ventures that qualify as VIEs where we are not the primary beneficiary and other entities that we do not control but have the ability to exercise significant influence over the operating and financial policies of the investee. The Company also uses the equity method when we function as the managing member or general partner and our venture partner has substantive participating rights or where we can be replaced by our venture partner as managing member without cause. As of December 31, 2017 (Unaudited), 2016 and 2015, the Company concluded that the Unconsolidated Joint Venture was not a variable interest entity and it did not control the entity, therefore the Company accounted for this entity under the equity method of accounting. Under the Unconsolidated Joint Venture operating agreement, capital contributions are determined based on the operating budgets and needs of the Unconsolidated Joint Venture, which vary throughout the life of the Unconsolidated Joint Venture based on the circumstances unique to the Unconsolidated Joint Venture. As of December 31, 2017, the Company had an ownership and percentage interest in one unconsolidated joint venture of 50%. Investment in the Unconsolidated Joint Venture is accounted for under the equity method of accounting. Under the equity method, the Company recognizes its proportionate share of earnings and losses generated by the Unconsolidated Joint Venture upon the delivery of lots or homes to third parties. The Company reviews the real estate inventory held by the Unconsolidated Joint Venture for impairments whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. The Company also reviews its investment in the Unconsolidated Joint Venture for evidence of other-than-temporary declines in value. To the extent the Company deems any portionguarantees of its investment insubsidiaries are full unconditional and joint and several and, accordingly, the Unconsolidated Joint Venture as presentation of such information is not recoverable, material.  For more information regarding the Company impairs its investment accordingly. AsCompany's assets and operations, please see Note 15. 107 Table of December 31, 2017 and 2016, the Company determined that no portion of its investment in the Unconsolidated Joint Venture was impaired.Contents The balance sheets for the Unconsolidated Joint Venture are as follows:     December 31     2017 2016     (Unaudited)     Cash $ 3,049,186 $ 4,545,757       Total assets $ 3,049,186 $ 4,545,757           Accounts payable $ 179,728 $ 66,952   Accrued expenses and other liabilities 1,260,173 2,823,598   Due to affiliate 7,525 3,063       Total liabilities 1,447,426 2,893,613           The Company’s equity 800,880 826,072   Other member’s equity 800,880 826,072       Total equity 1,601,760 1,652,144       Total liabilities and equity $ 3,049,186 $ 4,545,757 The condensed statements of operations for the Unconsolidated Joint Venture are as follows:               Years Ended December 31     2017 2016 2015     (Unaudited)       Revenues $ — $ 5,250,000 $ 175,610,776   Cost of sales and expenses (49,616 ) 6,114,092 140,742,205   Income (loss) of unconsolidated joint venture $ 49,616 $ (864,092 ) $ 34,868,571   Income (loss) from unconsolidated joint venture reflected in the accompanying statements of operations (Unaudited) $ 24,808 $ (459,073 ) $ 16,319,542 Income Taxes As a limited liability company, the Company is subject to certain minimal taxes and fees; however, income taxes on income reported by the Company are the obligation of the Members. The Company applies the provisions of ASC 740, Income Taxes. Based on its evaluation, under ASC 740, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements, nor has the Company been assessed interest or penalties by any major tax jurisdictions. The Company’s evaluation was performed for the tax years ended December 31, 2017, 2016 and 2015. New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which supersedes existing accounting literature relating to how and when a company recognizes revenue. Under ASU 2014-09, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. Additionally, ASU 2014-09 supersedes existing industry specific accounting literature relating to how a company expenses certain selling and marketing costs. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delayed the effective date of ASU 2014-09 by one year. ASU 2014-09 is effective for our annual reporting periods beginning after December 15, 2018. We will adopt the requirements of the new standard in 2019 and will use the modified retrospective transition method. We do not believe the adoption of ASU 2014-09 will have a material impact on the Company's financial statements and related disclosures. In February 2015, the FASB issued Accounting Standards Update ASU No. 2015-02, Amendments to the Consolidation Analysis ("ASU 2015-02"), which changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. The amendments in ASU 2015-02 are effective for interim and annual periods beginning after December 15, 2015. The adoption of ASU 2015-02 for the annual period ended December 31, 2016 resulted in no material effect on the Company's financial statements and related disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 will require organizations that lease assets (referred to as "lessees") to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Under ASU 2016-02, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Lessor accounting remains substantially similar to current GAAP. In addition, disclosures of leasing activities are to be expanded to include qualitative along with specific quantitative information. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2019. ASU 2016-02 mandates a modified retrospective transition method. We will adopt ASU 2016-02 on January 1, 2020, and expect no effect on our financial statements. In March 2016, the FASB issued ASU No. 2016-07, Investments- Equity Method and Joint Ventures: Simplifying the Transition to the Equity Method of Accounting ("ASU 2016-07"), which eliminates the requirement to apply the equity method of accounting retrospectively when a reporting entity obtains significant influence over a previously held investment.  Our adoption of ASU 2016-07 on January 1, 2017 did not have an effect on our financial statements. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force ("ASU 2016-15"). ASU 2016-15 provides guidance on how certain cash receipts and cash payments are to be presented and classified in the statement of cash flows.  ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2018. We will adopt ASU 2016-15 on January 1, 2019, and expect no effect on our financial statements. In February 2017, the FASB issued ASU No. 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets ("ASU 2017-05"). ASU 2017-05 clarifies the guidance for derecognition of nonfinancial assets and in-substance nonfinancial assets when the asset does not meet the definition of a business and is not a not-for-profit activity. ASU 2017-05 is effective for annual reporting periods beginning after December 15, 2018. We will adopt the requirements of the new standard in 2019 and will use the modified retrospective transition method. We do not believe the adoption of ASU 2017-05 will have a material impact on the Company's financial statements and related disclosures. 2. Due to Affiliates and Related Party Transactions Pursuant to the operating agreement of the Unconsolidated Joint Venture, the Company receives a management fee from the Unconsolidated Joint Venture in an amount equal to 3.0% of Unconsolidated Joint Venture revenues. During the years ended December 31, 2017 (Unaudited), 2016, and 2015 the Company earned $0, $79,166 and $4,071,046, respectively, in management fees which have been recorded by the Company as management fee revenues from affiliates in the accompanying statements of operations. Pursuant to the operating agreement, TNHC shall receive an overhead fee from the Company in an amount equal to 3.0%, less $500,000, of the Unconsolidated Joint Venture revenues. This amount will be paid as follows: Exhibit Number Exhibit Description 1) 1.5% of the projected gross sales revenue of the Unconsolidated Joint Venture, less $500,000, paid in equal monthly installments on or about the first day of the month over the projected life of the project. 2) 3.1 1.5% of the gross sales revenue from each home sold, payable upon the first day of the month following close of escrow. Pursuant to the operating agreement, IHP shall receive an overhead fee from the Company in an amount equal to $500,000, which has been paid in full. During the years ended December 31, 2017, 2016 and 2015, TNHC earned $0, $0, and $1,335,700 respectively, and IHP earned $0, $0, and $109,300, respectively, in monthly overhead fees, which have been recorded by the Company as overhead fees to the Members in the accompanying statements of operations. As of December 31, 2017 and 2016, no amounts were due to TNHC or IHP for such fees. During the years ended December 31, 2017 (Unaudited), 2016, and 2015 TNHC earned and received $0, $79,166 and $2,449,744 respectively, and IHP earned $0, $0, and $176,302 , respectively, in overhead fees earned from homes sold, which have been recorded by the Company as overhead fees to the Members in the accompanying statements of operations. As of December 31, 2017 and 2016, no amounts were due to TNHC and IHP for such fees. 3. Commitments and Contingencies The Company’s commitments and contingencies include the usual obligations and litigation incurred by real estate developers in the normal course of business. In the opinion of management, there are no material loss contingencies. As an owner of a developer of real estate, the Company is subject to various environmental laws of federal, state and local governments. The Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of real estate in the vicinity of the Company’s real estate and other environmental conditions of which the Company is unaware with respect to the real estate could result in future environmental liabilities. 4. Subsequent Events The Company has evaluated subsequent events through February 14, 2018, the date the financial statements were available for issuance. Report of Independent Auditors The Members TNHC Newport LLC We have audited the accompanying financial statements TNHC Newport LLC, which comprise the balance sheets as of December 31, 2017 and 2016, and the related statements of operations, members’ capital, and cash flows for the three year period ended December 31, 2017, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of TNHC Newport LLC at December 31, 2017 and 2016, and the results of its operations and its cash flows for the three year period ended December 31, 2017 in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Irvine, California February 14, 2018  TNHC Newport LLC  (A Delaware Limited Liability Company)        Balance Sheets               December 31   2017 2016       Assets     Cash $ 3,049,186 $ 4,545,757 Total assets $ 3,049,186 $ 4,545,757             Liabilities and members’ capital     Accounts payable $ 179,728 $ 66,952 Accrued expenses and other liabilities 1,260,173 2,823,598 Due to affiliate (Note 4) 7,525 3,063   1,447,426 2,893,613       Commitments and contingencies (Note 5)           Members’ capital 1,601,760 1,652,144 Total liabilities and members’ capital $ 3,049,186 $ 4,545,757       See accompanying notes.      TNHC Newport LLC  (A Delaware Limited Liability Company)          Statements of Operations           Year Ended December 31   2017 2016 2015         Revenues:       Home sales $ — $ 4,803,954 $ 161,728,995 Design studio option sales — 446,046 13,881,781   — 5,250,000 175,610,776 Cost of sales:       Cost of home sales (49,971 ) 5,469,778 121,020,740 Cost of design studio option sales — 297,062 10,191,160   (49,971 ) 5,766,840 131,211,900         Gross profit (loss) 49,971 (516,840 ) 44,398,876         Selling and marketing expenses 355 150,941 2,859,369 Selling and marketing expenses incurred from affiliates (Note 4) — 90,749 1,242,532 Overhead fees to affiliates (Note 4) — 105,562 5,428,404 Net income (loss) $ 49,616 $ (864,092 ) $ 34,868,571         See accompanying notes.       TNHC Newport LLC  (A Delaware Limited Liability Company)         Statements of Members' Capital         Years Ended December 31, 2017, 2016 and 2015             TNHC NB     Meridian  Residences,     Investors LLC  LLC Total         Balance at December 31, 2014 $ 19,239,436 $ 40,408,229 $ 59,647,665 Distributions (31,300,860 ) (54,699,140 ) (86,000,000 ) Net income 16,319,542 18,549,029 34,868,571 Balance at December 31, 2015 4,258,118 4,258,118 8,516,236 Distributions (2,972,973 ) (3,027,027 ) (6,000,000 ) Net loss (459,073 ) (405,019 ) (864,092 ) Balance at December 31, 2016 826,072 826,072 1,652,144 Distributions (50,000 ) (50,000 ) (100,000 ) Net income 24,808 24,808 49,616 Balance at December 31, 2017 $ 800,880 $ 800,880 $ 1,601,760         See accompanying notes.        TNHC Newport LLC  (A Delaware Limited Liability Company)              Statements of Cash Flows                               Year Ended December 31       2017 2016 2015 Operating activities       Net income (loss) $ 49,616 $ (864,092 ) $ 34,868,571 Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:         Net changes in operating assets and liabilities:           Real estate inventories — 3,650,099 74,758,196     Other assets — 44,139 1,235,895     Accounts payable 112,776 (4,506,675 ) (3,509,984 )     Accrued expenses and other liabilities (1,563,425 ) (252,886 ) 1,861,912     Due to affiliate 4,462 (46,217 ) (119,644 ) Net cash (used in) provided by operating activities (1,396,571 ) (1,975,632 ) 109,094,946             Financing activities       Restricted cash — 500,000 — Repayment of note payable to member — — (4,268,291 ) Proceeds from issuance of note payable — — 35,961,943 Repayment of note payable — — (53,692,886 ) Members’ capital distributions (100,000 ) (6,000,000 ) (86,000,000 ) Net cash used in financing activities (100,000 ) (5,500,000 ) (107,999,234 )             Net (decrease) increase in cash (1,496,571 ) (7,475,632 ) 1,095,712 Cash at beginning of year 4,545,757 12,021,389 10,925,677 Cash at end of year $ 3,049,186 $ 4,545,757 $ 12,021,389             Supplemental disclosures of cash flow information       Interest paid, net of amounts capitalized $ — $ — $ —                See accompanying notes.       TNHC Newport LLC (A Delaware Limited Liability Company) Notes to Financial Statements December 31, 2017, 2016 and 2015 1. Organization and Summary of Significant Accounting Policies TNHC Newport LLC, a Delaware limited liability company (the "Company"), was formed with an effective date of March 1, 2013. The Company was capitalized through cash and asset contributions by TNHC Meridian Investors LLC ("TNHC") and NB Residences, LLC ("NB Residences") (collectively, "the Members"). On April 1, 2013, the Company purchased 4.25 acres of land located in Newport Beach, California, for the development and sale of 79 homes in a community known as Meridian ("the Project"). Subject to the operating agreement, distributions of net cash flow to the Members shall be in the following order of priority: 1) To the Members in proportion to their respective accrued and unpaid First Priority Preference Amount, as defined; then 2) To the Members in proportion to their respective Undistributed First Priority Capital Amount, as defined; then 3) To the Members in proportion to their respective accrued and unpaid Second Priority Preference Amount, as defined; then 4) To the Members in proportion to their respective Undistributed Second Priority Capital Amount, as defined; then 5) To the Members in proportion to their respective Percentage Interests, as defined (TNHC 50% and NB Residences 50%). Upon the formation of the Company, TNHC received a distribution of $4,618,808 from the Company in order to bring contribution percentages of each Member in line with the operating agreement, which was 35% for TNHC and 65% for NB Residences. During 2014, the Members amended the operating agreement to allow NB Residences to make a contribution of $4,500,000 without the requirement for TNHC to make a corresponding contribution. This contribution was designated as an increase to NB Residences Undistributed Second Priority Capital. Subject to the operating agreement, income and loss are allocated to the Members generally in the same manner as distributions of net cash flow. Pursuant to the operating agreement, the preferred return on First Priority Capital, as defined, for both Members is 20% per annum, compounded monthly. The preferred return on Second Priority Capital, as defined, for both Members is 12% per annum, compounded monthly. During 2015, the First Priority Capital, Second Priority Capital and all preferred returns associated were returned to the partners, as such, no additional preferred return distributions are expected as of December 31, 2017 and 2016. The following is a summary of the preferred returns for the Members as of December 31, 2017:   TNHC NB Residences Total Cumulative First Priority preferred return $ — $ — $ — Cumulative First Priority preferred distributions — — — Cumulative Second Priority preferred return 5,532,742 11,085,315 16,618,057 Cumulative Second Priority preferred distributions (5,532,742 ) (11,085,315 ) (16,618,057 ) Remaining undistributed preferred return $ — $ — $ — Basis of Presentation The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") as contained within the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"). This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of its liabilities in the normal course of business. Management believes the Company has sufficient cash and access to capital to fund its operations. Use of Estimates The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of commitments and contingencies. Actual results could differ materially from those estimates. Cash The Company considers all highly liquid investments that are readily convertible to cash, with original maturity dates of three months or less, to be cash and cash equivalents. Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash deposited with financial institutions in excess of amounts insured by the Federal Deposit Insurance Corporation. The Company has not experienced any losses related to uninsured cash balances. Real Estate Inventories and Cost of Sales Real estate inventories are carried at cost. Development costs, including land, land development, direct costs of construction, indirect costs, interest, and property taxes incurred during the development period, are capitalized. Capitalization of development costs ends when the assets are substantially complete and ready for sale. Costs of home sales are allocated based on specific identification or relative sales value, depending on the nature of the costs. Project-specific costs are amortized to cost of sales as homes are closed based upon a method that approximates relative sales value. A provision for warranty costs is included in cost of homes sold at the time the sale of a home is recorded. Selling and marketing costs are expensed in the period incurred. Real estate inventories are stated at cost, unless the carrying amount is determined not to be recoverable, in which case the inventories are written down to fair value in accordance with ASC 360, Property, Plant and Equipment ("ASC 360"). ASC 360 requires that real estate assets be tested for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Impairment of assets is measured by comparing the carrying amount of an asset to the undiscounted future net cash flows expected to be generated by the asset. These evaluations for impairment are significantly impacted by estimates of the amounts and timing of revenues, costs and expenses, and other factors. If real estate assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds the fair value of the assets. Fair value is determined based on estimated future cash flows discounted for inherent risks associated with the real estate assets, or other valuation techniques. Revenue Recognition In accordance with ASC 360, revenues from home sales and other real estate sales are recorded and a profit is recognized when the respective units are closed. Home sales and other real estate sales are closed when all conditions of escrow are met, including delivery of the home, title passage, appropriate consideration is received and collection of associated receivables, if any, is reasonably assured, and other applicable criteria are met. Sales incentives are a reduction of revenues when the respective unit is closed. When it is determined that the earnings process is not complete, the sale and related profit are deferred for recognition in future periods. Income Taxes As a limited liability company, the Company is subject to certain minimal taxes and fees; however, income taxes on income reported by the Company are the obligation of the Members. The Company applies the provisions of ASC 740, Income Taxes ("ASC 740"). Based on its evaluation, under ASC 740, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements, nor has the Company been assessed interest or penalties by any major tax jurisdictions. The Company’s evaluation was performed for the tax years ended December 31, 2017, 2016 and 2015. New Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which supersedes existing accounting literature relating to how and when a company recognizes revenue. Under ASU 2014-09, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. Additionally, ASU 2014-09 supersedes existing industry specific accounting literature relating to how a company expenses certain selling and marketing costs. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delayed the effective date of ASU 2014-09 by one year. ASU 2014-09 is effective for our annual reporting periods beginning after December 15, 2018. We will adopt the requirements of the new standard in 2019 and will use the modified retrospective transition method. We do not believe the adoption of ASU 2014-09 will have a material impact on the Company's financial statements and related disclosures. In February 2015, the FASB issued Accounting Standards Update ASU No. 2015-02, Amendments to the Consolidation Analysis ("ASU 2015-02"), which changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. The amendments in ASU 2015-02 are effective for interim and annual periods beginning after December 15, 2015. Early adoption is permitted. The adoption of ASU 2015-02 for the annual period ended December 31, 2016 resulted in no material effect on the Company's financial statements and related disclosures. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 will require organizations that lease assets (referred to as "lessees") to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Under ASU 2016-02, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Lessor accounting remains substantially similar to current GAAP. In addition, disclosures of leasing activities are to be expanded to include qualitative along with specific quantitative information. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2019. ASU 2016-02 mandates a modified retrospective transition method. The Company's lease contracts primarily consist of rental agreements for office equipment where we are the lessee. The Company has begun the process of evaluating these lease contracts and believes all would be considered operating leases. Upon adoption, we may be required to add a right-of-use asset and a lease liability to our balance sheet. The Company will recognize lease expense on a straight-line basis. In March 2016, the FASB issued ASU No. 2016-07, Investments- Equity Method and Joint Ventures: Simplifying the Transition to the Equity Method of Accounting ("ASU 2016-07"), which eliminates the requirement to apply the equity method of accounting retrospectively when a reporting entity obtains significant influence over a previously held investment.  Our adoption of ASU 2016-07 on January 1, 2017 did not have an effect on our financial statements. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force ("ASU 2016-15"). ASU 2016-15 provides guidance on how certain cash receipts and cash payments are to be presented and classified in the statement of cash flows.  ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2018. We will adopt ASU 2016-15 on January 1, 2019, and expect no effect on our financial statements. In February 2017, the FASB issued ASU No. 2017-05, Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets ("ASU 2017-05"). ASU 2017-05 clarifies the guidance for derecognition of nonfinancial assets and in-substance nonfinancial assets when the asset does not meet the definition of a business and is not a not-for-profit activity. ASU 2017-05 is effective for annual reporting periods beginning after December 15, 2018. We will adopt the requirements of the new standard in 2019 and will use the modified retrospective transition method. We do not believe the adoption of ASU 2017-05 will have a material impact on the Company's financial statements and related disclosures. 2. Real Estate Inventories As of December 31, 2017 and 2016, the Company had $0 carrying amounts of its real estate inventories. The Company incurred, capitalized and amortized interest costs as follows:     Year Ended December 31     2017 2016 2015             Interest included in beginning real estate inventories $ — $ 49,241 $ 576,695   Interest incurred and capitalized — — 1,037,939   Interest amortized to cost of sales — (49,241 ) (1,565,393 )   Interest included in ending real estate inventories $ — $ — $ 49,241 3. Accrued Expenses and Other Liabilities Accrued expenses and other liabilities consisted of the following:     December 31     2017 2016           Completion reserve $ 146,351 $ 685,992   Accrued expenses 25,000 17,500   Warranty reserve 1,088,822 2,120,106     $ 1,260,173 $ 2,823,598 The completion reserve includes project costs for homes that have closed but for which invoices from vendors have not yet been received. The Company periodically assesses the adequacy of its completion reserve and adjusts the amounts as necessary. The Company offers warranties on its homes that generally cover various defects in workmanship, materials, or to cover structural construction defects. Estimated future direct warranty costs are accrued and charged to cost of sales in the period when the related homebuilding revenues are recognized. The Company assesses the adequacy of its warranty accrual on a quarterly basis and adjusts the amounts recorded if necessary. The Company's warranty accrual is included in accrued expenses and other liabilities in the accompanying balance sheets. Changes in the Company’s warranty liability are as follows:   Year Ended December 31   2017 2016 2015         Beginning warranty liability $ 2,120,106 $ 2,263,446 $ 601,002 Warranty provision — 52,500 1,756,030 Warranty payments (1,031,284 ) (195,840 ) (93,586 ) Ending warranty liability $ 1,088,822 $ 2,120,106 $ 2,263,446 4. Due to Affiliates and Related Party Transactions Amounts due to affiliates consisted of the following:     December 31     2017 2016           Accrued compensation and benefits $ 7,525 $ 3,063 During the years ended December 31, 2016 and 2015, TNHC incurred construction-related costs on the Company’s behalf totaling $354,183 and $2,120,294, respectively. The Company capitalized $263,434 and $877,762 of these amounts to real estate inventories for the years ended December 31, 2016 and 2015 and charged the remaining $90,749 and $1,242,532, respectively, to selling and marketing expenses incurred from affiliates in the accompanying statements of operations. During the year ended December 31, 2017, TNHC incurred payroll-related costs on the company's behalf, which were expensed to selling and marketing expenses incurred from affiliates in the accompanying statements of operations. As of December 31, 2017 and 2016, $7,525 and $3,063, respectively, was due to TNHC related to accrued compensation and is reflected in the accompanying balance sheets as due to affiliates. Pursuant to the operating agreement, TNHC and NB Residences shall receive an overhead fee from the Company in an amount equal to 3.0% and 1.0%, respectively, of the Project revenues. This amount will be paid as follows: 1) 1.5% of the projected gross sales revenue of the Project to TNHC and 0.5% of the projected gross sales revenue of the Project to NB Residences, paid in equal monthly installments on or about the first day of each month over the projected life of the project, which began April 1, 2013. 2) 1.5% of the gross sales revenue from each home sold to TNHC and 0.5% of the gross sales revenue from each home sold to NB Residences, payable upon the first day of the month following close of escrow. During the years ended December 31, 2017, 2016 and 2015, TNHC earned $0, $0, and $1,445,000, respectively, and NB Residences earned $0, $0, and $482,000, respectively, in monthly overhead fees, which have been recorded by the Company as overhead fees to affiliates in the accompanying statements of operations. During the years ended December 31, 2017, 2016, and 2015, TNHC earned $0, $79,166, and $2,626,046, respectively, and NB Residences earned $0, $26,396, and $875,358, respectively, in overhead fees earned from homes sold, which have also been recorded by the Company as overhead fees to affiliates in the accompanying statements of operations. As of December 31, 2017 and 2016, no amounts were outstanding for such fees. 5. Commitments and Contingencies The Company’s commitments and contingencies include the usual obligations and litigation incurred by real estate developers in the normal course of business. The Company establishes liabilities for legal claims and regulatory matters when such matters are both probable of occurring and a potential loss is reasonably estimable. We accrue for such matters based on the facts and circumstances specific to each matter and revise these estimates as the matters evolve. In such cases, there may exist an exposure to loss in excess of any amounts currently accrued. In view of inherent difficulty of predicting the outcome of these legal and regulatory matters, we generally cannot predict the ultimate resolution of the pending matters, the related timing, or the eventual loss. We may have the ability to recover a portion of our costs under various insurance policies covering the project. Estimates of such amounts are recorded when recovery is considered probable. In November 2016, Meridian at Newport Beach Association (the "HOA") filed a written notice against the Company. The claim alleged comprehensive construction defects, including acoustical issues, water damage, cracked pavers and fire stopping issues. The Company has begun performing warranty repairs in response to the claim. Repairs and mediation are on-going. In January 2018, the HOA alleged further issues involving gaskets in residential water heaters installed by the Company. Due to the recent nature of the additional allegation, at this time it is unclear what the method and cost of repair will be and the parties are investigating further. At this time, the Company believes that there is a reasonable possibility that a loss may occur, but an estimate of such possible loss or range of loss cannot be made. We have an insurance policy with limits that we believe covers any possible loss; however, due to the complex nature of coverage and insurance companies' coverage position on construction defect issues, we do not know and cannot estimate what portion of any loss would be covered by insurance. The Company obtains performance bonds in the normal course of business to ensure completion of the infrastructure of the Project. At December 31, 2017 and 2016, the Company had $0 in performance bonds outstanding with various cities, governmental entities, and others. As an owner and developer of real estate, the Company is subject to various environmental laws of federal, state and local governments. The Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of real estate in the vicinity of the Company’s real estate and other environmental conditions of which the Company is unaware with respect to the real estate could result in future environmental liabilities. 6. Subsequent Events The Company has evaluated subsequent events through February 14, 2018, the date the financial statements were available for issuance. Exhibit Number Exhibit Description 3.1 Amended and Restated Certificate of Incorporation of The New Home Company Inc. (incorporated by reference to Exhibit 3.1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2013) 3.2 State of Delaware Certificate of Change of Registered Agent and/or Registered Office (incorporated by reference to Exhibit 3.1 of the Company's Current Report on FromForm 8-K filed on August 1, 2016) 3.3   Amended and Restated Bylaws of The New Home Company Inc. (incorporated by reference to Exhibit 3.23.II of the Company’sCompany's Current Report on Form 8-K filed on AugustNovember 1, 2016)2019)     4.13.4   Certificate of Designations of Series A Junior Participating Preferred Stock of the New Home Company Inc. (incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K filed on May 8, 2020). 4.1 Specimen Common Stock Certificate of The New Home Company Inc. (incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-1 (Amendment No. 10, filed on January 24, 2014)) 4.2 Investor Rights Agreement among The New Home Company Inc., TNHC Partners LLC, IHP Capital Partners VI, LLC, WATT/TNHC LLC, TCN/TNHC LP and collectively H. Lawrence Webb, Wayne J. Stelmar, Joseph D. Davis and Thomas Redwitz (incorporated by reference to Exhibit 4.2 of the Company's Annual Report on Form 10-K for the year ended December 31, 2013) 4.3 Amendment No. 1 to Investor Rights Agreement among The New Home Company Inc., TNHC Partners LLC, IHP Capital Partners VI, LLC, WATT/TNHC, LLC, TCN/TNHC LP and collectively H. Lawrence Webb, Wayne J. Stelmar, Joseph D. Davis and Thomas Redwitz (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed on May 23, 2018)       4.34.4*   Indenture, dated asDescription of March 17, 2017, among the Company,Registrant's Securities Registered Pursuant to Section 12 of the Guarantors and U.S. Bank National Association, as trustee, including formSecurities Exchange Act of 7.25% Senior Notes due 2022 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 20, 2017)1934 4.4 Form of 7.250% Senior Notes due 2022 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on March 20, 2017)       4.5   First Supplemental Indenture dated as of April 28, 2017 between theAmendment No. 2 to Investor Rights Agreement among The New Home Company Inc., TNHC Partners LLC, IHP Capital Partners VI, LLC, WATT/TNHC, LLC, TCN/TNHC LP and U.S. Bank National Associationcollectively H. Lawrence Webb, Wayne J. Stelmar, Joseph D. Davis and Thomas Redwitz (incorporated by reference to Exhibit 4.4 toof the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2017)March 31, 2020).       4.6   Officers'Tax Benefit Preservation Plan, dated as of May 8, 2020, between The New Home Company Inc. and American Stock Transfer & Trust Company, LLC, which includes the Form of Certificate dated May 4, 2017, delivered pursuantof Designations of Series A Junior Participating Preferred Stock as Exhibit A, the Form of Right Certificate as Exhibit B and the Summary of Rights to the Indenture, and setting forth the terms of the Additional Notes 7.25% Senior Notes due 2022Purchase Preferred Shares as Exhibit C  (incorporated by reference to Exhibit 4.3 to4.1 of the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 2017)8, 2020).       4.7   Second Supplemental Indenture, dated as of JulyOctober 28, 2017 between2020, among The New Home Company Inc., the Company, the guaranteeing subsidiaries, as defined herein,Guarantors and U.S. Bank National Association as trustee (incorporated by reference to Exhibit 4.3 to4.1 of the Company's Current Report on Form 10-Q for the quarter ended September 30, 2017)8-K filed on October 28, 2020), including Form of 7.25% Senior Notes due 2025.       4.8 10.1 Third Supplemental Indenture dated as of September 18, 2017 between the Company, DMB/TNHC LLC and U.S. Bank National Association (incorporated by reference to Exhibit 4.4 to the Company's Form 10-Q for the quarter ended September 30, 2017) 4.9* Fourth Supplemental Indenture, dated as of October 27, 2017 between the Company, TNHC Tidelands LLC, TNHC Arizona Marketing LLC and U.S. Bank National Association 10.1 Registration Rights Agreement among The New Home Company Inc., TNHC Partners LLC, IHP Capital Partners VI, LLC, WATT/TNHC LLC, and TCN/TNHC LP (incorporated by reference to Exhibit 10.2 of the Company's Annual Report on Form 10-K for the year ended December 31, 2013) 10.2† The New Home Company Inc. 2014 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.3 of the Company's Annual Report on Form 10-K for the year ended December 31, 2013) 10.3† 10.3† The New Home Company Inc. Executive Incentive Compensation Plan (incorporated by reference to Exhibit 10.4 of the Company's Annual Report on Form 10-K for the year ended December 31, 2013) 10.4† Employment Agreement between The New Home Company Inc. and H. Lawrence Webb (incorporated by reference to Exhibit 10.5 of the Company's Annual Report on Form 10-K for the year ended December 31, 2013) 10.5† Employment Agreement between The New Home Company Inc. and Wayne Stelmar (incorporated by reference to Exhibit 10.6 of the Company's Annual Report on Form 10-K for the year ended December 31, 2013) 10.5(a)† Amendment to Employment Agreement, dated May 29, 2015, by and between The New Home Company Inc. and Wayne Stelmar (incorporated by reference to Exhibit 10.5 of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2015) 10.6† Employment Agreement between The New Home Company Inc. and Thomas Redwitz (incorporated by reference to Exhibit 10.8 of the Company's Annual Report on Form 10-K for the year ended December 31, 2013) 10.7† Employment Agreement, dated May 29, 2015, between The New Home Company Inc. and John Stephens (incorporated by reference to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2015) 10.8† Form of Indemnification Agreement between The New Home Company Inc. and each of its directors and officers (incorporated by reference to Exhibit 10.9 of the Company's Annual Report on Form 10-K for the year ended December 31, 2013) 108 Table of Contents 10.5† 10.9† The New Home Company Inc. 2014 Long-Term Incentive Plan form ofStock Option Award and Stock Option Agreement (incorporated by reference to Exhibit 10.10 of the Company's Annual Report on Form 10-K for the year ended December 31, 2013) 10.9(a)† 10.6† The New Home Company Inc. 2014 Long-Term Incentive Plan form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.11 of the Company's Annual Report on Form 10-K for the year ended December 31, 2013) 10.9(b)† 10.7† The New Home Company Inc. 2014 Long-Term Incentive Plan form of Restricted Stock Unit Award Agreement for Nonemployee Directors (incorporated by reference to Exhibit 10.11(a) of the Company's Annual Report on Form 10-K for the year ended December 31, 2015) 10.10† 10.8† The New Home Company Inc. Non-Employee Director Compensation Program (incorporated by reference to Exhibit 10.12 of the Company's Annual Report on Form 10-K for the year ended December 31, 2015) 10.11 Amended and Restated Credit Agreement, dated May 10, 2016, among The New Home Company Inc., U.S. Bank National Association d/b/a Housing Capital Company, as Administrative Agent, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed May 11, 2016) 10.12+ Agreement of Limited Partnership of Arantine Hills Holdings LP (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2014) 10.13† The New Home Company Inc. 2016 Incentive Award Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 24, 2016) 10.14† The New Home Company Inc. 2016 Incentive Award Plan form of Restricted Stock Unit Award Agreement (incorporated  by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016)       10.15† 10.9+ Amendment to Employment Agreement, dated February 16, 2017, by and between The New Home Company Inc. and H. Lawrence Webb (incorporated by reference to Exhibit 10.2 to the Company's Form 10-Q for the quarter ended March 31, 2017) 10.16† Amendment to Employment Agreement, dated February 16, 2017, by and between The New Home Company Inc. and John Stephens (incorporated by reference to Exhibit 10.3 to the Company's Form 10-Q for the quarter ended March 31, 2017) 10.17† Amendment to Employment Agreement, dated February 16, 2017, by and between The New Home Company Inc. and Thomas Redwitz (incorporated by reference to Exhibit 10.4 to the Company's Form 10-Q for the quarter ended March 31, 2017) 10.18† Employment Agreement, dated February 16, 2017, by and between The New Home Company Inc. and Leonard Miller (incorporated by reference to Exhibit 10.5 to the Company's Form 10-Q for the quarter ended March 31, 2017) 10.19† Consulting Agreement, dated February 16, 2017, by and between The New Home Company Inc. and Wayne Stelmar (incorporated by reference to Exhibit 10.6 to the Company's Form 10-Q for the quarter ended March 31, 2017) 10.20† Second Amendment to Employment Agreement, dated March 23, 2017, by and between The New Home Company Inc. and Thomas Redwitz (incorporated by reference to Exhibit 10.7 to the Company's Form 10-Q for the quarter ended March 31, 2017) 10.21 Letter agreement re: Arantine Hills Holdings LP - funding Excess Shortfall among TNHC-Arantine GP LLC, TNHC Land Company LLC and Arantine Hills Equity LP dated as of June 28, 2017 (incorporated by reference to Exhibit 10.2 to the Company's Form 10-Q for the quarter ended June 30, 2017) 10.22+ Limited Liability Company Agreement of TNHC Russell Ranch LLC, dated as of May 22, 2013, between TNHC Land Company LLC and IHP Capital Partners VI, LLC (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2017) 10.23+ 10.10+ First Amendment to Limited Liability Company Agreement of TNHC Russell Ranch LLC, dated as of August 4, 2017, between TNHC Land Company LLC and IHP Capital Partners VI, LLC (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2017) 10.11† The New Home Company Inc. 2016 Incentive Award Plan form of Restricted Stock Unit Award Agreement (incorporated  by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on February 16, 2018) 10.12† The New Home Company Inc. 2016 Incentive Award Plan form of Performance Share Unit Award Agreement (incorporated  by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on February 16, 2018) 10.13† First Amendment to The New Home Company Inc. 2014 Long-Term Incentive Plan dated February 12, 2018 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2018) 10.14† The New Home Company Inc. Amended and Restated 2016 Incentive Award Plan (incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed on May 23, 2018) 10.15† The New Home Company Inc. 2016 Incentive Award Plan form of Stock Option Award Agreement (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2019) 10.16† The New Home Company Inc. 2016 Incentive Award Plan form of Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2019) 10.17† Separation and Release Agreement, dated February 14, 2019, by and between The New Home Company Inc. and Thomas Redwitz (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2019) 10.18† Consulting Agreement, dated February 14, 2019, by and between The New Home Company Inc. and Thomas Redwitz (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2019) 10.19† The New Home Company Inc. Non-Employee Director Compensation Program, amended and restated on April 30, 2019 (incorporated by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2019) 10.20† Amended and Restated Employment Agreement by and between The New Home Company Inc. and Leonard Miller, dated July 30, 2019 (incorporated by reference to Exhibit 10.1 for the Company's Current Report on Form 8-K filed on July 30, 2019) 10.21† Amended and Restated Employment Agreement by and between The New Home Company Inc. and H. Lawrence Webb, dated July 30, 2019 (incorporated by reference to Exhibit 10.2 for the Company's Current Report on Form 8-K filed on July 30, 2019) 109 Table of Contents 10.22† Amended and Restated Employment Agreement by and between The New Home Company Inc. and John Stephens, dated July 30, 2019 (incorporated by reference to Exhibit 10.3 for the Company's Current Report on Form 8-K filed on July 30, 2019) 10.23 Second Amendment to Limited Liability Company Agreement of TNHC Russell Ranch between TNHC Land Company LLC and IHP Capital Partners VI, LLC (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019)       10.24   ModificationCredit Agreement, dated as of September 27, 2017,October 30, 2020, among The New Home Company Inc., U.S.JPMorgan Chase Bank, National Association, d/b/a Housing Capital Company,N.A., as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 toof the Company's Current Report on Form 8-K filed on OctoberNovember 2, 2017)2020) .       10.25*†   Third Amendment to ConsultingLimited Liability Company Agreement of TNHC Russell Ranch LLC, dated February 13, 2017, byas of December 17, 2020 between TNHC Land Company LLC and between The New Home Company Inc. and Wayne StelmarIHP Capital Partners VI, LLC       21.1*16.1   Letter from Ernst & Young LLP, dated March 23, 2020 (incorporated by reference to Exhibit 16.1 for the Company's Current Report on Form 8-K filed on March 23, 2020) 21.1* List of subsidiaries of The New Home Company Inc. 22* The New Home Company Inc. List of Subsidiary Guarantors     23.1* Consent of Independent Registered Public Accounting Firm, Ernst & Young LLP 23.2*   Consent of Independent Auditors, Ernst & YoungRegistered Public Accounting Firm, KPMG LLP       31.1* Chief Executive Officer Section 302 Certification of Periodic Report dated February 14, 201811, 2021 31.2* 31.2* Chief Financial Officer Section 302 Certification of Periodic Report dated February 14, 201811, 2021 32.1** Chief Executive Officer Section 906 Certification of Periodic Report dated February 14, 201811, 2021 32.2** Chief Financial Officer Section 906 Certification of Periodic Report dated February 14, 201811, 2021 101* 101* The following materials from The New Home Company Inc.’s Annual Report on Form 10-K for the year ended December 31, 2017,2020, formatted in Inline eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated StatementStatements of Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Audited Consolidated Financial Statements. †101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 104* Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document and contained in Exhibit 101). † Management Contract or Compensatory Plan or Arrangement + Confidential treatment was requested with respect to omitted portions of this Exhibit, which portions have been filed separately with the U.S. Securities and Exchange Commission. * Filed herewith ** The information in Exhibits 32.1 and 32.2 shall not be deemed "filed" for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act (including this Report), unless the Registrant specifically incorporates the foregoing information into those documents by reference. 110 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.       The New Home Company Inc. By: /s/ H. Lawrence WebbLeonard S. Miller H. Lawrence Webb Leonard S. Miller President and Chief Executive Officer and Chairman Date: February 14, 2018 11, 2021 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date Signature Title Date /s/ H. Lawrence WebbLeonard S. Miller   President and Chief Executive Officer and Chairman of the Board (Principal Executive Officer)   February 14, 201811, 2021 H. Lawrence WebbLeonard S. Miller     /s/ John M. Stephens Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) February 14, 2018 John M. Stephens /s/ Sam Bakhshandehpour Director February 14, 2018 Sam Bakhshandehpour               /s/ Michael BerchtoldJohn M. Stephens   DirectorExecutive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)   February 14, 201811, 2021 Michael BerchtoldJohn M. Stephens               /s/ David BermanH. Lawrence Webb Executive Chairman of the Board February 11, 2021 H. Lawrence Webb   Director February 14, 2018 David Berman   /s/ Sam Bakhshandehpour Director February 11, 2021 Sam Bakhshandehpour     /s/ Paul HeeschenMichael Berchtold Director February 11, 2021 Michael Berchtold   Director February 14, 2018 Paul Heeschen   /s/ Paul Heeschen Director February 11, 2021 Paul Heeschen     /s/ Gregory P. Lindstrom Director February 11, 2021 Gregory P. Lindstrom   Director February 14, 2018 Gregory P. Lindstrom   /s/ Cathey S. Lowe Director February 11, 2021 Cathey S. Lowe   Director February 14, 2018 Cathey S. Lowe   /s/ Douglas C. Neff Director February 11, 2021 Douglas C. Neff   Director February 14, 2018 Douglas C. Neff   /s/ Wayne Stelmar Director February 11, 2021 Wayne Stelmar   Director February 14, 2018 Wayne Stelmar   /s/ Nadine Watt Director February 14, 2018 Nadine Watt /s/ William A. Witte Director February 14, 2018 William A. Witte 125 111