Segment Disclosures

The following disclosure includes four homebuilding reportable segments that aggregate geographically the Company’s homebuilding operating segments, and the mortgage banking operations presented as one reportable segment. The homebuilding reportable segments are comprised of operating divisions in the following geographic areas:



Mid Atlantic:		Maryland, Virginia, West Virginia, Delaware and Washington, D.C.
North East:		New Jersey and Eastern Pennsylvania
Mid East:		New York, Ohio, Western Pennsylvania, Indiana and Illinois
South East:		North Carolina, South Carolina, Florida and Tennessee

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’s cost of capital.

Certain assets are not allocated to the operating segments as those assets are neither included in the operating segment’s corporate capital allocation charge, nor in the CODM’s evaluation of the operating segment’s performance. The Company records 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 overhead functions, such as accounting, treasury and human resources, are centrally performed and the costs are not allocated to the Company’s operating segments. Consolidation adjustments consist of such items necessary to convert the reportable segments’ results, which are predominantly maintained on a cash basis, to a full accrual basis for external financial statement presentation purposes, and are not allocated to the Company’s operating segments. External corporate interest expense primarily consists of interest charges on the Company’s 3.95% Senior Notes due 2022 (the “Senior Notes”) and is not charged to the operating segments because the charges are included in the corporate capital allocation discussed above.

The following tables present segment revenues, profit and assets with reconciliations to the amounts reported for the consolidated enterprise, where applicable:



	Three Months Ended March 31,
	2018		2017
Revenues:
Homebuilding Mid Atlantic	$	842,496	$	722,268
Homebuilding North East	122,714		106,231
Homebuilding Mid East	290,237		243,031
Homebuilding South East	234,646		176,057
Mortgage Banking	39,321		29,505
Total consolidated revenues	$	1,529,414	$	1,277,092



	Three Months Ended March 31,
	2018			2017
Income before taxes:
Homebuilding Mid Atlantic	$	91,047		$	64,489
Homebuilding North East	15,704			9,106
Homebuilding Mid East	27,211			22,159
Homebuilding South East	23,237			14,569
Mortgage Banking	22,550			15,953
Total segment profit before taxes	179,749			126,276
Reconciling items:
Contract land deposit reserve adjustment (1)	2,128			(728		)
Equity-based compensation expense	(9,509		)	(10,589		)
Corporate capital allocation (2)	50,700			46,187
Unallocated corporate overhead	(31,284		)	(27,234		)
Consolidation adjustments and other	5,201			3,813
Corporate interest expense	(5,987		)	(5,564		)
Reconciling items sub-total	11,249			5,885
Consolidated income before taxes	$	190,998		$	132,161



	March 31, 2018			December 31, 2017
Assets:
Homebuilding Mid Atlantic	$	1,119,218		$	1,079,225
Homebuilding North East	152,835			143,008
Homebuilding Mid East	288,846			263,019
Homebuilding South East	288,344			277,705
Mortgage Banking	387,296			397,052
Total segment assets	2,236,539			2,160,009
Reconciling items:
Cash and cash equivalents	414,763			645,087
Deferred taxes	113,462			111,953
Intangible assets and goodwill	50,105			50,144
Contract land deposit reserve	(27,871		)	(29,999		)
Consolidation adjustments and other	59,067			52,085
Reconciling items sub-total	609,526			829,270
Consolidated assets	$	2,846,065		$	2,989,279


(1)	This item represents changes to the contract land deposit impairment reserve, which are not allocated to the reportable segments.


(2)	This item represents the elimination of the corporate capital allocation charge included in the respective homebuilding reportable segments. The corporate capital allocation charge is based on the segment’s monthly average asset balance, and was as follows for the periods presented:



	Three Months Ended March 31,
	2018		2017
Corporate capital allocation charge:
Homebuilding Mid Atlantic	$	30,449	$	29,124
Homebuilding North East	4,180		3,814
Homebuilding Mid East	7,973		6,742
Homebuilding South East	8,098		6,507
Total	$	50,700	$	46,187