The accompanying unaudited, condensed consolidated financial statements include the accounts of NVR, Inc. (“NVR”, the “Company”, "we", "us" or the “Company”"our") and its subsidiaries and certain other entities in which the Company is deemed to be the primary beneficiary (see Notes 2 and 3 to the accompanying condensed consolidated financial statements).  Intercompany accounts and transactions have been eliminated in consolidation.  The statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  Because the accompanying condensed consolidated financial statements do not include all of the information and footnotes required by GAAP, they should be read in conjunction with the financial statements and notes thereto included in the Company’sour Annual Report on Form 10-K for the year ended December 31, 2017.2018.  In the opinion of management, all adjustments (consisting only of normal recurring accruals except as otherwise noted herein) considered necessary for a fair presentation have been included.  Operating results for the three and nine months ended September 30, 20182019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.2019.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates. Certain prior period amounts in the condensed consolidated statements of cash flows have been reclassified to conform to current period presentation. These reclassifications did not impact total cash from operating, investing or financing activities in the statement of cash flows.

For the three and nine months ended September 30, 20182019 and 2017,2018, comprehensive income equaled net income; therefore, a separate statement of comprehensive income is not included in the accompanying condensed consolidated financial statements.

NVRWe generally doesdo not engage in the land development business.  Instead, the Companywe typically acquiresacquire finished building lots at market prices from various development entities under Lot Purchase Agreements.  The Lot Purchase Agreements require deposits that may be forfeited if NVR failswe fail to perform under the Lot Purchase Agreements.  The deposits required under the Lot Purchase Agreements are in the form of cash or letters of credit in varying amounts, and typically range up to 10% of the aggregate purchase price of the finished lots.

NVR believesWe believe this lot acquisition strategy reduces the financial requirements and risks associated with direct land ownership and land development.  NVRWe may, at itsour option, choose for any reason and at any time not to perform under these Lot Purchase Agreements by delivering notice of itsour intent not to acquire the finished lots under contract.  NVR’sOur sole legal obligation and economic loss for failure to perform under these Lot Purchase Agreements is limited to the amount of the deposit pursuant to the liquidated damage provisions contained within the Lot Purchase Agreements.  None of the creditors of any of the development entities with which NVR enterswe enter Lot Purchase Agreements have recourse to theour general credit of NVR.  NVRcredit.  We generally doesdo not have any specific performance obligations to purchase a certain number or any of the lots, nor does NVRdo we guarantee completion of the development by the developer or guarantee any of the developers’ financial or other liabilities.

NVR isWe are not involved in the design or creation of the development entities from which the Company purchaseswe purchase lots under Lot Purchase Agreements.  The developer’s equity holders have the power to direct 100% of the operating activities of the development entity.  NVR hasWe have no voting rights in any of the development entities.  The sole purpose of the development entity’s activities is to generate positive cash flow returns for the equity holders.  Further, NVR doeswe do not share in any of the profit or loss generated by the project’s development.  The profits and losses are passed directly to the developer’s equity holders.

The deposit placed by NVRus pursuant to the Lot Purchase Agreement is deemed to be a variable interest in the respective development entities.  Those development entities are deemed to be VIEs.  Therefore, the development entities with which NVR enterswe enter into Lot Purchase Agreements, including the joint venture limited liability corporations discussed below, are evaluated for possible consolidation by NVR.us.  An enterprise must consolidate a VIE when that enterprise has a controlling financial interest in the VIE.  An enterprise is deemed to have a controlling financial interest if it has (i) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance, and (ii) the obligation to absorb losses of the VIE that could be significant to the VIE or the rights to receive benefits from the VIE that could be significant to the VIE.

NVR believesWe believe the activities that most significantly impact a development entity’s economic performance are the operating activities of the entity.  The development entity’s equity investors bear the full risk during the

The development entities with which NVR contractswe contract to buy finished lots typically select the respective projects, obtain the necessary zoning approvals, obtain the financing required with no support or guarantees from NVR,us, select who will purchase the finished lots and at what price, and manage the completion of the infrastructure improvements, all for the purpose of generating a cash flow return to the development entity’s equity holders and all independent of NVR.  The Company possessesus.  We possess no more than limited protective legal rights through the Lot Purchase Agreement in the specific finished lots that it iswe are purchasing, and NVR possesseswe possess no participative rights in the development entities.  Accordingly, NVR doeswe do not have the power to direct the activities of a developer that most significantly impact the developer’s economic performance.  For this reason, NVR haswe have concluded that it iswe are not the primary beneficiary of the development entities with which the Company enterswe enter into Lot Purchase Agreements, and therefore, NVR doeswe do not consolidate any of these VIEs.

In addition, NVR haswe have certain properties under contract with land owners that are expected to yield approximately 7,8007,000 lots, which are not included in the number of total lots controlled.  Some of these properties may require rezoning or other approvals to achieve the expected yield. These properties are controlled with deposits in cash and letters of credit totaling approximately $3,500$2,300 and $100, respectively, as of September 30, 2018,2019, of which approximately $1,300$1,400 is refundable if certain contractual conditions are not met.  NVRWe generally expectsexpect to assign the raw land contracts to a land developer and simultaneously enter into a Lot Purchase Agreement with the assignee if the project is determined to be feasible.

NVR’sOur total risk of loss related to contract land deposits as of September 30, 20182019 and December 31, 20172018 was as follows:

On a limited basis, NVR obtainswe obtain finished lots using joint venture limited liability corporations (“JVs”). The JVs are typically structured such that NVR iswe are a non-controlling member and isare at risk only for the amount the Company haswe have invested, or hashave committed to invest, in addition to any deposits placed under Lot Purchase Agreements with the joint venture. NVR isWe are not a borrower, guarantor or obligor on any debt of the JVs, as applicable. The Company entersWe enter into Lot Purchase Agreements to purchase lots from these JVs, and as a result hashave a variable interest in these JVs.

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

As of September 30, 2018, NVR2019, we directly owned a total of three5 separate raw land parcels with a carrying value of $36,064$80,193 that are expected to produce approximately 500800 finished lots. The CompanyWe also hashave additional funding commitments of approximately $7,900$6,800 under a joint development agreement related to one parcel, a portion of which the Company expectswe expect will be offset by development credits of approximately $4,700.$2,900.

None of the raw parcels had any indicators of impairment as of September 30, 2018.2019.

The following weighted average shares and share equivalents were used to calculate basic and diluted earnings per share for the three and nine months ended September 30, 20182019 and 2017:2018:

The following non-qualified stock options ("Options") and restricted share units (RSUs") issued under equity incentive plans were outstanding during the three and nine months ended September 30, 20182019 and 2017,2018, but were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive.

The Company establishesWe establish warranty and product liability reserves (“Warranty Reserve”) to provide for estimated future expenses as a result of construction and product defects, product recalls and litigation incidental to NVR’sour homebuilding business.  Liability estimates are determined based on management’s judgment, considering such factors as historical experience, the estimated current cost of corrective action, manufacturers’ and subcontractors’ participation in sharing the cost of corrective action, consultations with third party experts such as engineers, and discussions with the Company’sour general counsel and outside counsel retained to handle specific product liability cases.

The following disclosure includes fourWe disclose 4 homebuilding reportable segments that aggregate geographically the Company’sour homebuilding operating segments, and theour mortgage banking operations presented as one1 reportable segment.  The homebuilding reportable segments are comprised of operating divisions in the following geographic areas:

Homebuilding profit before tax includes all revenues and income generated from the sale of homes, less the cost of homes sold, selling, general and administrative expenses and a corporate capital allocation charge.  The corporate capital allocation charge is eliminated in consolidation and is based on the segment’s average net assets employed.  The corporate capital allocation charged to the operating segment allows the Chief Operating Decision Maker (“CODM”) to determine whether the operating segment’s results are providing the desired rate of return after covering the Company’sour cost of capital.  

Certain assets areAssets not allocated to the operating segments as those assets are neithernot included in either the operating segment’s corporate capital allocation charge nor inor the CODM’s evaluation of the operating segment’s performance.  The Company recordsWe record charges on contract land deposits when it is determined that it is probable that recovery of the deposit is impaired.  For segment reporting purposes, impairments on contract land deposits are generally charged to the operating segment upon the termination of a Lot Purchase Agreement with the developer, or the restructuring of a Lot Purchase Agreement resulting in the forfeiture of the deposit.  Mortgage banking profit before tax consists of revenues generated from mortgage financing, title insurance and closing services, less the costs of such services and general and administrative costs.  Mortgage banking operations are not charged a corporate capital allocation charge.

In addition to the corporate capital allocation and contract land deposit impairments discussed above, the other reconciling items between segment profit and consolidated profit before tax include unallocated corporate overhead (including all management incentive compensation), equity-based compensation expense, consolidation adjustments and external corporate interest expense.  NVR’s overheadOverhead functions such as accounting, treasury and human resources are centrally performed and thethese costs are not allocated to the Company’sour operating segments.  Consolidation