Century Communities, Inc. Fair Value Disclosure

‎ 14. Fair Value Disclosures Fair value measurements are used for the Company’s mortgage loans held for sale, certain mortgage loans held for investment, mortgage servicing rights, interest rate lock commitments and other derivative instruments on a recurring basis. We also utilize fair value measurements on a non-recurring basis for inventories and intangible assets when events and circumstances indicate that the carrying value is not recoverable. The fair value hierarchy and its application to the Company’s assets and liabilities is as follows: 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 the measurement date. Mortgage loans held for sale – Fair value is based on quoted market prices for committed and uncommitted mortgage loans. Derivative assets and liabilities – Derivative assets are associated with interest rate lock commitments and investor commitments on loans and may also be associated with forward mortgage-backed securities contracts. Derivative liabilities are associated with forward mortgage-backed securities contracts. Fair value is based on market prices for similar instruments. Level 3 – Valuations derived from techniques where one or more significant inputs or significant value drivers are unobservable in active markets at the measurement date. Mortgage servicing rights – The fair value of the mortgage servicing rights is calculated using third-party valuations. The key assumptions, which are generally unobservable inputs, used in the valuation of the mortgage servicing rights include mortgage prepayment rates, discount rates and cost to service. Mortgage loans held for investment at fair value – A portion of our mortgage loans held for investment included in prepaid expenses and other assets, which were those determined to be unsaleable and transferred from mortgage loans held for sale, are recorded at fair value and are calculated based on a Level 3 analysis which incorporates information including the value of underlying collateral, from markets where there is little observable trading activity. The following outlines the Company’s assets and liabilities measured at fair value on a recurring basis at December 31, 2025 and 2024, respectively (in thousands): December 31, December 31, Balance Sheet Classification Hierarchy 2025 2024Mortgage loans held for sale Mortgage loans held for sale Level 2 $ 299,145 $ 236,926Mortgage loans held for investment at fair value (1) Prepaid expenses and other assets Level 3 $ — $ 21,478Mortgage servicing rights (2) Prepaid expenses and other assets Level 3 $ 11,375 $ 42,404Derivative assets Prepaid expenses and other assets Level 2 $ 2,157 $ 3,990Derivative liabilities Accrued expenses and other liabilities Level 2 $ 519 $ — (1)During the third quarter of 2025, we sold our mortgage loans held for investment. The unobservable inputs used in the valuation of the mortgage loans held for investment at fair value include, among other items, the value of underlying collateral, from markets where there is little observable trading activity. (2)The unobservable inputs used in the valuation of the mortgage servicing rights include mortgage prepayment rates, discount rates and cost to service, which were a weighted average of 7.8%, 10.4%, and $80 per year per loan, respectively, as of December 31, 2025 and 8.5%, 10.6%, and $74 per year per loan, respectively, as of December 31, 2024. The high and low end of the range of unobservable inputs used in the valuation did not result in a significant change to the fair value measurement.       The following table represents the reconciliation of the beginning and ending balance for the Level 3 recurring fair value measurements, with gains and losses from the changes in fair value reflected in financial services revenue on the consolidated statements of operations (in thousands): Year Ended December 31,Mortgage servicing rights 2025 2024Beginning of period$ 42,404 $ 30,932Originations 14,115 10,827Settlements (1,620) (2,453)Sales (47,305) —Changes in fair value 3,781 3,098End of period$ 11,375 $ 42,404 Year Ended December 31,Mortgage loans held-for-investment at fair value 2025 2024Beginning of period$ 21,478 $ 21,041Transfers from loans held for sale 975 2,157Transfers to loans held for sale (19,952) —Settlements — (813)Reduction in unpaid principal balance (301) (569)Changes in fair value (2,200) (338)End of period$ — $ 21,478 During the second quarter of 2025, we sold mortgage servicing rights with an unpaid principal balance of approximately $3.0 billion for approximately $47.3 million. For the financial assets and liabilities that the Company does not reflect at fair value, the following present both their respective carrying value and fair value at December 31, 2025 and 2024: December 31, 2025 December 31, 2024 Hierarchy Carrying Fair Value Carrying Fair ValueCash and cash equivalents Level 1 $ 109,443 $ 109,443 $ 149,998 $ 149,9986.750% senior notes (1)(2) Level 2 $ — $ — $ 498,027 $ 498,7503.875% senior notes (1)(2) Level 2 $ 497,201 $ 473,750 $ 496,428 $ 446,8756.625% senior notes (1)(2) Level 2 $ 493,355 $ 503,150 $ — —Revolving line of credit(3) Level 2 $ 51,500 $ 51,500 $ 135,500 $ 135,500Other financing obligations(3)(4) Level 3 $ 111,820 $ 111,820 $ 113,454 $ 113,454Mortgage repurchase facilities(3) Level 2 $ 289,269 $ 289,269 $ 232,804 $ 232,804 (1) Estimated fair value of the senior notes is based on recent trading activity in inactive markets. (2) During the year ended December 31 2025, we entered into an indenture pursuant to which we issued $500.0 million aggregate principal amount of our 6.625% senior notes due 2033 and we legally extinguished $500.0 million in outstanding principal of our 6.750% senior notes due 2027. Carrying amounts include any associated unamortized deferred financing costs, premiums and discounts. As of December 31, 2025, these amounts totaled $2.8 million and $6.6 million for the 3.875% senior notes and 6.625% senior notes, respectively. As of December 31, 2024, these amounts totaled $2.0 million and $3.6 million for the 6.750% senior notes and 3.875% senior notes, respectively. (3) Carrying amount approximates fair value due to short-term nature and interest rate terms. (4) Other financing obligations included $21.5 million related to insurance premium notes and certain secured borrowings that bore a weighted average interest rate of 5.8%, and $90.3 million related to outstanding borrowings on construction loan agreements related to Century Living that bore a weighted average interest rate of 6.1% during the period ended December 31, 2025. Other financing obligations included $11.0 million related to insurance premium notes that bore a weighted average interest rate of 6.7%, and $102.4 million related to outstanding borrowings on the construction loan agreements that bore a weighted average interest rate of 6.5% during the period ended December 31, 2024. Non-financial assets and liabilities include items such as inventory and property and equipment that are measured at fair value when acquired and as a result of impairments, if deemed necessary. During the year ended December 31, 2025, we determined that inventory with a carrying value before impairment of $92.2 million, comprised of 11 communities across all of our homebuilding segments, was not recoverable. Accordingly, we recognized inventory impairment charges of $19.6 million related to communities in which we are actively selling homes, driven by our decision to increase incentives in certain communities directed at improving our sales absorptions primarily on move-in ready homes. Additionally, we recognized inventory impairment charges of $2.2 million related to a small number of individual finished lots within our Century Complete segment. In aggregate, we recognized total impairment charges of $21.8 million in order to record the inventory at fair value, primarily consisting of $7.4 million, $7.0 million, and $6.2 million for our Mountain, Century Complete, and Southeast segments, respectively. During the year ended December 31, 2024, we recorded impairment charges of $8.8 million for 9 communities and during the year ended December 31, 2023, we recorded impairment charges of $1.9 million for 5 communities. The estimated fair value of the communities was measured using a discounted cash flow approach with Level 3 inputs, and reflects estimated fair values in the periods the respective impairments were identified. When estimating future discounted cash flows, we have utilized a weighted-average discount rate of approximately 13%, 14%, and 12% in our valuations during the years ended December 31, 2025, 2024, and 2023, respectively. Changes in our cash flow projections in future periods related to these communities may change our conclusions on the recoverability of inventory in the future.