Consolidated Financial Statements

9 Months Ended

Sep. 30, 2011

Consolidated Financial Statements

Consolidated Financial Statements

Note 1.  Consolidated Financial Statements

The consolidated financial statements include the accounts of The Ryland Group, Inc. and its 100 percent-owned subsidiaries (the “Company”). Noncontrolling interest represents the selling entities’ ownership interest in land and lot option purchase contracts. (See Note 8, “Variable Interest Entities (‘VIE’).”) Intercompany transactions have been eliminated in consolidation. The results from continuing and discontinued operations are presented separately in the consolidated financial statements, and certain prior year amounts have been reclassified to conform to the 2011 presentation. (See Note 18, “Discontinued Operations.”) For a description of the Company’s accounting policies, see Note A, “Summary of Significant Accounting Policies,” in its 2010 Annual Report on Form 10-K.

The Consolidated Balance Sheet at September 30, 2011, the Consolidated Statements of Earnings for the three- and nine-month periods ended September 30, 2011 and 2010, the Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2011 and 2010 and the Consolidated Statement of Stockholders’ Equity as of and for the period ended September 30, 2011, have been prepared by the Company without audit. In the opinion of management, all adjustments, including normally recurring adjustments necessary to present fairly the Company’s financial position, results of operations and cash flows at September 30, 2011, and for all periods presented, have been made. Certain information and footnote disclosures normally included in the financial statements have been condensed or omitted. These financial statements should be read in conjunction with the financial statements and related notes included in the Company’s 2010 Annual Report on Form 10-K.

The Company has historically experienced, and expects to continue to experience, variability in quarterly results. Accordingly, the results of operations for the three and nine months ended September 30, 2011, are not necessarily indicative of the operating results expected for the year ending December 31, 2011.