# M/I Homes, Inc.: Form 10-K for the period ended Dec 31, 2022

- Company: [M/I Homes, Inc.](/companies/mho.md) (CIK 799292)
- Form: 10-K
- Filed: 2023-02-17
- Accepted by EDGAR: Feb 17, 2023, 10:43 ET
- Period: 2022-12-31
- Accession: 0000799292-23-000037
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/799292/000079929223000037/mho-20221231.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/799292/000079929223000037/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 12 months, 2022-01-01 to 2022-12-31 | $4.13bn | us-gaap:Revenues |
| Cost of revenue | 12 months, 2022-01-01 to 2022-12-31 | $3.07bn | us-gaap:CostOfGoodsAndServicesSold |
| Operating income | 12 months, 2022-01-01 to 2022-12-31 | $637.5m | us-gaap:OperatingIncomeLoss |
| Interest expense | 12 months, 2022-01-01 to 2022-12-31 | $2.3m | us-gaap:InterestExpense |
| Income tax | 12 months, 2022-01-01 to 2022-12-31 | $144.5m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 12 months, 2022-01-01 to 2022-12-31 | $490.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 12 months, 2022-01-01 to 2022-12-31 | $17.24 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 12 months, 2022-01-01 to 2022-12-31 | $17.60 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 12 months, 2022-01-01 to 2022-12-31 | 28,463,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 12 months, 2022-01-01 to 2022-12-31 | $184.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 12 months, 2022-01-01 to 2022-12-31 | $9.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 12 months, 2022-01-01 to 2022-12-31 | $55.3m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Total assets | at 2022-12-31 | $3.71bn | us-gaap:Assets |
| Total liabilities | at 2022-12-31 | $1.64bn | us-gaap:Liabilities |
| Shareholders' equity | at 2022-12-31 | $2.07bn | us-gaap:StockholdersEquity |

## Business

As filed, 46,675 characters.

### General

M/I Homes, Inc. and subsidiaries is one of the nation’s leading builders of single-family homes. The Company commenced homebuilding activities in 1976. Since that time, the Company has sold over 143,400 homes. Unless this Form 10-K otherwise indicates or the context otherwise requires, the terms the “Company,” “we,” “us” and “our” refer to M/I Homes, Inc. and its subsidiaries.

The Company consists of two distinct operations: homebuilding and financial services. Our homebuilding operations are aggregated for reporting purposes into two reporting segments - the Northern and Southern regions. Our financial services operations support our homebuilding operations by providing mortgage loans and title services to the customers of our homebuilding operations and are reported as an independent segment.

Our homebuilding operations comprise the most significant portion of our business, representing 98% of consolidated revenue in both 2022 and 2021. We design, market, construct and sell single-family homes and attached townhomes to first-time, move-up, empty-nester, and luxury buyers. In addition to home sales, our homebuilding operations generate revenue from the sale of land and lots. We use the term “home” to refer to a single-family residence, whether it is a single-family home or attached home. We use the term “community” to refer to a single development in which we construct homes. At times, “multiple communities” can exist in a single development where we offer multiple product types. We primarily construct homes in planned development communities and mixed-use communities. We are currently offering homes for sale in 196 communities within 17 markets located in ten states. Our average sales price of homes delivered during 2022 was $479,000, and the average sales price of our homes in backlog at December 31, 2022 was $541,000. We offer homes ranging from a base sales price of approximately $200,000 to $800,000 and believe that this range of price points allows us to appeal to and attract a wide range of buyers. We believe that we distinguish ourselves from competitors by offering homes in select areas with a high level of design and construction quality, providing superior customer service and offering mortgage and title services to fully serve our customers. In our experience, our product offerings and customer service make the homebuying process more efficient for our customers.

Our financial services operations generate revenue primarily from originating and selling mortgages and collecting fees for title insurance and closing services. We offer mortgage banking services to our homebuyers through our 100%-owned subsidiary, M/I Financial, LLC (“M/I Financial”). We offer title services through subsidiaries that are 100%-owned by the Company. Our financial services operations accounted for 2% and 3% of our consolidated revenues in 2022 and 2021, respectively. See the “Financial Services” section below for additional information regarding our financial services operations.

Our principal executive offices are located at 4131 Worth Avenue, Suite 500, Columbus, Ohio 43219. The telephone number of our corporate headquarters is (614) 418-8000 and our website address is www.mihomes.com. Information on our website is not a part of and shall not be deemed incorporated by reference in this Form 10-K.

### Markets

For reporting purposes, our 17 homebuilding divisions are aggregated into the following two segments:

| Region | Market/Division | Year Operations Commenced |
| --- | --- | --- |
| Northern | Columbus, Ohio | 1976 |
| Northern | Cincinnati, Ohio | 1988 |
| Northern | Indianapolis, Indiana | 1988 |
| Northern | Chicago, Illinois | 2007 |
| Northern | Minneapolis/St. Paul, Minnesota | 2015 |
| Northern | Detroit, Michigan | 2018 |
| Southern | Tampa, Florida | 1981 |
| Southern | Orlando, Florida | 1984 |
| Southern | Sarasota, Florida | 2016 |
| Southern | Fort Myers/Naples, Florida | 2022 |
| Southern | Charlotte, North Carolina | 1985 |
| Southern | Raleigh, North Carolina | 1986 |
| Southern | Houston, Texas | 2010 |
| Southern | San Antonio, Texas | 2011 |
| Southern | Austin, Texas | 2012 |
| Southern | Dallas/Fort Worth, Texas | 2013 |
| Southern | Nashville, Tennessee | 2021 |

We believe we have experienced management teams in each of our divisions with local market expertise. Our business requires in-depth knowledge of local markets to acquire land in desirable locations and on favorable terms, engage subcontractors, plan communities that meet local demand, anticipate consumer tastes in specific markets, and assess local regulatory environments. Although we centralize certain functions (such as accounting, human resources, legal, land purchase approval, and risk management) to benefit from economies of scale, our local management, generally under the direction of an Area President and supervised by a Region President, exercises considerable autonomy in identifying land acquisition opportunities, developing and implementing product and sales strategies, and controlling costs.

### Industry Overview and Current Market Conditions

Beginning in the second half of 2022, many of our markets began to experience a slowdown in homebuilding demand due to an unprecedented increase in mortgage interest rates and historically high inflation, which negatively impacted affordability and mortgage availability. Homebuilding conditions also continued to be negatively impacted by labor and supply shortages and increasing costs of materials and labor. We began to adjust sales prices and provide sales incentives in most of our markets during the fourth quarter of 2022 as well as offer financing incentives, all of which had a negative impact on our revenues, gross margins and income in the fourth quarter of 2022 compared to what we have experienced over the past two years. We are focused on managing our investment in land inventory and land development based on current market conditions and our projected future sales absorption levels, in addition to managing overhead costs and minimizing raw material and construction costs. We believe that the economic uncertainties caused by increased interest rates, historically high inflation, labor and supply shortages, and increased cost pressures may continue into 2023.

Despite the affordability issues and slowing demand resulting from the negative economic conditions, we believe long-term housing market fundamentals remain strong, including favorable demographics and a limited supply of new and resale inventory.

### Business Strategy

We remain focused on maximizing profitability, continuing to expand our market share using our more affordable designs, and being more selective investing in land and land development opportunities. Consistent with our focus on improving long-term financial results, we expect to continue to emphasize the following strategic business objectives in 2023:

- managing our land spend and inventory levels;
- opening new communities;
- managing overhead spend;
- maintaining a strong balance sheet and liquidity levels; and
- emphasizing customer service, product quality and design, and premier locations.

Future economic and homebuilding industry conditions and the demand for homes are subject to continued uncertainty due to numerous factors, including the impacts of mortgage availability, inflation, increasing labor and supply costs, and supply chain disruptions and labor shortages. These factors are highly uncertain and outside our control. As a result, we can provide no assurance that the positive trends reflected in our financial and operating metrics in 2022 will continue in 2023.

### Sales and Marketing

In 2022, we continued to focus our marketing efforts on first-time and move-up homebuyers, including home designs targeted to first-time, millennial, multi-generational and empty-nester homebuyers. We market and sell our homes primarily under the M/I Homes brand. Our marketing efforts are directed at driving interest in and preference for the M/I Homes brand over other homebuilders, the resale market, and in some cases the option to remodel an existing home.

We provide our homebuyers with the following products, programs and services which we believe differentiate our brand: (1) homes with high quality construction located in attractive areas and desirable communities that are supported by our 10-year transferable structural warranty in all of our markets; (2) our Whole Home Building Standards which are designed to deliver features and benefits that satisfy the buyer’s expectation for a better-built home, including a more eco-friendly and energy efficient home that we believe will generally save our customers up to 30% on their energy costs compared to a home that is built to minimum code requirements; (3) our Design Studios and Design Consultants that assist our homebuyers in selecting product and design options; (4) fully furnished model homes and highly-trained sales consultants to build the buyer’s confidence and enhance the quality of the homebuying experience; (5) our mortgage financing programs that we offer through M/I Financial, including competitive fixed-rate and adjustable-rate loans; (6) our Ready Now Homes program which offers homebuyers the opportunity to close on certain new homes in 90 days or less; and (7) our unwavering focus on customer care and customer satisfaction.

By offering Whole Home Energy-Efficient Homes to our customers, we enable our homebuyers to save on their energy costs (the second largest cost of home ownership) compared to a home that is built to minimum code requirements, while also contributing to the reduction of greenhouse gas emissions and potential climate change impacts. We use independent RESNET-Certified Raters and the HERS (Home Energy Rating System) Index, the national standard for energy efficiency, to measure the performance of our homes, including insulation, ventilation, air tightness, and the heating and cooling system. Our average scores are generally lower (and, therefore, better) than the Environmental Protection Agency’s Energy Star target standard of 72-75 or the average score for a resale home (130 or higher). These lower HERS scores translate to not only reduced heating and cooling costs for our homebuyers, but also reduced energy usage compared to an average resale home, and therefore a lower environmental impact.

To further enhance the homebuying process, we operate Design Studios in some markets. Our Design Studios allow our homebuyers to select from a variety of product and design options that are available for purchase as part of the original construction of their homes. Our centers are staffed with Design Consultants who help our homebuyers select the right combination of options to meet their budget, lifestyle and design sensibilities. In most of our markets, we offer our homebuyers the option to consider and make design planning decisions using our Envision Online Design Center. We believe this tool is helpful for prospective buyers to use during the planning phase and makes their actual visit to our Design Studios more productive and efficient as our Design Consultants can view the buyer’s preliminary design selections and pull samples in advance of the buyer’s visit.

We also invest in designing and decorating fully-furnished and distinctive model homes intended to create an atmosphere reflecting how people live today and help our customers imagine the possibilities for a “home of their own, just the way they dreamed it.” We carefully select the interior decorating and design of our model homes to reflect the lifestyles of our prospective buyers. We believe these models showcase our homes at their maximum livability and potential and provide ideas and inspiration for our customers to incorporate desirable design options into their new home.

Our company-employed sales consultants are trained and prepared to meet the buyer’s expectations and build the buyer’s confidence by fully explaining the features and benefits of our homes, helping each buyer determine which home best suits the buyer’s needs, explaining the construction process, and assisting the buyer in choosing the best financing option. We give significant attention to the ongoing training of all sales personnel to assure a high level of professionalism and product knowledge. As of December 31, 2022, we employed 236 home sales consultants.

We also offer specialized mortgage financing programs through M/I Financial to assist our homebuyers. We offer conventional financing options along with programs offered by the Federal Housing Authority (“FHA”), U.S. Veterans Administration (“VA”), United States Department of Agriculture (“USDA”) and state housing bond agencies. M/I Financial offers our homebuyers “one-stop” shopping by providing mortgage and title services for the purchase of their home, which we believe saves our customers both time and money. By working with many of the major mortgage providers in the country, we seek to offer our homebuyers unique programs with below-market financing options that are more competitive than what homebuyers could obtain on their own. With respect to title services, the Company’s title subsidiaries work closely with our homebuilding divisions so that we are able to provide an organized and efficient home delivery process.

We also build inventory homes in most of our communities to offer homebuyers the opportunity to close on certain new homes in 90 days or less. These homes enhance our marketing and sales efforts to prospective homebuyers who require a home delivery within a short time frame and allow us to compete effectively with existing homes available in the market. We determine our inventory homes strategy in each market based on local market factors, such as job growth, the number of job relocations, housing demand and supply, seasonality and our past experience in the market. We maintain a level of inventory homes in each community based on our current and planned sales pace and construction capacity, and we monitor and adjust inventory homes on an ongoing basis as conditions warrant.

We seek to keep our homebuyers actively involved in the construction of their new home by communicating with them throughout the design and construction process. We achieve this with “MyMIHome”, a digital experience, that delivers notification of key milestones, photos of the construction progress, checklists for customers to complete, easy access to purchase contracts and other related documents, and more. Our goal is to put the buyer first and enhance the total homebuying experience. We believe prompt and courteous responses to homebuyers’ needs throughout the homebuying process reduce post-delivery repair costs, enhance our reputation for quality and service, and encourage repeat and referral business from homebuyers and the real estate community.

Finally, we believe our ultimate differentiator comes from the principles our company was founded upon: integrity and delivering superior customer service and a quality product. Our customer satisfaction scores are measured by an independent third-party company at both 30 days and 6 months after delivery.

We market our homes using digital and traditional media. The particular media used differs from market to market based on area demographics and other competitive factors. We market directly to consumers via newspaper, direct mail, billboards, radio, and television as well as internet marketing using our website, search engine optimization, paid search, and display advertising. We leverage our presence on referral sites, such as Zillow.com, Realtor.com, and NewHomeSource.com, to drive sales leads to our internet sales managers. We also use email marketing to maintain communication with existing prospects and customers. We use our social media presence to communicate to potential homebuyers the experiences of customers who have purchased our homes and to provide content about our homes and design features.

### Product Lines, Design and Construction

Our residential communities are generally located in suburban areas that are easily accessible through public and personal transportation. Our communities are designed as neighborhoods that fit existing land characteristics. We strive to achieve diversity among architectural styles within a community by offering a variety of house models and several exterior design options for each model. We believe our communities have attractive entrances with distinctive signage and landscaping and that our attention to community detail avoids a “development” appearance and gives each community a diversified neighborhood appearance.

We offer homes ranging from a base sales price of approximately $200,000 to $800,000 and from approximately 1,000 to 5,500 square feet. In addition to single-family detached homes, we also offer attached townhomes in several of our markets. We believe that offering a wide range of homes enables us to attract first-time, millennial, multi-generational, move-up, empty-nester and luxury homebuyers.

We devote significant resources to the research, design and development of our homes to meet the demands of our buyers and evolving market requirements. We regularly review our plans offered per division to ensure that these home designs are still relevant and appropriate for that particular market. Across all of our divisions, we currently offer nearly 400 different floor plans designed to reflect current lifestyles and design trends.

With a growing at-home workforce, we have had to address evolving lifestyle needs. In particular, home offices are in high demand with features such as high ceilings, larger floor area and natural light. We continue to develop new floor plans and communities specifically for the growing empty-nester market. These plans (primarily ranch and main floor master bedroom type plans) focus on move-down buyers, are smaller in size, and feature outdoor living potential, fewer bedrooms, and improved community amenities. Our homebuilding divisions often share successful plans with other divisions, when appropriate.

As affordability remains a key driver of sales, our “Smart Series” has become more important than ever and represented approximately 50% of our total sales for the year ended December 31, 2022. Our “Smart Series” is market specific and intended to offer buyers excellent value, desirable locations, and pre-selected packages of upgraded finishes and appliances. The “Smart Series” targets entry-level and move-down buyers and focuses significant attention on affordability, livability and offering some design flexibility to our customers. We continue to increase our multi-family Smart Series offerings in several of our divisions. These Smart Series townhome programs are thoughtfully designed and intended to be more affordable and take advantage of higher density opportunities either as stand-alone communities or as part of our conventional Smart Series single-family neighborhoods.

Our “City Collection” floor plans offer a unique and upscale urban lifestyle by utilizing narrow lots, detached rear garages and thoughtfully designed interiors. Our City Collection enables us to participate in new infill development opportunities that extend beyond our traditional suburban markets.

We design all of our product lines to reduce production costs and construction cycle times while adhering to our quality standards and using materials and construction techniques that reflect our commitment to more environmentally conscious homebuilding methods. All of our homes are constructed according to proprietary designs that meet the applicable FHA and VA requirements and all local building codes. We attempt to maintain efficient operations by utilizing standardized materials. Our raw materials consist primarily of lumber, concrete and similar construction materials, and while these materials are generally available from a variety of sources, we have reduced construction and administrative costs by executing national purchasing contracts with select vendors. However, we experienced labor and supply shortages and price increases in 2022 as well as increased cycle times. Our homes are constructed according to standardized prototypes which are designed and engineered to provide innovative product design while attempting to minimize costs of construction and control product consistency and availability. We believe our construction process, and the construction cycle times resulting from product line design referenced above, generally reduce the time our subcontractors and vendors spend transporting labor, equipment, and materials to and from our communities and thereby also reduce the environmental impact and carbon emissions associated with construction for our homes. We generally employ subcontractors for the installation of site improvements and the construction of homes. The construction of each home is supervised by a Personal Construction Supervisor who reports to a Production Manager, both of whom are employees of the Company. Our Personal Construction Supervisors manage the scheduling and construction process. Subcontractor work is performed pursuant to written agreements that require our subcontractors to comply with all applicable laws and labor practices, follow local building codes and permits, and meet performance, warranty, and insurance requirements. The agreements generally specify a fixed price for labor and materials and are structured to provide price protection for a majority of the higher-cost phases of construction for homes in our backlog.

For our buyers that are not interested in purchasing an inventory home (homes started in the absence of an executed contract), we begin construction on the homes after we have obtained a sales contract and preliminary written confirmation from the buyer’s lender that financing should be approved. In certain markets, contracts may be accepted contingent upon the sale of an existing home, and construction may be authorized through a certain phase prior to satisfaction of that contingency. The construction of our homes typically takes approximately four to six months from the start of construction to completion of the home, depending on the size and complexity of the particular home being built, weather conditions, and the availability of labor, materials, and supplies. However, due to the strong overall housing demand in 2021 and early 2022, we experienced disruptions in our supply chain, including the availability of labor and the timely availability of certain materials, which lengthened our production cycle times in certain markets. As demand began to slow in the latter half of 2022, however, some of these disruptions began to subside in a number of our markets. We remain focused on improving cycle times in all of our markets. Continued improvement in supply chain and labor market conditions would enhance our ability to reduce production times.

We construct inventory homes to facilitate delivery of homes on an immediate-need basis under our Ready Now Homes program and to provide presentation of new products. For some prospective buyers, selling their existing home has become a less predictable process and, as a result, when they sell their home, they often need to find, buy and move into a new home in

90 days or less. Other buyers simply prefer the certainty provided by being able to fully visualize a home before purchasing it. Of the total number of homes closed in 2022 and 2021, 43% and 35%, respectively, were inventory homes which include both homes started as inventory homes and homes that started under a contract that were later cancelled and became inventory homes as a result. The increase in the percentage of inventory homes closed in 2022 compared to 2021 was due to longer cycle times on new builds and the uncertain interest rate environment which we believe led buyers to purchase homes that could close quickly and, therefore, provide less interest rate risk.

### Backlog

We sell our homes under standard purchase contracts, which generally require a homebuyer deposit at the time of signing the contract. The amount of the deposit varies among markets and communities. We also generally require homebuyers to pay additional deposits when they select options or upgrades for their homes. Most of our home purchase contracts stipulate that if a homebuyer cancels a contract with us, we have the right to retain the homebuyer’s deposits. However, we generally permit our homebuyers to cancel their obligations and obtain refunds of all or a portion of their deposits (unless home construction has started) in the event mortgage financing cannot be obtained within the period specified in their contract to maintain goodwill with the potential buyer.

Backlog consists of homes that are under contract but have not yet been delivered. Ending backlog represents the number of homes in backlog from the previous period plus the number of net new contracts (new contracts for homes less cancellations) generated during the current period minus the number of homes delivered during the current period. The backlog at any given time will be affected by cancellations. Due to the seasonality of the homebuilding industry, the number of homes delivered has historically increased from the first to the fourth quarter in any year.

As of December 31, 2022, we had a total of 3,137 homes in backlog with an aggregate sales value of $1.7 billion, in various stages of completion, including homes that are under contract but for which construction had not yet begun. As of December 31, 2021, we had a total of 4,835 homes in backlog, with an aggregate sales value of $2.4 billion. Homes included in year-end backlog are typically included in homes delivered in the subsequent year.

### Warranty

We provide certain warranties in connection with our homes and also perform inspections with the buyer of each home immediately prior to delivery and as needed after a home is delivered. The Company offers both a transferable limited warranty program (“Home Builder’s Limited Warranty”) and a transferable structural limited warranty. The Home Builder’s Limited Warranty covers construction defects for a statutory period based on geographic market and state law (currently ranging from four to ten years for the states in which the Company operates) and includes a mandatory arbitration clause. The structural warranty is for 10 years for homes sold after December 31, 2021, 10 or 15 years for homes sold after December 1, 2015 and on or before December 31, 2021, and 10 or 30 years for homes sold after April 25, 1998 and on or before December 1, 2015. We also pass along to our homebuyers all warranties provided by the manufacturers or suppliers of components installed in each home. Although our subcontractors are generally required to repair and replace any product or labor defects during their respective warranty periods, we are ultimately responsible to the homeowner for making such repairs during our applicable warranty period. Accordingly, we have estimated and established reserves for both our Home Builder’s Limited Warranty and potential future structural warranty costs based on the number of home deliveries and historical data trends for our communities. In the case of the structural warranty, we also employ an actuary to assist in the determination of our future costs on an annual basis. Our warranty expense (excluding stucco-related repair costs in certain of our Florida communities in 2020, as more fully discussed in Note 8 to our Consolidated Financial Statements) was approximately 0.7%, 0.6% and 0.7% of total housing revenue in 2022, 2021 and 2020, respectively.

### Land Acquisition and Development

We continuously evaluate land acquisition opportunities in the normal course of our homebuilding business, and we focus on both replenishing our lot positions and adding to our lot positions in key submarkets to expand our market share. Our goal is to maintain an approximate three to five-year supply of lots, including lots controlled under option contracts and purchase agreements, which we believe provides an appropriate horizon for addressing regulatory matters and land development and the subsequent build-out of the homes in each community, and allows us to manage our business plan for future home deliveries.

We are focused on adding land positions in desirable locations in a cost effective manner that is responsive to changing market conditions and growing our market share and community count in our existing markets. Before acquiring land, we complete extensive comparative studies and analyses, which assist us in evaluating the economic feasibility of each land acquisition. We consider a number of factors, including projected rates of return, estimated gross margins, and projected pace of absorption and sales prices of the homes to be built, all of which are impacted by our evaluation of population and employment growth patterns, demographic trends and competing new home subdivisions and resales in the relevant sub-market.

We attempt to acquire land with a minimum cash investment and negotiate takedown options when available from sellers. We also restrict the use of guarantees or commitments in our land contracts to limit our financial exposure to the amounts invested in the property and development costs during the life of the community we are developing. We believe this approach significantly reduces our risk. In addition, we generally obtain necessary development approvals before we acquire land. We acquire land primarily through contingent purchase agreements, which typically condition our obligation to purchase land upon approval of zoning and utilities, as well as our evaluation of soil and subsurface conditions, environmental and wetland conditions, market analysis, development costs, title matters and other property-related criteria. All land and lot purchase agreements and the funding of land purchases require the approval of our corporate land acquisition committee, which is comprised of our senior management team and key operating and financial officers. Further details relating to our land option agreements are included in Note 8 to our Consolidated Financial Statements.

In 2022, we developed over 80% of our lots internally, primarily due to a lack of availability of developed lots in desirable locations in our markets. Raw land that requires development generally remains more available. In order to minimize our investment and risk of large exposure in a single location, we have periodically partnered with other land developers or homebuilders to share in the cost of land investment and development through joint ownership and development agreements, joint ventures, and other similar arrangements. For joint venture arrangements where a special purpose entity is established to own the property, we enter into limited liability company or similar arrangements (“LLCs”) with the other partners. Further details relating to our joint venture arrangements are included in Note 6 to our Consolidated Financial Statements.

During the development of lots, we are required by some municipalities and other governmental authorities to provide completion bonds or letters of credit for utilities, streets and other improvements. The development agreements under which we are required to provide completion bonds or letters of credit are generally not subject to a required completion date and only require that the improvements are in place in phases as homes are built and sold. In locations where development has progressed, the amount of development work remaining to be completed is typically less than the remaining amount of bonds or letters of credit due to timing delays in obtaining release of the bonds or letters of credit.

Our ability to continue development activities over the long-term will depend upon, among other things, a suitable economic environment and our continued ability to locate suitable parcels of land, enter into options or agreements to purchase such land, obtain governmental approvals for such land, and consummate the acquisition and development of such land.

In the normal course of our homebuilding business, we balance the economic risk of owning lots and land with the necessity of having lots available for construction of our homes. Our management teams regularly examine lots under contract and changing market conditions to determine if current estimates continue to meet the targeted returns for the land before it was purchased. In situations where we believe targeted returns are no longer likely to be achieved, we may choose to terminate certain land purchase contracts which may result in write-offs of deposits and/or pre-acquisition costs. During the years ended December 31, 2022, 2021 and 2020, we incurred $13.6 million, $2.0 million and $2.2 million, respectively, of write-offs for land deposits and pre-acquisition costs for land that we no longer intend to purchase.

The following table sets forth our land position in lots (including lots held in joint venture arrangements) at December 31, 2022:

| Region | Lots Owned Developed Lots | Lots Under Development | Undeveloped Lots (a) | Total Lots Owned | Lots Under Contract | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Northern | 4,254 | 1,125 | 2,593 | 7,972 | 7,406 | 15,378 |
| Southern | 4,273 | 4,524 | 8,235 | 17,032 | 9,643 | 26,675 |
| Total | 8,527 | 5,649 | 10,828 | 25,004 | 17,049 | 42,053 |

(a) Includes our interest in raw land held by joint venture arrangements expected to be developed into 2,988 lots.

### Financial Services

We sell our homes to customers who generally finance their purchases through mortgages. M/I Financial provides our customers with competitive financing and coordinates and expedites the loan origination transaction through the steps of loan application, loan approval, and closing and title services. M/I Financial provides financing services in all of our housing markets. We believe that our ability to offer financing to customers on competitive terms as a part of the sales process is an important factor in completing sales.

M/I Financial has been approved by the U.S. Department of Housing and Urban Development, FHA, VA and USDA to originate mortgages that are insured and/or guaranteed by these entities. In addition, M/I Financial has been approved by the Federal Home Loan Mortgage Corporation (“Freddie Mac”) and the Federal National Mortgage Association (“Fannie Mae”) as a seller and servicer of mortgages and as a Government National Mortgage Association (“Ginnie Mae”) issuer. Our agency approvals, along with a sub-servicing relationship, allow us to sell loans on either a servicing released or servicing retained basis. This option provides flexibility and additional financing options to our customers.

We also provide title and closing services to purchasers of our homes through our 100%-owned subsidiaries, TransOhio Residential Title Agency Ltd., M/I Title Agency Ltd., and M/I Title LLC. Through these entities, we serve as a title insurance agent by providing title insurance policies and examination and closing services to purchasers of our homes in all of our housing markets except for North Carolina. TransOhio Residential Title Agency Ltd. provides examination and title insurance services to our housing markets in the Raleigh and Charlotte markets. We assume no underwriting risk associated with the title policies.

### Corporate Operations

Our corporate operations and home office are located in Columbus, Ohio, where we perform the following functions at a centralized level:

- establish strategy, goals and operating policies;
- ensure brand integrity and consistency across all local and regional communications;
- monitor and manage the performance of our operations;
- allocate capital resources;
- provide financing and perform all cash management functions for the Company, and maintain our relationship with lenders;
- maintain centralized information and communication systems; and
- maintain centralized financial reporting, internal audit functions, and risk management.

### Competition

The homebuilding industry is fragmented and highly competitive. We operate as a top ten builder in the majority of our markets. We compete with numerous national, regional, and local homebuilders in each of the geographic areas in which we operate. Our competition ranges from small local builders to larger regional builders to publicly-owned builders and developers, some of which have greater financial, marketing, land acquisition, and sales resources than us. Previously owned homes and the availability of rental housing provide additional competition. We compete primarily on the basis of price, location, design, quality, service, and reputation.

Our financial services operations compete with other mortgage lenders to arrange financings for homebuyers. Principal competitive factors include pricing, mortgage loan terms, underwriting criteria, interest rates, customer service and other features of mortgage loan products available to the consumer.

### Government Regulation and Environmental Matters

Our homebuilding operations are subject to various local, state and federal statutes, ordinances, rules and regulations concerning the protection of health and the environment, including the emission or discharge of materials into the environment, storm water and surface water management, soil, groundwater and wetlands protection, subsurface conditions and air quality protection and enhancement. Environmental laws and existing conditions may result in delays, cause us to incur substantial compliance and other costs and prohibit or severely restrict homebuilding activity in environmentally sensitive areas. For instance, the SEC has proposed extensive climate-related disclosure rules, which, if adopted, would likely impose significant compliance costs on us. Environmental costs and accruals were not material to our operations, cash flows or financial position in 2022, 2021 or 2020.

Our homebuilding operations are also subject to various local, state and federal statutes, ordinances, rules and regulations concerning building, zoning, design, construction, sales, consumer protection and similar matters. These regulations increase the cost to produce and market our homes, and in some instances, delay our ability to develop and finish lots and can present a similar challenge for the timely delivery of finished lots to us by outside developers. Counties and cities in which we build homes have at times declared moratoriums on the issuance of building permits and imposed other restrictions in the areas in which sewage treatment facilities and other public facilities do not reach minimum standards. In addition, our homebuilding operations are regulated in certain areas by restrictive zoning and density requirements that limit the number of homes that can be built within the boundaries of a particular area. We may also experience extended timelines for receiving required approvals from municipalities or other government agencies that can delay our anticipated development and construction activities in our communities. During 2022, we experienced delays in receiving governmental and municipality approvals in certain of our community locations, and we expect that we may experience a similar level of delays in 2023.

Our mortgage company and title insurance agencies are subject to various local, state and federal statutes, ordinances, rules and regulations (including requirements for participation in programs offered by FHA, VA, USDA, Ginnie Mae, Fannie Mae and Freddie Mac). These regulations restrict certain activities of our financial services operations as further described in our description of “Risk Factors” below in Item 1A. In addition, our financial services operations are subject to regulation at the state and federal level, including regulations issued by the Consumer Financial Protection Bureau, with respect to specific origination, selling and servicing practices.

See “Item 1A. Risk Factors” in Part I of this Annual Report on Form 10-K for additional information on Government Regulation and Environmental Matters.

### Seasonality

Our homebuilding operations have historically experienced significant seasonality and quarter-to-quarter variability in homebuilding activity levels. In general, homes delivered increase substantially in the second half of the year. We believe that this seasonality reflects the tendency of homebuyers to shop for a new home in the spring with the goal of closing in the fall or winter, as well as the scheduling of construction to accommodate seasonal weather conditions. Our financial services operations also experience seasonality because their loan originations correspond with the delivery of homes in our homebuilding operations.

### Human Capital

At December 31, 2022, we employed 1,663 people (including part-time employees), including 1,298 in homebuilding operations, 239 in financial services and 126 in management and administrative services. None of our employees are represented by a collective bargaining agreement. In January 2023, we reduced our headcount by approximately 10% as a result of market conditions.

We believe that our employees are our most important resource. Our workforce development strategy is rooted in building a workforce in which individuals from a diverse mix of backgrounds, experiences and talents can thrive, contribute and develop professionally. We recognize the value of creating a collaborative, inclusive workplace, and to help foster such an environment, we promote a culture of mutual understanding and respect among employees, customers and building partners.

We are committed to a culture of diversity, equity and inclusion. In 2020, we established a Diversity, Equity and Inclusion Committee (the “DEI Committee”) which is comprised of certain members of our executive team and senior leaders in our human resources department and our mortgage and business operations divisions. The DEI Committee is responsible for developing the guiding principles of our diversity, equity and inclusion program and a strategy to further these principles and achieve our goals.

We believe in developing each employee’s professional skill set and promoting career development. Our operating divisions assign training to our employees based upon their particular roles and responsibilities. In addition, all of our employees must adhere to our code of conduct and participate in mandatory company-wide training sessions to ensure all employees follow the same set of safety and ethical standards. These training sessions cover topics such as workplace safety, cyber security, risk mitigation, unconscious bias, harassment, and discrimination.

We pay our employees competitively and offer a comprehensive set of benefits to full-time employees, including a 401(k) Profit Sharing Plan to help employees plan for retirement, which we believe are competitive with others in our industry.

More information regarding our human capital programs and initiatives can be found in the “Employee Engagement and Safety” section of our Environmental, Social and Governance Report. A copy of our Environmental, Social and Governance Report is available on our website at www.mihomes.com under the “Investors” heading. Information on our website, including the Environmental, Social and Governance Report, is not incorporated by reference in or otherwise considered a part of this Annual Report on Form 10-K.

### Environmental, Social and Governance

During 2022, our environmental, social and governance (“ESG”) working group (which we formed in 2020 and is comprised of certain members of our leadership team and other members from a cross section of the Company) continued to focus on advancing our ESG practices and reporting. Among other things, the ESG working group continued to evaluate the impact of our business on the environment and how our actions contribute to environmentally responsible sustainability (including through green space preservation, redevelopment and infill activities and incorporation of energy efficient technology and building standards), the potential impact of climate change on our business, our human capital management policies and practices (including our DEI and employee engagement and safety initiatives), our community engagement and our corporate governance practices.

In 2022, we also published our third annual Environmental, Social and Governance Report which provides detailed information regarding our ESG policies, initiatives and strategies and includes certain quantifiable performance indicators for 2021. These performance indicators were based on the Sustainability Accounting Standards Board industry-specific standards and applicable aspects of the Global Reporting Initiative standards. We believe our Environmental, Social and Governance Report demonstrates our commitment to integrate sustainable values into our company and business. A copy of our Environmental, Social and Governance Report is available on our website at www.mihomes.com under the “Investors” heading. Information on our website, including the Environmental, Social and Governance Report, is not incorporated by reference in or otherwise considered a part of this Annual Report on Form 10-K.

### Available Information

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and file annual, quarterly and current reports, proxy statements and other information with the SEC. These filings are available to the public on the SEC’s website at www.sec.gov.

Our website address is www.mihomes.com. We make available, free of charge, on or through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our website also includes printable versions of our Corporate Governance Guidelines, our Code of Business Conduct and Ethics, and the charters for each of our Audit, Compensation, and Nominating and Corporate Governance Committees. The contents of our website are not incorporated by reference in, or otherwise made a part of, this Annual Report on Form 10-K.

## Risk factors

As filed, 51,386 characters.

Our future business, results of operations, financial condition, prospects and cash flows and the market price for our securities are subject to numerous risks, many of which are driven by factors that we cannot control. The following cautionary discussion of risks, uncertainties and assumptions relevant to our business includes factors we believe could cause our actual results to differ materially from expected and historical results. Other factors beyond those listed below, including factors unknown to us and factors known to us which we have not currently determined to be material, could also adversely affect our business, results of operations, financial condition, prospects and cash flows and the market price for our securities. Also see “Special Note of Caution Regarding Forward-Looking Statements” above.

#### Risks Related to Our Business and Industry

***A deterioration in homebuilding industry conditions or in broader economic conditions could have adverse effects on our business and results of operations.***

The homebuilding industry is cyclical and affected by changes in general economic, real estate and other business conditions that could adversely affect our results of operations, financial condition and cash flows. Certain economic, real estate and other business conditions that have significant effects on the homebuilding industry include:

- employment levels and job and personal income growth;
- availability and pricing of financing for homebuyers;
- short and long-term interest rates;
- overall consumer confidence and the confidence of potential homebuyers in particular;
- demographic trends;
- changes in energy prices;
- housing demand from population growth, household formation and other demographic changes, among other factors;
- U.S. and global financial system and credit market stability;
- private party and governmental residential consumer mortgage loan programs, and federal and state regulation of lending and appraisal practices;
- federal and state personal income tax rates and provisions, including provisions for the deduction of residential consumer mortgage loan interest payments and other expenses;
- the supply of and prices for available new or existing homes (including lender-owned homes acquired through foreclosures and short sales) and other housing alternatives, such as apartments and other residential rental property;
- homebuyer interest in our current or new product designs and community locations, and general consumer interest in purchasing a home compared to choosing other housing alternatives; and
- real estate taxes.

These above conditions, among others, are complex and interrelated. Adverse changes in such business conditions may have a significant negative impact on our business. The negative impact may be national in scope but may also negatively affect some of the regions or markets in which we operate more than others. When such adverse conditions affect any of our larger markets, those conditions could have a proportionately greater impact on us than on some other homebuilding companies. We cannot predict their occurrence or severity, nor can we provide assurance that our strategic responses to their impacts would be successful.

We began to experience a slowdown in the homebuilding and mortgage lending industries during the second half of 2022. As the national economy weakened and inflation and mortgage interest rates rose at unprecedented rates, we experienced a decline in the demand for our homes. Continued decline in the homebuilding and mortgage lending industries and overall economy could decrease the market value of our inventory which could have a negative impact on our gross margins form home sales. A reduction in our gross margins from home sales could have a significantly negative impact on our financial position and results of operations. Additional external factors, such as foreclosure rates, mortgage availability, high inflation, and unemployment rates, could also negatively impact our results.

Increased mortgage interest rates have made it increasingly difficult for potential customers to qualify for sufficient financing, which is contributing to the affordability issues negatively impacting the homebuilding and mortgage lending industries. Customers may be less willing or able to buy our homes if these conditions continue to impact the homebuilding industry. We are closely monitoring our sales prices and have begun to offer sales incentives and mortgage rate buy-down programs and adjust base sales prices in certain circumstances and in certain communities, which will negatively impact our sales prices and future gross margins. Our cancellation rate has increased significantly from 2021 as buyers are walking away from home purchases due to affordability issues. In the future, our pricing strategies may be limited by market conditions. We may be unable to change the mix of our home offerings, reduce the costs of the homes we build or offer more affordable homes to maintain our gross margins or satisfactorily address changing market conditions in other ways. In addition, cancellations of home sales contracts in backlog may continue to increase.

Our absorption rate during 2022 declined to 3.1 per community compared to prior year’s 4.1 (a record high). Any further decline in sales activity could adversely affect our results of operations, financial condition and cash flows.

Our financial services business is closely related to our homebuilding business, as it originates mortgage loans principally on behalf of purchasers of the homes we build. As the demand for our homes declined during 2022, the financial results of our financial services segment also declined.

Additionally, we may be subject to increased counterparty risks, including purchasers of mortgages originated by M/I Financial being unwilling or unable to perform their obligations to us. To the extent a third party is unwilling or unable to perform such obligations, our financial condition, results of operations and/or cash flows could be negatively impacted.

***Increased competition levels in the homebuilding and mortgage lending industries could result in a reduction in our new contracts and homes delivered, along with decreases in the average sales prices of homes delivered and/or decreased mortgage originations, which would have a negative impact on our results of operations.***

The homebuilding industry is fragmented and highly competitive. We compete with numerous public and private homebuilders, including some that are substantially larger than us and may have greater financial resources than we do. We also compete with community developers and land development companies, some of which are also homebuilders or affiliates of homebuilders. Homebuilders compete for customers, land, building materials, subcontractor labor and financing. Competition for home orders is primarily based upon home sales price, location of property, home style, financing available to prospective homebuyers, quality of homes built, customer service and general reputation in the community, and may vary by market, sub-market and even by community. Additionally, competition within the homebuilding industry can be impacted by an excess supply of new and existing homes available for sale resulting from a number of factors including, among other things, increases in unsold started homes available for sale and increases in home foreclosures. Increased competition may cause us to decrease our home sales prices and/or increase home sales incentives in an effort to generate new home sales and maintain homes in backlog until they close. Increased competition can also result in us selling fewer homes or experiencing a higher number of cancellations by homebuyers. These competitive pressures may negatively impact our future financial and operating results.

Through our financial services operations, we also compete with numerous banks and other mortgage bankers and brokers, some of which are larger than us and may have greater financial resources than we do. Competitive factors that affect our financial services operations include pricing, mortgage loan terms, underwriting criteria and customer service. To the extent that we are unable to adequately compete with other companies that originate mortgage loans, the results of operations from our mortgage operations may be negatively impacted.

***Further reduction in the availability of mortgage financing or continued increases in mortgage interest rates or down payment requirements could adversely affect our business.***

Mortgage interest rates increased significantly in 2022 from historical lows, which increased the costs of owning a home and reduced the demand for our homes. The additional increases forecasted by the Federal Reserve could further increase the costs of owning a home and reduce the demand for our homes.

In addition, any reduction in the availability of the financing provided by Fannie Mae and Freddie Mac could adversely affect interest rates, mortgage availability and our sales of new homes and origination of mortgage loans.

FHA and VA mortgage financing support remains an important factor in marketing our homes. Any increases in down payment requirements, lower maximum loan amounts, or limitations or restrictions on the availability of FHA and VA financing support could adversely affect interest rates, mortgage availability and our sales of new homes and origination of mortgage loans.

Even if potential customers do not need financing, changes in the availability of mortgage products may make it harder for them to sell their current homes to potential buyers who need financing, which may lead to lower demand for new homes.

Many of our homebuyers obtain financing for their home purchases from M/I Financial. If, due to the factors discussed above, M/I Financial is limited from making or unable to make loan products available to our homebuyers, our home sales and our homebuilding and financial services results of operations may be adversely affected.

***If land is not available at reasonable prices or terms, our homes sales revenue and results of operations could be negatively impacted and/or we could be required to scale back our operations in a given market.***

Our operations depend on our ability to obtain land for the development of our communities at reasonable prices and with terms that meet our underwriting criteria. Our ability to obtain land for new communities may be adversely affected by changes in the general availability of land, the willingness of land sellers to sell land at reasonable prices, competition for available land, availability of financing to acquire land, zoning, regulations that limit housing density and other market conditions. If the supply of land, and especially developed lots, appropriate for development of communities is limited because of these factors, or for any other reason, the number of homes that we build and sell may decline. To the extent that we are unable to timely purchase land or enter into new contracts for the purchase of land at reasonable prices, our revenue and results of operations could be negatively impacted and/or we could be required to scale back our operations in a given market.

***Our land investment exposes us to significant risks, including potential impairment charges, that could negatively impact our profits if the market value of our inventory declines.***

We must anticipate demand for new homes several years prior to homes being sold to homeowners. There are significant risks inherent in controlling or purchasing land, especially as the demand for new homes fluctuates and land purchases become more competitive, which can increase the costs of land. There is often a significant lag time between when we acquire land for development and when we sell homes in neighborhoods we have planned, developed and constructed. The value of undeveloped land, lots and housing inventories can fluctuate significantly as a result of changing market conditions. In addition, inventory carrying costs can be significant, and fluctuations in value can reduce profits. Economic conditions could require that we sell homes or land at a loss, hold land in inventory longer than planned or walk away from land that we no longer intend to purchase resulting in write-offs of land deposits, which could significantly impact our financial condition, results of operations, cash flows and stock performance. We recorded an aggregate loss of $18.4 million during the fourth quarter of 2022 that included $10.2 million of write-offs of land deposits for land we no longer intend to purchase as a result of our efforts to right-size our land portfolio and $8.2 million of asset impairment charges. Additionally, as conditions in the homebuilding industry decline, we are required to evaluate our inventory for potential impairment, which may result in additional valuation adjustments, which could be significant and could negatively impact our financial results and condition. We cannot make any assurances that the measures we employ to manage inventory risks and costs will be successful.

***Supply shortages and risks related to the demand for labor and building materials could increase costs and delay deliveries.***

The residential construction industry experiences labor and material shortages and risks from time to time, including: work stoppages; labor disputes; shortages in qualified subcontractors and construction personnel; lack of availability of adequate utility infrastructure and services; our need to rely on local subcontractors who may not be adequately capitalized or insured; and delays in availability, or fluctuations in prices, of building materials. These labor and material shortages and risks can be more severe during periods of strong demand for housing or during periods when the markets in which we operate experience natural disasters that have a significant impact on existing residential and commercial structures. Any of these circumstances could delay the start or completion of our communities, increase the cost of developing one or more of our communities and increase the construction cost of our homes. To the extent that market conditions prevent the recovery of increased costs, including, among other things, subcontracted labor, developed lots, building materials, and other resources, through higher sales prices, our gross margins from home sales and results of operations could be adversely affected.

We continued to experience disruptions in our supply chain during 2022, including the availability and shortage of labor and certain building materials and finishing products, such as cabinets and appliances, which lengthened the production cycles in certain markets and increased costs for labor and building materials. In 2022, we were able to manage through these disruptions and cost increases by raising prices and managing other costs. However, if labor and building material shortages, and cost increases continue, our gross margins and results of operations could be adversely affected if we are unable to continue to increase prices or achieve other cost savings.

We depend on the continued availability of and satisfactory performance of subcontracted labor for the construction of our homes and to provide related materials. As noted above, we have experienced, and may continue to experience, labor and material shortages in certain of our markets. The cost of labor may also be adversely affected by shortages of qualified subcontractors and construction personnel, changes in laws and regulations relating to union activity and changes in immigration laws and trends in labor migration. We cannot provide any assurance that there will be a sufficient supply of, or satisfactory performance by, these unaffiliated third-party subcontractors, which could have a material adverse effect on our business.

### Tax law changes could make home ownership more expensive and/or less attractive.

If the federal government or a state government changes its income tax laws by eliminating or substantially reducing the income tax benefits associated with homeownership, such as personal tax deductions for mortgage loan interest and real estate taxes, the after-tax cost of owning a home could measurably increase. Any such increases, in addition to increases in personal income tax rates, could adversely impact demand for and/or selling prices of new homes, including our homes, and the effect on our consolidated financial statements could be adverse and material.

### We may not be able to offset the impact of inflation through price increases.

Inflation can have a long-term adverse impact on us because if our costs of land, materials and labor increase, we would need to increase the sale prices of our homes to maintain satisfactory margins. As a result of the historically high rates of inflation in 2022, we experienced, and expect to continue to experience into 2023, increases in the costs of land, materials and labor. In such a highly inflationary environment, we may not be able to raise home prices enough to keep pace with the increased costs of land and house construction, which could reduce our profit margins.

***Our limited geographic diversification could adversely affect us if the demand for new homes in our markets declines.***

We have operations in Ohio, Indiana, Illinois, Michigan, Minnesota, North Carolina, Florida, Tennessee and Texas. Our limited geographic diversification could adversely impact us if the demand for new homes or the level of homebuilding activity in our current markets declines, since there may not be a balancing opportunity in a stronger market in other geographic regions.

### We may write-off intangible assets, such as goodwill.

We recorded goodwill in connection with our acquisition of the assets and operations of Pinnacle Homes. On an ongoing basis, we will evaluate whether facts and circumstances indicate any impairment of the value of intangible assets. As circumstances change, we cannot provide any assurance that we will realize the value of these intangible assets. If we determine that a significant impairment has occurred, we will be required to write-off the impaired portion of intangible assets, which could have a material adverse effect on our results of operations in the period in which the write-off occurs.

***Mortgage investors could seek to have us buy back loans or compensate them for losses incurred on mortgages we have sold based on claims that we breached our limited representations or warranties.***

M/I Financial originates mortgages, primarily for our homebuilding customers. A portion of the mortgage loans originated are sold on a servicing released, non-recourse basis, although M/I Financial remains liable for certain limited representations and warranties, such as fraud, and warranties related to loan sales. Accordingly, mortgage investors have in the past and could in the future seek to have us buy back loans or compensate them for losses incurred on mortgages we have sold based on claims that we breached our limited representations or warranties. There can be no assurance that we will not have significant liabilities in respect of such claims in the future, which could exceed our reserves, or that the impact of such claims on our results of operations will not be material.

***Homebuilding is subject to construction defect, product liability and warranty claims that can be significant and costly.***

As a homebuilder, we are subject to construction defect, product liability and warranty claims in the ordinary course of business. These claims are common in the homebuilding industry and can be significant and costly. We and many of our subcontractors have general liability, property, workers compensation and other business insurance. This insurance is intended to protect us against a portion of our risk of loss from claims, subject to certain self-insured retentions, deductibles and other coverage limits. The availability of insurance for construction defects, and the scope of the coverage, are currently limited and the policies that can be obtained are costly and often include exclusions. There can be no assurance that coverage will not be further restricted or become more costly. Also, at times we have waived certain provisions of our customary subcontractor insurance requirements, which increases our and our insurers’ exposure to claims and increases the possibility that our insurance will not cover all the costs we incur.

We record warranty and other reserves for the homes we sell based on a number of factors, including historical experience in our markets, insurance and actuarial assumptions and our judgment with respect to the qualitative risks associated with the types of homes we build. Because of the high degree of judgment required in determining these liability reserves, our actual future liability could differ significantly from our reserves. Given the inherent uncertainties, we cannot provide assurance that our insurance coverage, our subcontractor arrangements and our reserves will be adequate to address all of our construction defect, product liability and warranty claims. If the costs to resolve these claims exceed our estimates, our results of operations, financial condition and cash flows could be adversely affected.

We have received claims related to stucco installation from homeowners in certain of our communities in our Tampa and Orlando, Florida markets and have been named as a defendant in legal proceedings initiated by certain of such homeowners. While we have estimated our overall future stucco repair costs, our estimate is based on our judgment, various assumptions and internal data. Given the inherent uncertainties, we cannot provide assurance that the final costs to resolve these claims will not exceed our accrual and adversely affect our results of operations, financial condition and cash flows. See Note 1 and Note 8 to the Company’s Consolidated Financial Statements for further information regarding these stucco claims and our warranty reserves.

### Our subcontractors can expose us to warranty and other risks.

We rely on subcontractors to construct our homes, and in many cases, to select and obtain building materials. Despite our detailed specifications and quality control procedures, in some cases, it may be determined that subcontractors used improper construction processes or defective materials in the construction of our homes. Although our subcontractors have principal responsibility for defects in the work they do, we have ultimate responsibility to the homebuyers. When we identify these defects, we repair them in accordance with our warranty obligations. Improper construction processes and defective products widely used in the homebuilding industry can result in the need to perform extensive repairs to large numbers of homes. The cost of complying with our warranty obligations may be significant if we are unable to recover the cost of repairs from subcontractors, materials suppliers and insurers.

We also can suffer damage to our reputation, and may be exposed to possible liability, if subcontractors fail to comply with applicable laws, including laws involving matters that are not within our control. When we learn about potentially improper practices by subcontractors, we try to cause the subcontractors to discontinue them. However, we may not always be able to cause our subcontractors to discontinue potentially improper practices, and even when we can, we may not be able to avoid claims against us for personal injury, property damage or other losses relating to prior actions of our subcontractors.

#### Risks Related to Indebtedness and Financing

***The terms of our indebtedness may restrict our ability to operate and, if our financial performance declines, we may be unable to maintain compliance with the covenants in the documents governing our indebtedness.***

Our $650 million unsecured revolving credit facility dated July 18, 2013, as amended, with M/I Homes, Inc. as borrower and guaranteed by the Company's wholly-owned homebuilding subsidiaries (the “Credit Facility”), the indenture governing our 3.95% Senior Notes due 2030 (the “2030 Senior Notes”) and the indenture governing our 4.95% Senior Notes due 2028 (the “2028 Senior Notes”) impose restrictions on our operations and activities. These restrictions and/or our failure to comply with the terms of our indebtedness could have a material adverse effect on our results of operations, financial condition and ability to operate our business.

Under the terms of the Credit Facility, we are required, among other things, to maintain compliance with various covenants, including financial covenants relating to a minimum consolidated tangible net worth, a minimum interest coverage ratio or liquidity, and a maximum leverage ratio. Failure to comply with these covenants or any of the other restrictions of the Credit Facility, whether because of a decline in our operating performance or otherwise, could result in a default under the Credit Facility. If a default occurs, the affected lenders could elect to declare the indebtedness, together with accrued interest and other fees, to be immediately due and payable, which could cause a default under the documents governing any of our other indebtedness that is then outstanding if we are not able to repay such indebtedness from other sources. If this happens and we are unable to obtain waivers from the required lenders, the lenders could exercise their rights under the documents governing our indebtedness, including forcing us into bankruptcy or liquidation.

The indentures governing the 2030 Senior Notes and the 2028 Senior Notes also contain covenants that may restrict our ability to operate our business and may prohibit or limit our ability to grow our operations or take advantage of potential business opportunities as they arise. Failure to comply with these covenants or any of the other restrictions or covenants contained in the indentures governing the 2030 Senior Notes and/or the 2028 Senior Notes could result in a default under the applicable indenture, in which case holders of the 2030 Senior Notes and/or the 2028 Senior Notes may be entitled to cause the sums evidenced by such notes to become due immediately. This acceleration of our obligations under the 2030 Senior Notes and the 2028 Senior Notes could force us into bankruptcy or liquidation and we may be unable to repay those amounts without selling substantial assets, which might be at prices well below the long-term fair values and carrying values of the assets. Our ability to comply with the foregoing restrictions and covenants may be affected by events beyond our control, including prevailing economic, financial and industry conditions.

***Our indebtedness could adversely affect our financial condition, and we and our subsidiaries may incur additional indebtedness, which could increase the risks created by our indebtedness.***

As of December 31, 2022, we had approximately $692.5 million of indebtedness (net of debt issuance costs), excluding issuances of letters of credit, our $200 million secured mortgage warehousing agreement, with M/I Financial as borrower (the “MIF Mortgage Warehousing Agreement”), and our $90 million mortgage repurchase facility, with M/I Financial as borrower (the “MIF Mortgage Repurchase Facility”), and we had $555.1 million of remaining availability for borrowings under the Credit Facility. In addition, under the terms of the Credit Facility, the indentures governing the 2030 Senior Notes and the 2028 Senior Notes and the documents governing our other indebtedness, we have the ability, subject to applicable debt covenants, to incur additional indebtedness. Our incurrence of additional indebtedness could magnify other risks related to us and our business. Our indebtedness and any future indebtedness we may incur could have a significant adverse effect on our future financial condition.

For example:

- a significant portion of our cash flow may be required to pay principal and interest on our indebtedness, which could reduce the funds available for working capital, capital expenditures, acquisitions or other purposes;
- borrowings under the Credit Facility bear, and borrowings under any new facility could bear, interest at floating rates, which could result in higher interest expense in the event of an increase in interest rates;
- the terms of our indebtedness could limit our ability to borrow additional funds or sell assets to raise funds, if needed, for working capital, capital expenditures, acquisitions or other purposes;
- our debt level and the various covenants contained in the Credit Facility, the indentures governing our 2030 Senior Notes and 2028 Senior Notes and the documents governing our other indebtedness could place us at a relative competitive disadvantage compared to some of our competitors; and
- the terms of our indebtedness could prevent us from raising the funds necessary to repurchase all of the 2030 Senior Notes and the 2028 Senior Notes tendered to us upon the occurrence of a change of control, which, in each case, would constitute a default under the applicable indenture, which in turn could trigger a default under the Credit Facility and the documents governing our other indebtedness.

***In the ordinary course of business, we are required to obtain performance bonds from surety companies, the unavailability of which could adversely affect our results of operations and/or cash flows.***

As is customary in the homebuilding industry, we are often required to provide surety bonds to secure our performance under construction contracts, development agreements and other arrangements. Our ability to obtain surety bonds primarily depends upon our credit rating, capitalization, working capital, past performance, management expertise and certain external factors, including the overall capacity of the surety market and the underwriting practices of surety bond issuers. The ability to obtain surety bonds also can be impacted by the willingness of insurance companies and sureties to issue performance bonds. If we cannot obtain surety bonds when required, our results of operations and/or cash flows could be adversely impacted.

### The M/I Financial warehouse facilities will expire in 2023.

M/I Financial uses two mortgage warehouse facilities to finance eligible residential mortgage loans originated by M/I Financial, the MIF Mortgage Warehousing Agreement and the MIF Mortgage Repurchase Facility. These facilities will expire on May 26, 2023 and October 23, 2023, respectively. If we are unable to renew or replace the warehousing facilities when they mature, the activities of our financial services segment could be impeded and our home sales and our homebuilding and financial services results of operations may be adversely affected.

***We have financial needs that we meet through the capital markets, including the debt and secondary mortgage markets, and disruptions in these markets could have an adverse impact on our results of operations, financial condition and/or cash flows.***

We have financial needs that we meet through the capital markets, including the debt and secondary mortgage markets. Our requirements for additional capital, whether to finance operations or to service or refinance our existing indebtedness, fluctuate as market conditions and our financial performance and operations change. We cannot provide assurances that we will maintain cash reserves and generate cash flow from operations in an amount sufficient to enable us to service our debt or to fund other liquidity needs.

The availability of additional capital, whether from private capital sources or the public capital markets, fluctuates as our financial condition and general market conditions change. There may be times when the private capital markets and the public debt or equity markets lack sufficient liquidity or when our securities cannot be sold at attractive prices, in which case we would not be able to access capital from these sources. In addition, a weakening of our financial condition or deterioration in our credit ratings could adversely affect our ability to obtain necessary funds. Even if financing is available, it could be costly or have other adverse consequences.

There are a limited number of third-party purchasers of mortgage loans originated by our financial services operations. The exit of third-party purchasers of mortgage loans from the business, reduced investor demand for mortgage loans and mortgage-backed securities in the secondary mortgage markets and increased investor yield requirements for those loans and securities may have an adverse impact on our results of operations, financial condition and/or cash flows.

***If our ability to resell mortgages to investors is impaired, we may be required to broker loans.***

M/I Financial sells a portion of the loans originated on a servicing released, non-recourse basis, although M/I Financial remains liable for certain limited representations and warranties related to loan sales and for repurchase obligations in certain limited circumstances. If M/I Financial is unable to sell loans to viable purchasers in the marketplace, our ability to originate and sell mortgage loans at competitive prices could be limited which would negatively affect our operations and our profitability. Additionally, if the secondary mortgage market declines significantly, our ability to sell mortgages could be adversely impacted and we would be required to make arrangements with banks or other financial institutions to fund our buyers’ closings. If we became unable to sell loans into the secondary mortgage market or directly to Fannie Mae and Freddie Mac or issue Ginnie Mae securities, we would have to modify our origination model, which, among other things, could significantly reduce our ability to sell homes.

#### Regulatory and Legal Risks

***We can be injured by failures of persons who act on our behalf to comply with applicable regulations and guidelines.***

There are instances in which subcontractors or others through whom we do business engage in practices that do not comply with applicable regulations or guidelines. When we become aware of practices relating to homes we build or financing we provide that do not comply with applicable laws, rules or regulations, we actively move to stop the non-complying practices as soon as possible. However, regardless of the steps we take after we become aware of practices that do not comply with applicable laws, rules or regulations, we can in some instances be subject to fines or other governmental penalties, and our reputation can be injured, due to the practices having taken place.

***We could be adversely affected by efforts to impose joint employer liability on us for labor law violations committed by our subcontractors.***

Our homes are constructed by employees of subcontractors and other parties. We have limited ability to control what these parties pay their employees or the rules they impose on their employees. However, various governmental agencies may seek to hold parties like us responsible for violations of wage and hour laws and other labor laws by subcontractors. The National Labor Relations Board (“NLRB”) has revised its joint employer standard a number of times over the last few years and may do so again in future periods. Future rulings by the NLRB or other courts or governmental agencies could make us responsible for labor violations committed by our subcontractors. Governmental rulings that hold us responsible for labor practices by our subcontractors could create substantial exposures for us under our subcontractor relationships.

***We are subject to extensive government regulations, which could restrict our business and cause us to incur significant expense.***

The homebuilding industry is subject to numerous local, state, and federal statutes, ordinances, rules, and regulations concerning building, zoning, sales, consumer protection, and similar matters. This regulation affects construction activities as well as sales activities, mortgage lending activities, land availability and other dealings with homebuyers. These statutes, ordinances, rules, and regulations, and any failure to comply therewith, could give rise to additional liabilities or expenditures and have an adverse effect on our results of operations, financial condition or business.

We are also subject to various local, state, and federal statutes, ordinances, rules and regulations concerning the protection of health and the environment, including the emission or discharge of materials into the environment, storm water and surface water management, soil, groundwater and wetlands protection, subsurface conditions and air quality protection and enhancement. The environmental regulations applicable to each community in which we operate vary greatly depending on the location of the community site, the site’s environmental conditions and the present and former use of the site. These statutes, ordinances, rules and regulations may cause delays, may cause us to incur substantial compliance, remediation or other costs, and can prohibit or severely restrict development and homebuilding activity. In addition, any failure to comply therewith could give rise to fines, penalties or other liabilities, obligations to remediate, permit revocations or other sanctions and have an adverse effect on our results of operations, financial condition or business.

Recently, there has been growing concern from advocacy groups, government agencies and the general public regarding the impact of climate change. Transition risks, such as government restrictions, standards or regulations intended to reduce greenhouse gas emissions and potential climate change impacts, are emerging and may increase in the future in the form of additional restrictions or regulations on land development and home construction in certain areas. Such restrictions and regulations could increase our operating and compliance costs and have an adverse effect on our results of operations, financial condition or business.

ESG matters have also attracted increasing governmental and societal attention, which may expand our reporting, diligence, and disclosure on topics including climate change, waste production, water usage, human capital, labor, and risk oversight, and the nature, scope, and complexity of matters that we are required to control, assess, and report. The rapidly evolving laws, regulations, policies and related interpretations, as well as increased enforcement actions by various governmental and regulatory agencies, relating to ESG matters including climate change may create challenges for the Company, alter the environment in which we do business and increase compliance costs, which could adversely impact our results of operations and cash flows.

We must also obtain licenses, permits and approvals from various governmental authorities in connection with our development activities, and these governmental authorities often have broad discretion in exercising their approval authority. During 2022, we experienced delays in receiving governmental and municipality approvals in certain of our community locations, and we expect that we may experience a similar level of delays in 2023. Governmental authorities may also restrict or place moratoriums on the availability of utilities, such as water and sewer taps. In some areas, governmental authorities may enact growth control initiatives, which restrict the number of building permits available in a given year. In addition, we may be required to apply for additional approvals or modify our existing approvals because of changes in local circumstances or applicable law. If governmental authorities in which we operate take actions like these, it could have an adverse effect on our business by causing delays, increasing our costs, or limiting our ability to operate in the applicable area.

We incur substantial costs related to compliance with legal and regulatory requirements. Any increase in legal and regulatory requirements may cause us to incur substantial additional costs or, in some cases, cause us to determine that certain property is not feasible for development.

***Our results of operations, financial condition and cash flows could be adversely affected if pending or future legal claims against us are not resolved in our favor.***

In addition to the legal proceedings related to stucco discussed above, the Company and certain of its subsidiaries have been named as defendants in certain other legal proceedings which are incidental to our business. While management currently believes that the ultimate resolution of these other legal proceedings, individually and in the aggregate, will not have a material adverse effect on the Company’s results of operations, financial condition or cash flows, such legal proceedings are subject to inherent uncertainties. The Company has recorded a liability to provide for the anticipated costs, including legal defense costs, associated with the resolution of these other legal proceedings. However, the costs to resolve these legal proceedings ultimately may exceed the recorded estimates and, therefore, have a material adverse effect on the Company’s results of operations, financial condition, and cash flows.

Similarly, if additional legal proceedings are filed against us in the future, including with respect to stucco installation in our Florida communities, the negative outcome of one or more of such legal proceedings could have a material adverse effect on our results of operations, financial condition and cash flows.

#### General Risk Factors

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

We have historically experienced seasonality and quarter-to-quarter variability in homebuilding activity levels. In general, the number of homes delivered and associated home sales revenue have increased during the third and fourth quarters, compared with the first and second quarters. We believe that this type of seasonality reflects the historical tendency of homebuyers to purchase new homes in the spring and summer with deliveries scheduled in the fall or winter, as well as the scheduling of construction to accommodate seasonal weather conditions in certain markets. There can be no assurance that this seasonality pattern will continue to exist in future reporting periods. In addition, as a result of such variability, our historical performance may not be a meaningful indicator of future results.

***Damage to our corporate reputation or brand from negative publicity could adversely affect our business, financial results and/or stock price.***

Adverse publicity related to our company, industry, personnel, operations or business performance may cause damage to our corporate reputation or brand and may generate negative sentiment, potentially affecting the performance of our business or our stock price, regardless of its accuracy. Negative publicity can be disseminated rapidly through digital platforms, including social media, websites, blogs and newsletters. Customers and other interested parties value readily available information and often act on such information without further investigation and without regard to its accuracy. The harm may be immediate without affording us an opportunity for redress or correction, and our success in preserving our brand image depends on our ability to recognize, respond to and effectively manage negative publicity in a rapidly changing environment. Adverse publicity or unfavorable commentary from any source could damage our reputation, reduce the demand for our homes or negatively impact the morale and performance of our employees, which could adversely affect our business.

***Natural disasters and severe weather conditions could delay deliveries, increase costs and decrease demand for homes in affected areas.***

Several of our markets, specifically our operations in Florida, North Carolina and Texas, are situated in geographical areas that are regularly impacted by severe storms, including hurricanes, flooding and tornadoes. In addition, our operations in the Northern Region can be impacted by severe storms, including tornadoes. Also, the physical impacts of climate change may cause these occurrences to increase in frequency, severity and duration. The occurrence of these or other natural disasters can cause delays in the completion of, or increase the cost of, developing one or more of our communities, and as a result could materially and adversely impact our results of operations.

***Information technology failures and data security breaches could harm our business.***

We use information technology, digital communications and other computer resources to carry out important operational and marketing activities and to maintain our business records. We have implemented systems and processes intended to address ongoing and evolving cyber security risks, secure our information technology, applications and computer systems, and prevent unauthorized access to or loss of sensitive, confidential and personal data. We adhere to the NIST CSF Framework to ensure we have proper controls in place to reduce our risk to cyber security threats. We also depend on various partners and providers, and our mortgage software service partners, to secure our home buyers’ personal identifiable and confidential information. We provide regular personnel awareness training regarding potential cyber security threats, including the use of internal tips, reminders and phishing assessments, to help ensure employees remain diligent in identifying potential risks. In addition, we have deployed monitoring capabilities to support early detection, internal and external escalation, and effective responses to potential anomalies. Many of our information technology and other computer resources are provided to us and/or maintained on our behalf by third-party service providers pursuant to agreements that specify to varying degrees certain security and service level standards. We also rely upon our third-party service providers to maintain effective cyber security measures to keep our information secure and to carry cyber insurance. Although we and our service providers employ what we believe are adequate security, disaster recovery and other preventative and corrective measures, our security measures, taken as a whole, may not be sufficient for all possible situations and may be vulnerable to, among other things, hacking, employee error, system error and faulty password management.

Our ability to conduct our business may be impaired if these informational technology and computer resources, including our website, are compromised, degraded or damaged or if they 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 or intentional or unintentional personnel actions (including the failure to follow our security protocols), or lost connectivity to our networked resources. A significant disruption in the functioning of these resources, or breach thereof, including our website, could damage our reputation and cause us to lose customers, sales and revenue.

In addition, breaches of our information technology systems or data security systems, including cyber attacks, could result in the unintended and/or unauthorized public disclosure or the misappropriation of proprietary, personal identifying and confidential information (including information we collect and retain in connection with our business about our homebuyers, business partners and employees), and require us to incur significant expense (that we may not be able to recover in whole or in part from our service providers or responsible parties, or their or our insurers) to address and remediate or otherwise resolve. The unintended and/or unauthorized public disclosure or the misappropriation of proprietary, personal identifying or confidential information may also lead to litigation or other proceedings against us by affected individuals and/or business partners and/or by regulators, and the outcome of such proceedings, which could include losses, penalties, fines, injunctions, expenses and charges recorded against our earnings, could have a material and adverse effect on our financial condition, results of operations and cash flows and harm our reputation. In addition, the costs of maintaining adequate protection against such threats, based on considerations of their evolution, increasing sophistication, pervasiveness and frequency and/or increasingly demanding government-mandated standards or obligations regarding information security and privacy, could be material to our consolidated financial statements in a particular period or over various periods.

***We depend on the services of certain key employees, and the loss of their services could hurt our business.***

Our success depends, in part, on our ability to attract, train and retain skilled personnel. If we are unable to retain our key employees or attract, train and retain other skilled personnel in the future, our operations could be materially and adversely impacted and we may incur additional expenses to identify and train new personnel.

***Our business could be materially and adversely disrupted by an epidemic, pandemic or similar public health issue, or fear of such an event, and the measures that international, federal, state and local public health and governmental authorities implement to address it.***

An epidemic, pandemic or similar public health issue, or fear of such an event, and the measures undertaken by governmental authorities to address it, could significantly disrupt or prevent us from operating our business in the ordinary course for an extended period, and thereby, and/or along with any associated economic and/or social instability or distress, have a material adverse effect on our business, results of operations, financial condition and/or cash flows.

The impact of an epidemic, pandemic or similar public health issue on our business will depend on future developments, including whether governmental authorities impose additional health and safety measures, the outbreak, duration and severity of new variants, the acceptance and effectiveness of vaccines, and the impact of the pandemic on our employees, customers, and building partners. These developments are highly uncertain and outside of our control. To the extent an epidemic, pandemic or similar public health issue has a significant adverse effect on the U.S. economy, our business, results of operations, financial condition and/or cash flows could be materially adversely effected.

## Properties

As filed, 383 characters.

We lease all of our offices (see Note 9 to our Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding our office leases).

Due to the nature of our business, a substantial amount of property is held as inventory in the ordinary course of business. See “Item 1. BUSINESS – Land Acquisition and Development” and “Item 1. BUSINESS – Backlog.”

## Management's discussion and analysis

As filed, 89,726 characters.

### OPERATIONS

### OVERVIEW

M/I Homes, Inc. and subsidiaries is one of the nation’s leading builders of single-family homes, having sold over 143,400 homes since commencing homebuilding activities in 1976. The Company’s homes are marketed and sold primarily under the M/I Homes brand. The Company has homebuilding operations in Columbus and Cincinnati, Ohio; Indianapolis, Indiana; Chicago, Illinois; Minneapolis/St. Paul, Minnesota; Detroit, Michigan; Fort Myers/Naples, Tampa, Sarasota and Orlando, Florida; Austin, Dallas/Fort Worth, Houston and San Antonio, Texas; Charlotte and Raleigh, North Carolina; and Nashville, Tennessee.

Included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are the following topics relevant to the Company’s performance and financial condition:

- Application of Critical Accounting Estimates and Policies;
- Results of Operations;
- Discussion of Our Liquidity and Capital Resources; and
- Impact of Interest Rates and Inflation.

### APPLICATION OF CRITICAL ACCOUNTING ESTIMATES AND POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent 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 assumptions on historical experience and various other factors that it believes are 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. On an ongoing basis, management evaluates such estimates and assumptions and makes adjustments as deemed necessary. Actual results could differ from these estimates using different estimates and assumptions, or if conditions are significantly different in the future. See “Forward - Looking Statements” above in Part I.

Listed below are those estimates and policies that we believe are critical and require the use of complex judgment in their application. Our critical accounting estimates should be read in conjunction with the Notes to our Consolidated Financial Statements.

***Revenue Recognition.*** Revenue and the related profit from the sale of a home and revenue and the related profit from the sale of land to third parties are recognized in the financial statements on the date of closing if delivery has occurred, title has passed to the buyer, all performance obligations (as defined below) have been met, and control of the home or land is transferred to the buyer in an amount that reflects the consideration we expect to be entitled to receive in exchange for the home or land. If not received immediately upon closing, cash proceeds from home closings are held in escrow for the Company’s benefit, typically for up to three days, and are included in Cash, cash equivalents and restricted cash on the Consolidated Balance Sheets.

Sales incentives vary by type of incentive and by amount on a community-by-community and home-by-home basis. The costs of any sales incentives in the form of free or discounted products and services provided to homebuyers are reflected in Land and housing costs in the Consolidated Statements of Income because such incentives are identified in our home purchase contracts with homebuyers as an intrinsic part of our single performance obligation to deliver and transfer title to their home for the transaction price stated in the contracts. Sales incentives that we may provide in the form of closing cost allowances are recorded as a reduction of housing revenue at the time the home is delivered.

We record sales commissions within Selling expenses in the Consolidated Statements of Income when incurred (i.e., when the home is delivered) as the amortization period is generally one year or less and therefore capitalization is not required as part of the practical expedient for incremental costs of obtaining a contract.

Contract liabilities include customer deposits related to sold but undelivered homes. Substantially all of our home sales are scheduled to close and be recorded to revenue within one year from the date of receiving a customer deposit. Contract liabilities expected to be recognized as revenue, excluding revenue pertaining to contracts that have an original expected duration of one year or less, is not material.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. All of our home purchase contracts have a single performance obligation as the promise to transfer the home is not separately identifiable from other promises in the contract and, therefore, not distinct. Our primary performance obligation, to deliver the agreed-upon home, is generally satisfied in less than one year from the original contract date. Deferred revenue resulting from any other uncompleted performance obligations existing at the time we deliver new homes to our homebuyers is not material.

Although our third party land sale contracts may include multiple performance obligations, the revenue we expect to recognize in any future year related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, is not material. We do not disclose the value of unsatisfied performance obligations for land sale contracts with an original expected duration of one year or less.

We recognize the majority of the revenue associated with our mortgage loan operations when the mortgage loans are sold and/or related servicing rights are sold to third party investors or retained and managed under a third party sub-service arrangement. The revenue recognized is reduced by the fair value of the related guarantee provided to the investor. The fair value of the guarantee is recognized in revenue when the Company is released from its obligation under the guarantee. We recognize financial services revenue associated with our title operations as homes are delivered, closing services are rendered, and title policies are issued, all of which generally occur simultaneously as each home is delivered. All of the underwriting risk associated with title insurance policies is transferred to third-party insurers.

See Note 1 to our Consolidated Financial Statements for additional information related to our revenues disaggregated by geography and revenue source.

***Inventory.*** Inventory includes the costs of land acquisition, land development and home construction, capitalized interest, real estate taxes, direct overhead costs incurred during development and home construction, and common costs that benefit the entire community, less impairments, if any. Land acquisition, land development and common costs (both incurred and estimated to be incurred) are typically allocated to individual lots based on the total number of lots expected to be closed in each community or phase, or based on the relative fair value, the relative sales value or the front footage method of each lot. Any changes to the estimated total development costs of a community or phase are allocated proportionately to the homes remaining in the community or phase and homes previously closed. The cost of individual lots is transferred to homes under construction when home construction begins. Home construction costs are accumulated on a specific identification basis. Costs of home deliveries include the specific construction cost of the home and the allocated lot costs. Such costs are charged to cost of sales simultaneously with revenue recognition, as discussed above. When a home is closed, we typically have not yet paid all incurred costs necessary to complete the home. As homes close, we compare the home construction budget to actual recorded costs to date to estimate the additional costs to be incurred from our subcontractors related to the home. We record a liability and a corresponding charge to cost of sales for the amount we estimate will ultimately be paid related to that home. We monitor the accuracy of such estimates by comparing actual costs incurred in subsequent months to the estimate. Although actual costs to complete a home in the future could differ from our estimates, our method has historically produced consistently accurate estimates of actual costs to complete closed homes.

Inventory is recorded at cost, unless events and circumstances indicate that the carrying value of the land is impaired, at which point the inventory is written down to fair value as required by Accounting Standards Codification (“ASC”) 360-10, *Property, Plant and Equipment (“*ASC 360”). The Company assesses inventory for recoverability on a quarterly basis if events or changes in local or national economic conditions indicate that the carrying amount of an asset may not be recoverable. In conducting our quarterly review for indicators of impairment on a community level, we evaluate, among other things, margins on sales contracts in backlog, the margins on homes that have been delivered, expected changes in margins with regard to future home sales over the life of the community, expected changes in margins with regard to future land sales, the value of the land itself as well as any results from third-party appraisals. From the review of all of these factors, we identify communities whose carrying values may exceed their estimated undiscounted future cash flows and run a test for recoverability. For those communities whose carrying values exceed the estimated undiscounted future cash flows and which are deemed to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the communities exceeds the estimated fair value. Due to the fact that the Company’s cash flow models and estimates of fair values are based upon management estimates and assumptions, unexpected changes in market conditions and/or changes in management’s intentions with respect to the inventory may lead the Company to incur additional impairment charges in the future. Because each inventory asset is unique, there are numerous inputs and assumptions used in our valuation techniques, including estimated average selling price, construction and development costs, absorption pace (reflecting any product mix change strategies implemented or to be implemented), selling strategies, alternative land uses (including disposition of all or a portion of the land owned), or discount rates, which could materially impact future cash flow and fair value estimates.

If communities are not recoverable based on estimated future undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. The fair value of a community is estimated by discounting management’s cash flow projections using an appropriate risk-adjusted interest rate. As of December 31, 2022, we utilized discount rates ranging from 13% to 16% in our valuations. The discount rate used in determining each asset’s estimated fair value reflects the inherent risks associated with the related estimated cash flow stream, as well as current risk-free rates available in the market and estimated market risk premiums. During the fourth quarter of 2022, we recorded an aggregate loss of $18.4 million that included $10.2 million of write-offs of land deposits for land we no longer intend to purchase in order to right-size our land portfolio and $8.2 million of asset impairment charges.

Our quarterly assessments reflect management’s best estimates. Due to the inherent uncertainties in management’s estimates and uncertainties related to our operations and our industry as a whole as further discussed in “Item 1A. Risk Factors” in Part I of this Annual Report on Form 10-K, we are unable to determine at this time if and to what extent future impairments will occur. Additionally, due to the volume of possible outcomes that can be generated from changes in the various model inputs for each community, we do not believe it is possible to create a sensitivity analysis that can provide meaningful information for the users of our financial statements.

***Warranty Reserves.*** We record warranty reserves to cover our exposure to the costs for materials and labor not expected to be covered by our subcontractors to the extent they relate to warranty-type claims. Warranty reserves are established by charging cost of sales and crediting a warranty reserve for each home delivered. The warranty reserves for the Company’s Home Builder’s Limited Warranty (“HBLW”) are established as a percentage of average sales price and adjusted based on historical payment patterns determined, generally, by geographic area and recent trends. Factors that are given consideration in determining the HBLW reserves include: (1) the historical range of amounts paid per average sales price on a home; (2) type and mix of amenity packages added to the home; (3) any warranty expenditures not considered to be normal and recurring; (4) timing of payments; (5) improvements in quality of construction expected to impact future warranty expenditures; and (6) conditions that may affect certain projects and require a different percentage of average sales price for those specific projects. Changes in estimates for warranties occur due to changes in the historical payment experience and differences between the actual payment pattern experienced during the period and the historical payment pattern used in our evaluation of the warranty reserve balance at the end of each quarter. Actual future warranty costs could differ from our current estimated amount.

Our warranty reserves for our 30-year (offered on all homes sold after April 25, 1998 and on or before December 1, 2015 in all of our markets except our Texas markets), 15-year (offered on all homes sold after December 1, 2015 and on or before December 31, 2021 in all of our markets except our Texas markets) and 10-year (offered on all homes sold in our Texas markets and in all of our markets beginning January 1, 2022) transferable structural warranty programs are established on a per-unit basis. While the structural warranty reserve is recorded as each house is delivered, the sufficiency of the structural warranty per unit charge and total reserve is reevaluated on an annual basis, with the assistance of an actuary, using our own historical data and trends, industry-wide historical data and trends, and other project specific factors. The reserves are also evaluated quarterly and adjusted if we encounter activity that is inconsistent with the historical experience used in the annual analysis. These reserves are subject to variability due to uncertainties regarding structural defect claims for products we build, the markets in which we build, claim settlement history, insurance and legal interpretations, among other factors.

Our warranty reserve amounts are based upon historical experience and geographic location. While we believe that our warranty reserves are sufficient to cover our projected costs, there can be no assurances that historical data and trends will accurately predict our actual warranty costs. See Note 1 and Note 8 to our Consolidated Financial Statements for additional information related to our warranty reserves.

### RESULTS OF OPERATIONS

### Overview

We began to experience weakening in homebuyer demand during the second half of 2022. The robust housing market of the previous 18 months began to decline as a result of the uncertain macroeconomic conditions in the broader U.S. economy, particularly the historic rise in mortgage interest rates and the high rate of inflation not experienced since the 1970s. We believe that these economic conditions, together with housing affordability issues and consumer fears of an economic recession, caused many potential homebuyers to postpone their homebuying decisions. As a result of this weakening demand, our new contracts and homes delivered declined 27% and 3%, respectively, in 2022 from 2021. In addition, our company-wide absorption pace of sales per community in 2022 declined to 3.1 per month compared to 4.1 per month in 2021 as a result of the declining market conditions. Our average number of selling communities increased to 196 at the end of 2022 from 175 at the end of 2021.

Despite these challenges, we achieved the following results during the year ended December 31, 2022 in comparison to the year ended December 31, 2021, all of which represented record highs for the Company:

- Revenue increased 10% to $4.1 billion
- Income before income taxes increased 25% to $635.2 million
- Net income increased 24% to $490.7 million
- Shareholders’ equity of $2.1 billion

Our improved profitability is attributable primarily to improved margins and overhead leverage when compared to 2021 as consumer demand for housing remained robust in 2021 and early 2022 when the majority of our homes delivered during 2022 were placed under contract, driving record financial results for our business.

We believe that the economic uncertainties caused by increased interest rates, historically high inflation, labor and supply shortages, and increased cost pressures will continue into 2023. However, we continue to believe long-term housing market fundamentals remain strong, including favorable demographics and a limited supply of new and resale inventory. In January 2023, we sold approximately 630 homes, an 18% decrease compared to January 2022, but an approximate 60% sequential increase compared to average monthly sales during the second half of 2022. We have also experienced an increase in traffic compared to prior year’s January.

Given the uncertainty in the housing market and the general economy, we may choose to delay the development and opening of some new communities to match homebuyer demand in 2023. We recorded an aggregate loss of $18.4 million during the fourth quarter of 2022 that included $10.2 million of write-offs of land deposits for land we no longer intend to purchase in order to right-size our land portfolio and $8.2 million of asset impairment charges.

### Summary of Company Financial Results in 2022

*The calculations of adjusted income before income taxes, adjusted net income, and adjusted housing gross margin, each of which is a non-GAAP measure, are described and reconciled to income before income taxes, net income, and housing gross margin, respectively, which represent the most directly comparable financial measures calculated in accordance with GAAP, below under “Non-GAAP Financial Measures.”*

Income before income taxes for the twelve months ended December 31, 2022 increased 25% from $509.1 million for the year ended December 31, 2021 to $635.2 million for the year ended December 31, 2022. Income before income taxes was unfavorably impacted by $18.4 million of asset impairment charges and deposit write-offs in 2022 and by $9.1 million pre-tax charge for loss on early extinguishment of debt related to the redemption of our 2025 Senior Notes (as more fully discussed below and in Note 8 to our Consolidated Financial Statements) in 2021. Excluding these charges in both 2022 and 2021, adjusted income before income taxes increased 26% from $518.2 million in 2021 to $653.6 million in 2022.

In 2022, we achieved net income of $490.7 million, or $17.24 per diluted share, which includes the after-tax impact of the asset impairment charges and deposit write-offs noted above ($0.50 per diluted share), compared to net income of $396.9 million, or $13.28 per diluted share in 2021, which includes the after-tax impact of the loss on early extinguishment of debt noted above ($0.23 per diluted share). Excluding these charges in both periods, adjusted net income increased 25% from $403.9 million ($13.51 per diluted share) in 2021 to $504.6 million ($17.74 per diluted share) in 2022. Our effective tax rate was 22.8% in 2022 compared to 22.1% in 2021.

In 2022, we recorded record total revenue of $4.13 billion, of which $4.01 billion was from homes delivered, $34.8 million was from land sales, and $86.2 million was from our financial services operations. Revenue from homes delivered increased 10% from 2021 driven primarily by a 14% increase in the average sales price of homes delivered ($59,000 per home delivered), which was primarily in response to robust consumer demand in 2021 and early 2022 when the majority of our homes delivered during the quarter were placed under contract, offset partially by a 3% decrease in the number of homes delivered in 2022 (272 units), which was due to reduced demand for new homes as well as increased year-over-year cycle times related to supply chain issues and labor shortages. Revenue from land sales increased $21.4 million from 2021 due primarily to more land sales in the current year compared to the prior year. Revenue from our financial services segment decreased 16% to $86.2 million in 2022 as a result of a decrease in loans closed and sold during the year, in addition to lower margins on loans sold during the period compared to the prior year.

Total gross margin (total revenue less total land and housing costs) increased $135.0 million in 2022 compared to 2021 as a result of a $150.8 million improvement in the gross margin of our homebuilding operations (the sum of housing gross margin and land gross margin), offset partially by a $15.8 million decline in the gross margin of our financial services operations. With respect to our homebuilding gross margin, our gross margin on homes delivered (housing gross margin) improved

$142.3 million, due to the 14% increase in the average sales price of homes delivered ($59,000 per home delivered) compared to prior year, partially offset by the 3% decrease in the number of homes delivered. Our housing gross margin percentage improved 150 basis points from 22.1% in the prior year to 23.6% in 2022. Exclusive of the asset impairment charges and deposit write-offs in 2022, our adjusted housing gross margin percentage improved 190 basis points. Our gross margin on land sales (land gross margin) improved $8.6 million in 2022 compared to 2021 as a result of the mix of lots sold in the current year compared to the prior year. The gross margin of our financial services operations declined $15.8 million in 2022 compared to 2021 as a result of a decreases in the number of loan originations and lower margins on loans sold, partially offset by an increase in the average loan amount during 2022 compared to prior year.

We opened an all-time record 101 new communities during 2022. We sell a variety of home types in various communities and markets, each of which yields a different gross margin. The timing of the openings of new replacement communities as well as underlying lot costs varies from year to year. The mix of communities delivering homes may cause fluctuations in our new contracts and housing gross margin from year to year.

For 2022, selling, general and administrative expense increased $15.8 million, which partially offset the increase in our gross margin discussed above, but improved as a percentage of revenue to 9.8% in 2022 from 10.4% in 2021. General and administrative expense increased $22.8 million compared to 2021 and also increased as a percentage of revenue from 5.1% in 2021 to 5.2% in 2022. The dollar increase in general and administrative expense was primarily due to an $11.5 million increase in compensation-related expenses due to our increased headcount and strong financial performance which led to higher incentive-based compensation, a $2.5 million increase in land-related costs primarily due to write-offs of abandoned land transaction costs and a $8.8 million increase in miscellaneous expenses. Selling expense decreased $7.0 million from 2021 and improved as a percentage of revenue to 4.6% in 2022 from 5.3% in 2021, partially offsetting the increase in general and administrative expense above. Variable selling expense for sales commissions contributed $8.7 million to the decrease due to the lower number of homes delivered during the period, offset partially by a $1.7 million increase in non-variable selling expense primarily related to increased costs associated with our sales offices and models.

### Outlook

Housing market conditions began to decline during the second half of 2022, resulting in significantly weakened overall demand for new homes. We attribute this decline in demand to various macroeconomic conditions, including steep increases in mortgage rates since January 2022, substantial increases in home prices over the past two years, the high rate of inflation, and economic recession concerns of our potential homebuyers. The extent to which these factors will continue to impact our business is highly uncertain and unpredictable, and our past performance should not be considered indicative of our future results on any metric or set of metrics given the uncertainty in the U.S. economy.

Despite these negative economic developments, we believe that the homebuilding industry will continue to benefit over the long term from a continued undersupply of available homes, positive consumer demographics, scarcity of rentals and increasing rent prices.

We believe that we are well positioned to manage through these challenging economic conditions with our affordable product offerings, lot supply and planned new community openings. We remain sensitive to the changes in market conditions, and continue to focus on controlling overhead leverage, carefully managing our investment in land and land development spending and offering incentives, including mortgage interest rate buy-downs, to retain our backlog and improve our sales pace. Our strong balance sheet and liquidity position should also provide us with the flexibility to operate effectively through changing economic conditions. However, we cannot provide any assurances that the strategic business objectives listed below will remain successful, and we may need to adjust elements of our strategy to effectively address evolving market conditions.

We expect to continue to emphasize the following strategic business objectives in 2023:

- managing our land spend and inventory levels;
- opening new communities;
- managing overhead spend;
- maintaining a strong balance sheet and liquidity levels; and
- emphasizing customer service, product quality and design, and premier locations.

During 2022, we invested $341.1 million in land acquisitions and $496.2 million in land development. We invested in less land acquisitions in 2022 due to declining demand for new homes and invested more in land development to finish lots needed to start homes and allow us to open new communities in an effort to increase demand and sales. We continue to closely review all of our land acquisition and land development spending and monitor our ongoing pace of home sales and deliveries, and we will adjust our land and investment spend accordingly. As a result of the unprecedented current market conditions with municipality delays, extended cycle times, and increased mortgage interest rates impacting sales, we are not providing land spending estimates for 2023 at this time.

We ended 2022 with approximately 42,100 lots under control, which represents a 5.0 year supply of lots based on 2022 homes delivered, including certain lots that we anticipate selling to third parties. This represents a 4% decrease from our approximately 44,000 lots under control at the end of 2021. We opened a record 101 communities and closed 80 communities in 2022, ending the year with a total of 196 communities, compared to 175 at the end of 2021.

Although the timing of opening new communities and closing out existing communities is subject to substantial variation, we expect to grow our community count by approximately 15% by the end of 2023 to 225 communities.

While we believe 2023 will be a very challenging year compared to the past few years of historically strong market conditions, we believe that we are well positioned with a strong balance sheet and backlog to manage through the current economic environment. However, the challenging macroeconomic conditions described above could materially and negatively affect our performance in 2023, particularly when compared to our performance over the past few years.

Future economic and homebuilding industry conditions and the demand for homes are subject to continued uncertainty due to many factors, including the impacts of increased mortgage interest rates, inflation, materials and labor cost increases, supply chain disruptions and labor shortages, and the further impact of these actions on the economy, employment levels, consumer confidence, and financial markets, among other things. These factors are highly uncertain and outside our control. As a result, our past performance may not be indicative of future results.

### Segment Reporting

We have determined our reportable segments are: Northern homebuilding; Southern homebuilding; and financial services operations. The homebuilding operating segments that comprise each of our reportable segments are as follows:

| Northern | Southern |
| --- | --- |
| Chicago, Illinois | Orlando, Florida |
| Cincinnati, Ohio | Sarasota, Florida |
| Columbus, Ohio | Tampa, Florida |
| Indianapolis, Indiana | Fort Myers/Naples, Florida |
| Minneapolis/St. Paul, Minnesota | Austin, Texas |
| Detroit, Michigan | Dallas/Fort Worth, Texas |
|  | Houston, Texas |
|  | San Antonio, Texas |
|  | Charlotte, North Carolina |
|  | Raleigh, North Carolina |
|  | Nashville, Tennessee |

31

The following table shows, by segment: revenue; gross margin; selling, general and administrative expense; operating income (loss); interest expense (income); and depreciation and amortization for the years ended December 31, 2022, 2021 and 2020:

*(In thousands)*

| Revenue: | Year Ended 2022 | 2021 | 2020 |
| --- | ---: | ---: | ---: |
| Northern homebuilding | **$1,714,236** | $1,595,746 | $1,256,405 |
| Southern homebuilding | **2,330,962** | 2,048,113 | 1,702,727 |
| Financial services (a) | **86,195** | 102,028 | 87,013 |
| Total revenue | **$4,131,393** | $3,745,887 | $3,046,145 |
| **Gross margin:** |  |  |  |
| Northern homebuilding | **$334,300** | $331,521 | $232,915 |
| Southern homebuilding (b) | **623,347** | 475,366 | 356,415 |
| Financial services (a) | **86,195** | 102,028 | 87,013 |
| Total gross margin (b) (c) | **$1,043,842** | $908,915 | $676,343 |
| **Selling, general and administrative expense:** |  |  |  |
| Northern homebuilding | **$116,801** | $119,563 | $107,327 |
| Southern homebuilding | **171,473** | 162,705 | 153,854 |
| Financial services (a) | **41,813** | 39,737 | 33,618 |
| Corporate | **76,304** | 68,614 | 62,283 |
| Total selling, general and administrative expense | **$406,391** | $390,619 | $357,082 |
| **Operating income (loss):** |  |  |  |
| Northern homebuilding | **$217,499** | $211,958 | $125,588 |
| Southern homebuilding (b) | **451,874** | 312,661 | 202,561 |
| Financial services (a) | **44,382** | 62,291 | 53,395 |
| Less: Corporate selling, general and administrative expense | **(76,304)** | (68,614) | (62,283) |
| Total operating income (b) (c) | **$637,451** | $518,296 | $319,261 |
| **Interest expense (income):** |  |  |  |
| Northern homebuilding | **$(469)** | $76 | $2,465 |
| Southern homebuilding | **(1,447)** | (464) | 4,292 |
| Financial services (a) | **5,122** | 3,912 | 2,927 |
| Corporate | **(956)** | (1,368) | — |
| Total interest expense | **$2,250** | $2,156 | $9,684 |
| Other income (d) | **$(6)** | $(2,046) | $(466) |
| Loss on early extinguishment of debt (e) | **—** | 9,072 | — |
| Income before income taxes | **$635,207** | $509,114 | $310,043 |
| **Depreciation and amortization:** |  |  |  |
| Northern homebuilding | **$3,308** | $3,407 | $3,342 |
| Southern homebuilding | **2,790** | 3,644 | 4,468 |
| Financial services | **2,178** | 2,227 | 3,034 |
| Corporate | **8,898** | 7,637 | 6,734 |
| Total depreciation and amortization | **$17,174** | $16,915 | $17,578 |

(a) Our financial services operational results should be viewed in connection with our homebuilding business as its operations originate loans and provide title services primarily for our homebuyers, with the exception of a small amount of mortgage refinancing.

(b) The year ended December 31, 2020 includes a $0.9 million net charge for stucco-related repair costs in certain of our Florida communities (as more fully discussed below and in Note 8 to our Consolidated Financial Statements).

(c) Total gross margin and total operating income were reduced by $18.4 million of asset impairment charges and deposit write-offs taken during the year ended December 31, 2022 and $8.4 million of asset impairment charges taken during the year ended December 31, 2020.

(d) Other income is comprised of the gain on the sale of a non-operating asset during the fourth quarter of 2021 as well as equity in (income) loss from joint venture arrangements.

(e) Loss on early extinguishment of debt relates to the early redemption of our 5.625% senior notes due 2025 (the “2025 Senior Notes”) during the third quarter of 2021, consisting of a $7.1 million prepayment premium due to early redemption and $2.0 million for the write-off of unamortized debt issuance costs.

The following tables show total assets by segment at December 31, 2022, 2021 and 2020:

*(In thousands)*

|  | At December 31, 2022 Northern | Southern |  | Corporate, Financial Services and Unallocated | Total |
| --- | ---: | ---: | --- | ---: | ---: |
| Deposits on real estate under option or contract | **$8,138** | **$47,601** |  | **$—** | **$55,739** |
| Inventory (a) | **1,100,472** | **1,672,391** |  | **—** | **2,772,863** |
| Investments in joint venture arrangements | **—** | **51,554** |  | **—** | **51,554** |
| Other assets | **38,265** | **103,182** | (b) | **693,320** | **834,767** |
| Total assets | **$1,146,875** | **$1,874,728** |  | **$693,320** | **$3,714,923** |

*(In thousands)*

|  | At December 31, 2021 Northern | Southern |  | Corporate, Financial Services and Unallocated | Total |
| --- | ---: | ---: | --- | ---: | ---: |
| Deposits on real estate under option or contract | $4,123 | $48,795 |  | $— | $52,918 |
| Inventory (a) | 987,258 | 1,412,258 |  | — | 2,399,516 |
| Investments in joint venture arrangements | — | 57,121 |  | — | 57,121 |
| Other assets | 37,527 | 63,844 | (b) | 628,927 | 730,298 |
| Total assets | $1,028,908 | $1,582,018 |  | $628,927 | $3,239,853 |

*(In thousands)*

|  | At December 31, 2020 Northern | Southern |  | Corporate, Financial Services and Unallocated | Total |
| --- | ---: | ---: | --- | ---: | ---: |
| Deposits on real estate under option or contract | $5,031 | $40,326 |  | $— | $45,357 |
| Inventory (a) | 847,524 | 1,023,727 |  | — | 1,871,251 |
| Investments in unconsolidated joint ventures | 1,378 | 33,295 |  | — | 34,673 |
| Other assets | 37,465 | 57,588 | (b) | 596,711 | 691,764 |
| Total assets | $891,398 | $1,154,936 |  | $596,711 | $2,643,045 |

(a) Inventory includes: single-family lots, land and land development costs; land held for sale; homes under construction; model homes and furnishings; community development district infrastructure; and consolidated inventory not owned.

(b) Includes development reimbursements from local municipalities.

### Reportable Segments

The following table presents, by reportable segment, selected operating and financial information as of and for the years ended December 31, 2022, 2021 and 2020:

*(Dollars in thousands)*

| Northern Region | Year Ended December 31, 2022 | 2021 | 2020 |
| --- | ---: | ---: | ---: |
| Homes delivered | **3,581** | 3,592 | 3,071 |
| New contracts, net | **2,747** | 3,667 | 3,743 |
| Backlog at end of period | **1,056** | 1,890 | 1,815 |
| Average sales price of homes delivered | **$478** | $443 | $408 |
| Average sales price of homes in backlog | **$523** | $484 | $436 |
| Aggregate sales value of homes in backlog | **$552,451** | $914,130 | $792,029 |
| Housing revenue | **$1,711,627** | $1,591,125 | $1,252,597 |
| Land sale revenue | **$2,609** | $4,621 | $3,808 |
| Operating income homes (a) | **$217,309** | $210,841 | $125,410 |
| Operating income land | **$190** | $1,117 | $178 |
| Number of average active communities | **92** | 86 | 93 |
| Number of active communities, end of period | **98** | 90 | 90 |
| **Southern Region** |  |  |  |
| Homes delivered | **4,785** | 5,046 | 4,638 |
| New contracts, net | **3,921** | 5,417 | 5,684 |
| Backlog at end of period | **2,081** | 2,945 | 2,574 |
| Average sales price of homes delivered | **$480** | $404 | $364 |
| Average sales price of homes in backlog | **$551** | $493 | $406 |
| Aggregate sales value of homes in backlog | **$1,145,719** | $1,452,743 | $1,044,878 |
| Housing revenue | **$2,298,800** | $2,039,344 | $1,687,365 |
| Land sale revenue | **$32,162** | $8,769 | $15,362 |
| Operating income homes (a) (b) | **$440,329** | $310,550 | $201,750 |
| Operating income land | **$11,545** | $2,111 | $811 |
| Number of average active communities | **86** | 96 | 122 |
| Number of active communities, end of period | **98** | 85 | 112 |
| **Total Homebuilding Regions** |  |  |  |
| Homes delivered | **8,366** | 8,638 | 7,709 |
| New contracts, net | **6,668** | 9,084 | 9,427 |
| Backlog at end of period | **3,137** | 4,835 | 4,389 |
| Average sales price of homes delivered | **$479** | $420 | $381 |
| Average sales price of homes in backlog | **$541** | $490 | $419 |
| Aggregate sales value of homes in backlog | **$1,698,170** | $2,366,873 | $1,836,907 |
| Housing revenue | **$4,010,427** | $3,630,469 | $2,939,962 |
| Land sale revenue | **$34,771** | $13,390 | $19,170 |
| Operating income homes (a) (b) (c) | **$657,638** | $521,391 | $327,160 |
| Operating income land | **$11,735** | $3,228 | $989 |
| Number of average active communities | **179** | 183 | 215 |
| Number of active communities, end of period | **196** | 175 | 202 |

(a) Includes the effect of total homebuilding selling, general and administrative expense for the region as disclosed in the first table set forth in this “Outlook” section.

(b) Includes a $0.9 million net charge for stucco-related repair costs in certain of our Florida communities (as more fully discussed below and in Note 8 to our Consolidated Financial Statements) taken during 2020.

(c) Includes $18.4 million of asset impairment charges and deposit write-offs taken during the year ended December 31, 2022 and $8.4 million of asset impairment charges taken during the year ended December 31, 2020.

*(Dollars in thousands)*

| Financial Services | Year Ended December 31, 2022 | 2021 | 2020 |
| --- | ---: | ---: | ---: |
| Number of loans originated | **5,374** | 6,525 | 5,888 |
| Value of loans originated | **$2,069,615** | $2,239,928 | $1,843,576 |
| Revenue | **$86,195** | $102,028 | $87,013 |
| Less: Selling, general and administrative expenses | **41,813** | 39,737 | 33,618 |
| Less: Interest expense | **5,122** | 3,912 | 2,927 |
| Income before income taxes | **$39,260** | $58,379 | $50,468 |

A home is included in “new contracts” when our standard sales contract is executed. “Homes delivered” represents homes for which the closing of the sale has occurred. “Backlog” represents homes for which the standard sales contract has been executed, but which are not included in homes delivered because closings for these homes have not yet occurred as of the end of the period specified.

The composition of our homes delivered, new contracts, net and backlog is constantly changing and may be based on a dissimilar mix of communities between periods as new communities open and existing communities wind down. Further, home types and individual homes within a community can range significantly in price due to differing square footage, option selections, lot sizes and quality and location of lots. These variations may result in a lack of meaningful comparability between homes delivered, new contracts, net and backlog due to the changing mix between periods.

### Cancellation Rates

The following table sets forth the cancellation rates for each of our homebuilding segments for the years ended December 31, 2022, 2021 and 2020:

|  | Year Ended December 31, 2022 | 2021 | 2020 |
| --- | ---: | ---: | ---: |
| Northern | **11.7%** | 7.4% | 9.4% |
| Southern | **16.1%** | 8.1% | 12.4% |
| Total cancellation rate | **14.3%** | 7.8% | 11.2% |

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### Non-GAAP Financial Measures

This report contains information about our adjusted housing gross margin, adjusted income before income taxes, and adjusted net income, each of which constitutes a non-GAAP financial measure. Because adjusted housing gross margin, adjusted income before income taxes, and adjusted net income are not calculated in accordance with GAAP, these financial measures may not be completely comparable to similarly-titled measures used by other companies in the homebuilding industry and, therefore, should not be considered in isolation or as an alternative to operating performance and/or financial measures prescribed by GAAP. Rather, these non-GAAP financial measures should be used to supplement our GAAP results in order to provide a greater understanding of the factors and trends affecting our operations.

Adjusted housing gross margin, adjusted income before income taxes, and adjusted net income are calculated as follows:

*(Dollars in thousands)*

|  | Year Ended December 31, 2022 | 2021 | 2020 |
| --- | ---: | ---: | ---: |
| Housing revenue | **$4,010,427** | $3,630,469 | $2,939,962 |
| Housing cost of sales | **3,064,515** | 2,826,810 | 2,351,621 |
| Housing gross margin | **945,912** | 803,659 | 588,341 |
| Add: Stucco-related charges (a) | **—** | — | 860 |
| Add: Impairment (b) | **18,352** | — | 8,435 |
| Adjusted housing gross margin | **$964,264** | $803,659 | $597,636 |
| Housing gross margin percentage | **23.6%** | 22.1% | 20.0% |
| Adjusted housing gross margin percentage | **24.0%** | 22.1% | 20.3% |
| Income before income taxes | **$635,207** | $509,114 | $310,043 |
| Add: Stucco-related charges (a) | **—** | — | 860 |
| Add: Impairment (b) | **18,352** | — | 8,435 |
| Add: Loss on early extinguishment of debt (c) | **—** | 9,072 | — |
| Adjusted income before income taxes | **$653,559** | $518,186 | $319,338 |
| Net income | **$490,662** | $396,868 | $239,874 |
| Add: Stucco-related charges - net of tax (a) | **—** | — | 654 |
| Add: Impairment - net of tax (b) | **13,948** | — | 6,411 |
| Add: Loss on early extinguishment of debt - net of tax (c) | **—** | 6,985 | — |
| Adjusted net income | **$504,610** | $403,853 | $246,939 |

(a) Represents warranty charges, net of recoveries, for stucco-related repair costs in certain of our Florida communities (as more fully discussed in Note 8 to our Consolidated Financial Statements).

(b) Represents asset impairment charges and deposit write-offs taken during 2022 and asset impairment charges taken during 2020.

(c) Loss on early extinguishment of debt relates to the early redemption of our 2025 Senior Notes during the third quarter of 2021, consisting of a $7.1 million prepayment premium due to early redemption and $2.0 million for the write-off of unamortized debt issuance costs.

We believe adjusted housing gross margin, adjusted income before income taxes, and adjusted net income are each relevant and useful financial measures to investors in evaluating our operating performance as they measure the gross profit, income before income taxes, and net income we generated specifically on our operations during a given period. These non-GAAP financial measures isolate the impact that the acquisition-related charges, stucco-related charges and impairment charges have on housing gross margins; the impact that the other income, loss on early debt extinguishment, acquisition-related charges, stucco-related charges and impairment charges have on income before income taxes; and that the other income, loss on early debt extinguishment, acquisition-related charges, stucco-related charges and impairment charges have on net income, and allow investors to make comparisons with our competitors that adjust housing gross margins, income before income taxes, and net income in a similar manner. We also believe investors will find these adjusted financial measures relevant and useful because they represent a profitability measure that may be compared to a prior period without regard to variability of the charges noted above. These financial measures assist us in making strategic decisions regarding community location and product mix, product pricing and construction pace.

### Year Over Year Comparisons

### Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

*The calculation of adjusted housing gross margin (referred to below) is described and reconciled to housing gross margin, the financial measure that is calculated using our GAAP results, below under “Segment Non-GAAP Financial Measures.”*

***Northern Region.*** During the twelve months ended December 31, 2022, homebuilding revenue in our Northern region increased $118.5 million, from $1.60 billion in 2021 to $1.71 billion in 2022. This 7% increase in homebuilding revenue was the result of an 8% increase in the average sales price of homes delivered ($35,000 per home delivered), which was primarily in response to robust consumer demand in 2021 and early 2022 when the majority of our homes delivered during the year were placed under contract, partially offset by a decrease in the number of homes delivered (11 units), due to decreased demand as a result of the macroeconomic conditions described above in our Overview section, difficult comps versus last year, and a $2.0 million decrease in land sale revenue. Operating income in our Northern region increased $5.5 million, from $212.0 million in 2021 to $217.5 million in 2022. The increase in operating income was primarily the result of a $2.7 million increase in our gross margin in addition to a $2.8 million decrease in selling, general, and administrative expense. With respect to our homebuilding gross margin, our housing gross margin improved $3.7 million, due to the increases noted above. Our housing gross margin percentage declined 130 basis points from 20.8% in 2021 to 19.5% in 2022 largely due to increased construction and lot costs, offset partially by the increase in average sales price of homes delivered compared to prior year. Our housing gross margin was unfavorably impacted by $10.4 million of asset impairment charges and deposit write-offs taken in 2022. Exclusive of these charges, our adjusted housing gross margin percentage declined 70 basis points to 20.1%. Our land sale gross margin declined $0.9 million as a result of the mix of lots sold in the current year compared to the prior year and fewer land sales compared to prior year.

Selling, general and administrative expense decreased $2.8 million from $119.6 million in 2021 to $116.8 million in 2022, and improved as a percentage of revenue to 6.8% in 2022 from 7.5% in 2021. The decrease in selling, general and administrative expense was attributable to a $3.8 million decrease in selling expense, due to a $5.8 million decrease in variable selling expenses resulting from decreases in sales commissions produced by the lower number of homes delivered offset, in part, by a $2.0 million increase in non-variable selling expenses primarily related to costs associated with our sales offices and models. The decrease in selling, general and administrative expense was partially offset by a $1.0 million increase in general and administrative expense, which was primarily related to a $1.5 million increase in compensation related expenses as a result of an increase in incentive compensation due to improved results, partially offset by a $0.5 million decrease in miscellaneous expenses.

During 2022, we experienced a 25% decrease in new contracts in our Northern region, from 3,667 in 2021 to 2,747 in 2022. Backlog decreased 44% from 1,890 homes at December 31, 2021 to 1,056 homes at December 31, 2022. The decreases in new contracts and backlog were primarily due to decreased demand as a result of the macroeconomic conditions described above in our Overview section and difficult comps versus last year. Average sales price in backlog increased to $523,000 at December 31, 2022 compared to $484,000 at December 31, 2021. During the twelve months ended December 31, 2022, we opened 34 new communities in our Northern region compared to 40 during 2021. Our monthly absorption rate in our Northern region declined to 2.5 per community in 2022, compared to 3.6 per community in 2021 due to the decline in new contracts noted above.

***Southern Region.*** For the twelve months ended December 31, 2022, homebuilding revenue in our Southern region increased $282.8 million, from $2.05 billion in 2021 to $2.33 billion in 2022. This 14% increase in homebuilding revenue was primarily the result of a 19% increase in the average sales price of homes delivered ($76,000 per home delivered) and a $23.4 million increase in land sale revenue, partially offset by a 5% decrease in the number of homes delivered (261 units) due to decreased demand as a result of the macroeconomic conditions described above in our Overview section, a decrease in our average number of communities and difficult comps versus last year. Operating income in our Southern region increased $139.2 million from $312.7 million in 2021 to $451.9 million in 2022. This increase in operating income was the result of a $148.0 million improvement in our gross margin, offset, in part, by an $8.8 million increase in selling, general, and administrative expense. With respect to our homebuilding gross margin, our housing gross margin improved $138.5 million, due primarily to the increase in the average sales price of homes delivered noted above. Our housing gross margin percentage improved 340 basis points from 23.2% in 2021 to 26.6% in 2022 largely due to the increase in average sales price of homes delivered compared to prior year. Our housing gross margin was unfavorably impacted by $8.0 million of deposit write-offs taken in 2022. Exclusive of these charges, our adjusted housing gross margin percentage improved 380 basis points to 27.0%. Our land sale gross margin improved $9.4 million as a result of the mix of lots sold in the current year compared to the prior year.

Selling, general and administrative expense increased $8.8 million from $162.7 million in 2021 to $171.5 million in 2022 but declined as a percentage of revenue to 7.4% in 2022 from 7.9% in 2021. The increase in selling, general and administrative expense was attributable to a $12.2 million increase in general and administrative expense, which was primarily related to a $5.2 million increase in compensation related expenses as a result of an increase in incentive compensation due to our strong financial performance during the period, a $4.7 million increase in land-related expenses and a $2.3 million increase in miscellaneous expenses, offset, in part, by a $3.4 million decrease in selling expense. Selling expense declined due to a $2.9 million decrease in variable selling expenses resulting from increases in sales commissions produced by the lower number of homes delivered and a $0.5 million decrease in non-variable selling expenses primarily related to the timing of sales office and model openings and a reduction in marketing costs.

During 2022, we experienced a 28% decrease in new contracts in our Southern region, from 5,417 in 2021 to 3,921 in 2022. Backlog decreased 29% from 2,945 homes at December 31, 2021 to 2,081 homes at December 31, 2022. The decreases in new contracts and backlog were primarily due to decreased demand as a result of the macroeconomic conditions described above in our Overview section, a decrease in our average number of communities, and difficult comps compared to prior year. Average sales price in backlog increased to $551,000 at December 31, 2022 from $493,000 at December 31, 2021. During 2022, we opened 67 communities in our Southern region compared to 32 in 2021. Our monthly absorption rate in our Southern region declined to 3.8 per community in 2022 from 4.7 per community in 2021.

***Financial Services.*** Revenue from our mortgage and title operations decreased $15.8 million, or 16%, from a record $102.0 million for the twelve months ended December 31, 2021 to $86.2 million for the twelve months ended December 31, 2022 as a result of an 18% decrease in the number of loan originations, from 6,525 in 2021 to 5,374 in 2022, and lower margins on loans sold during the period compared to prior year. Partially offsetting this was an increase in the average loan amount from $343,000 in 2021 to $385,000 in 2022.

Our financial service operations ended 2022 with a $17.9 million decrease in operating income compared to 2021, which was primarily due to the decrease in revenue discussed above in addition to a $2.1 million increase in selling, general and administrative expense compared to 2021. The increase in selling, general and administrative expense was attributable to an increase in compensation expense related to our increase in employee headcount as a result of our expansion into new markets.

At December 31, 2022, M/I Financial provided financing services in all of our markets. Approximately 78% of our homes delivered during 2022 were financed through M/I Financial, compared to 84% during 2021. Capture rate is influenced by financing availability and can fluctuate from quarter to quarter.

***Corporate Selling, General and Administrative Expenses.*** Corporate selling, general and administrative expense increased $7.7 million, from $68.6 million in 2021 to $76.3 million in 2022. The increase was primarily due to a $2.8 million increase in compensation expense due to increased headcount during the period, a $1.9 million increase related to costs associated with new information systems and a $3.0 million increase in miscellaneous expenses.

***Other income.*** Other income includes a $1.9 million gain on the sale of a non-operating asset that occurred during the fourth quarter of 2021 (see Note 1 to our Consolidated Financial Statements for more information) and equity in income from joint venture arrangements. Equity in income from joint venture arrangements represents our portion of pre-tax earnings from our joint venture arrangements where a special purpose entity is established (“LLCs”) with the other partners. The Company earned less than $0.1 million and $0.1 million of equity in income from its LLCs during 2022 and 2021, respectively.

***Interest Expense - Net.*** Interest expense for the Company increased $0.1 million from $2.2 million in the twelve months ended December 31, 2021 to $2.3 million in the twelve months ended December 31, 2022. This increase in interest expense was primarily due to an increase in our average outstanding borrowings resulting in an increase in our weighted average borrowings from $716.7 million in 2021 to $811.0 million in 2022.

***Loss on Early Extinguishment of Debt.*** We recognized a loss on early extinguishment of debt of $9.1 million during 2021 as a result of the write-off of unamortized debt issuance costs and a prepayment premium associated with the redemption of our 2025 Senior Notes.

***Income Taxes.*** Our overall effective tax rate was 22.8% for the year ended December 31, 2022 and 22.0% for the year ended December 31, 2021. The increase in the effective rate for the twelve months ended December 31, 2022 was primarily attributable to decreased tax benefits from energy tax credits and equity compensation (see Note 14 to our Consolidated Financial Statements for more information).

***Segment Non-GAAP Financial Measures.*** This report contains information about our adjusted housing gross margin, which constitutes a non-GAAP financial measure. Because adjusted housing gross margin is not calculated in accordance with GAAP, this financial measure may not be completely comparable to similarly-titled measures used by other companies in the homebuilding industry and, therefore, should not be considered in isolation or as an alternative to operating performance and/or financial measures prescribed by GAAP. Rather, this non-GAAP financial measure should be used to supplement our GAAP results in order to provide a greater understanding of the factors and trends affecting our operations.

Adjusted housing gross margin for each of our reportable segments is calculated as follows:

*(Dollars in thousands)*

| Northern region: | Year Ended December 31, 2022 | 2021 |
| --- | ---: | ---: |
| Housing revenue | **$1,711,627** | $1,591,125 |
| Housing cost of sales | **1,377,517** | 1,260,721 |
| Housing gross margin | **334,110** | 330,404 |
| Add: Impairment (a) | **10,405** | — |
| Adjusted housing gross margin | **$344,515** | $330,404 |
| Housing gross margin percentage | **19.5%** | 20.8% |
| Adjusted housing gross margin percentage | **20.1%** | 20.8% |
| **Southern region:** |  |  |
| Housing revenue | **$2,298,800** | $2,039,344 |
| Housing cost of sales | **1,686,998** | 1,566,089 |
| Housing gross margin | **611,802** | 473,255 |
| Add: Impairment (a) | **7,946** | — |
| Adjusted housing gross margin | **$619,748** | $473,255 |
| Housing gross margin percentage | **26.6%** | 23.2% |
| Adjusted housing gross margin percentage | **27.0%** | 23.2% |

(a) Represents asset impairment charges taken during the respective periods.

### Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

For a comparison of our results of operations for the fiscal years ended December 31, 2021 and December 31, 2020, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 17, 2022.

### LIQUIDITY AND CAPITAL RESOURCES

### Overview of Capital Resources and Liquidity

At December 31, 2022, we had $311.5 million of cash, cash equivalents and restricted cash, with $310.6 million of this amount comprised of unrestricted cash and cash equivalents, which represents a $74.5 million increase in unrestricted cash and cash equivalents from December 31, 2021. Our principal uses of cash during 2022 were investment in land and land development, construction of homes, mortgage loan originations, investment in joint ventures, operating expenses, short-term working capital, and debt service requirements, including the repayment of amounts outstanding under our credit facilities, and the repurchase of $55.3 million of our outstanding common shares under our 2021 Share Repurchase Program during the first, second and third quarters of 2022. In order to fund these uses of cash, we used proceeds from home deliveries, the sale of mortgage loans, as well as excess cash balances, borrowings under our credit facilities, and other sources of liquidity.

The Company is a party to three primary credit agreements: (1) the Credit Facility, our $650 million unsecured revolving credit facility, dated July 18, 2013, as amended (the “Credit Facility”), with M/I Homes, Inc. as borrower and guaranteed by the Company’s wholly-owned homebuilding subsidiaries; (2) the MIF Mortgage Warehousing Agreement, our $200 million secured mortgage warehousing agreement (which increased to $275 million from September 19, 2022 to November 13, 2022 and to $300 million from November 14, 2022 to February 6, 2023), with M/I Financial as borrower; and (3) the MIF Mortgage Repurchase Facility, our $90 million mortgage repurchase agreement, with M/I Financial as borrower.

As of December 31, 2022, we had outstanding notes payable (consisting primarily of notes payable for our financial services operations, the 2030 Senior Notes and the 2028 Senior Notes) with varying maturities totaling an aggregate principal amount of $946 million, with $246 million payable within 12 months. Future interest payments associated with these notes payable totaled $198 million as of December 31, 2022, with $32 million payable within 12 months.

As of December 31, 2022, there were no borrowings outstanding and $94.9 million of letters of credit outstanding under our $650 million Credit Facility, leaving $555.1 million available. We expect to continue managing our balance sheet and liquidity carefully in 2023 by managing our spending on land acquisition and development and construction of inventory homes, as well as overhead expenditures, relative to our ongoing volume of home deliveries, and we expect to meet our current and anticipated cash requirements in 2023 from cash receipts and availability under our credit facilities, as well as excess cash balances.

During the year ended December 31, 2022, we delivered 8,366 homes, started 7,792 homes, and spent $341.1 million on land purchases and $496.2 million on land development.

We are selectively acquiring and developing lots in our markets to replenish and increase our lot supply and are being more selective in investing in land and land development opportunities in response to the current market conditions. We will continue to monitor market conditions and our pace of home sales and deliveries and adjust our land spending accordingly. Pursuant to our land option agreements, as of December 31, 2022, we had a total of 17,049 lots under contract, with an aggregate purchase price of approximately $803.5 million, to be acquired during the period from 2023 through 2029.

Our off-balance sheet arrangements relating to our homebuilding operations include joint venture arrangements, land option agreements, guarantees and indemnifications associated with acquiring and developing land, and the issuance of letters of credit and completion bonds. Our use of these arrangements is for the purpose of securing the most desirable lots on which to build homes for our homebuyers in a manner that we believe reduces the overall risk to the Company. See Note 6 to our Consolidated Financial Statements for more information regarding these arrangements.

***Operating Cash Flow Activities.*** During 2022, we generated $184.1 million of cash in operating activities, compared to using $16.8 million of cash from operating activities in 2021. The cash generated by operating activities in 2022 was primarily a result of net income of $490.7 million, proceeds from the sale of mortgage loans that exceeded mortgage loan originations by $33.5 million and a $34.3 million increase in other liabilities, offset partially by a $348.7 million increase in inventory and $30.7 million decrease in accounts payable and customer deposits. The cash used in operating activities in 2021 was primarily a result of a $508.2 million increase in inventory, along with payments for mortgage loan originations which exceeded the proceeds from the sale of mortgage loans by $43.9 million, offset by net income of $396.9 million and a $121.7 million increase in accounts payable, customer deposits and other liabilities.

***Investing Cash Flow Activities.*** During 2022, we used $27.4 million of cash in investing activities, compared to using $51.7 million of cash in investing activities during 2021. This $24.3 million decrease in cash usage was primarily due to a decrease in cash contributions to our joint venture arrangements compared to prior year.

***Financing Cash Flow Activities.*** During 2022, we used $81.5 million of cash in our financing activities, compared to generating $44.1 million of cash during 2021. The cash used in financing activities in 2022 was primarily due to net repayments under our two M/I Financial credit facilities of $20.4 million in addition to the repurchase of $55.3 million of our outstanding common shares during 2022.

On July 28, 2021, the Company announced that its Board of Directors authorized a new share repurchase program pursuant to which the Company may purchase up to $100 million of its outstanding common shares (see Note 16 to our Consolidated Financial Statements). On February 17, 2022, the Company announced that its Board of Directors approved an increase to its 2021 Share Repurchase Program by an additional $100 million. During 2022, the Company repurchased 1.2 million common shares with an aggregate purchase price of $55.3 million which was funded with cash on hand. As of December 31, 2022, the Company was authorized to repurchase an additional $93.1 million of outstanding common shares under the 2021 Share Repurchase Program.

The timing and amount of any future purchases under the 2021 Share Repurchase Program will be determined by the Company’s management at its discretion based on a variety of factors, including the market price of the Company’s common shares, business considerations, general market and economic conditions and legal requirements.

At December 31, 2022 and December 31, 2021, our ratio of homebuilding debt to capital was 25% and 30%, respectively, calculated as the carrying value of our outstanding homebuilding debt (which consists of borrowings under our Credit Facility, our 2030 Senior Notes, our 2028 Senior Notes, and Notes Payable-Other) divided by the sum of the carrying value of our outstanding homebuilding debt plus shareholders’ equity. We believe that this ratio provides useful information for understanding our financial position and the leverage employed in our operations, and for comparing us with other homebuilders.

We fund our operations with cash flows from operating activities, including proceeds from home deliveries, land sales and the sale of mortgage loans. We believe that these sources of cash, along with our balance of unrestricted cash and borrowings available under our credit facilities, will be sufficient to fund our currently anticipated working capital needs, investment in land and land development, construction of homes, operating expenses, planned capital spending, and debt service requirements for at least the next twelve months. In addition, we routinely monitor current and anticipated operational and debt service requirements, financial market conditions, and credit relationships and we may choose to seek additional capital by issuing new debt and/or equity securities or engaging in other financial transactions to strengthen our liquidity or our long-term capital structure. The financing needs of our homebuilding and financial services operations depend on anticipated sales volume in the current year as well as future years, inventory levels and related turnover, forecasted land and lot purchases, debt maturity dates, and other factors. If we seek such additional capital or engage in such other financial transactions, there can be no assurance that we would be able to obtain such additional capital or consummate such other financial transactions on terms acceptable to us, if at all, and such additional equity or debt financing or other financial transactions could dilute the interests of our existing shareholders, add operational limitations and/or increase our interest costs.

Included in the table below is a summary of our available sources of cash from the Credit Facility, the MIF Mortgage Warehousing Agreement and the MIF Mortgage Repurchase Facility as of December 31, 2022:

*(In thousands)*

|  | Expiration Date | Outstanding Balance | Available Amount |
| --- | --- | ---: | ---: |
| Notes payable – homebuilding (a) | (a) | $— | $555,144 |
| Notes payable – financial services (b) | (b) | $245,741 | $2,489 |

(a) The available amount under the Credit Facility is computed in accordance with the borrowing base calculation under the Credit Facility, which applies various advance rates for different categories of inventory and totaled $1.6 billion of availability for additional senior debt at December 31, 2022. As a result, the full $650 million commitment amount of the facility was available, less any borrowings and letters of credit outstanding. There were no borrowings outstanding and $94.9 million of letters of credit outstanding at December 31, 2022, leaving $555.1 million available. The Credit Facility has an expiration date of December 9, 2026.

(b) The available amount is computed in accordance with the borrowing base calculations under the MIF Mortgage Warehousing Agreement and the MIF Mortgage Repurchase Facility, each of which may be increased by pledging additional mortgage collateral, not to exceed the maximum aggregate commitment amount of M/I Financial's warehousing agreements as of December 31, 2022, which was $390 million, which included a temporary increase for the MIF Mortgage Warehouse Agreement applicable through February 6, 2023 (as described below) at which time the maximum aggregate commitment amount under the two agreements reverted to $290 million. The MIF Mortgage Warehousing Agreement has an expiration date of May 26, 2023. M/I Financial entered into an amendment to the MIF Mortgage Repurchase Facility, which extended its term for an additional year to October 23, 2023.

### Notes Payable - Homebuilding.

***Homebuilding Credit Facility.*** On December 9, 2022, the company entered into an amendment to the Credit Facility, which, among other things, (1) increased the commitments from lenders to $650 million, (2) extended the maturity to December 9, 2026, (3) increased the accordion feature pursuant to which the maximum borrowing availability may be increased to an aggregate of $800 million, subject to obtaining additional commitments from lenders, (4) increased the sub-facility for letters of credit included in the Credit Facility to $250 million from $150 million, and (5) replaced LIBOR with the secured overnight financing rate (“SOFR”) as an interest rate bench mark (subject to a floor of 0.25%) and permitted the Company to select an index rate for each borrowing from multiple interest rate options, including one, three or six month adjusted term SOFR, plus a margin of 1.75 basis points (subject to adjustment in subsequent quarterly periods based on the Company’s then applicable leverage ratio).

Borrowings under the Credit Facility constitute senior, unsecured indebtedness and availability is subject to, among other things, a borrowing base calculated using various advance rates for different categories of inventory. The Credit Facility also provides for a $250 million sub-facility for letters of credit. The Credit Facility contains various representations, warranties and covenants which require, among other things, that the Company maintain (1) a minimum level of Consolidated Tangible Net Worth of $1.3 billion at December 31, 2022 (subject to increase over time based on earnings and proceeds from equity offerings), (2) a leverage ratio not in excess of 60%, and (3) either a minimum Interest Coverage Ratio of 1.5 to 1.0 or a minimum amount of available liquidity. In addition, the Credit Facility contains covenants that limit the Company’s number of unsold housing units, as well as the amount of Investments in Unrestricted Subsidiaries and Joint Ventures (each as defined in the Credit Facility).

The Company’s obligations under the Credit Facility are guaranteed by all of the Company’s subsidiaries, with the exception of subsidiaries that are primarily engaged in the business of mortgage financing, title insurance or similar financial businesses relating to the homebuilding and home sales business, certain subsidiaries that are not 100%-owned by the Company or another subsidiary, and other subsidiaries designated by the Company as Unrestricted Subsidiaries, subject to limitations on the aggregate amount invested in such Unrestricted Subsidiaries. The guarantors for the Credit Facility are the same subsidiaries that guarantee our 2030 Senior Notes and our 2028 Senior Notes.

As of December 31, 2022, the Company was in compliance with all covenants of the Credit Facility, including financial covenants. The following table summarizes the most significant restrictive covenant thresholds under the Credit Facility and our compliance with such covenants as of December 31, 2022:

*(Dollars in millions)*

| Financial Covenant |  | Covenant Requirement | Actual |
| --- | --- | ---: | ---: |
| Consolidated Tangible Net Worth | ≥ | $1,317.0 | $1,980.7 |
| Leverage Ratio | ≤ | 0.60 | 0.19 |
| Interest Coverage Ratio | ≥ | 1.5 to 1.0 | 22.9 to 1.0 |
| Investments in Unrestricted Subsidiaries and Joint Ventures | ≤ | $594.2 | $6.0 |
| Unsold Housing Units | ≤ | 3,087 | 1,505 |

### Notes Payable - Financial Services.

***MIF Mortgage Warehousing Agreement.*** The MIF Mortgage Warehousing Agreement is used to finance eligible residential mortgage loans originated by M/I Financial. The MIF Mortgage Warehousing Agreement provides a maximum borrowing availability of $200 million, which increased to $275 million from September 19, 2022 to November 13, 2022 and increased to $300 million from November 14, 2022 to February 6, 2023, which were periods of expected increases in the volume of mortgage originations. The MIF Mortgage Warehousing Agreement expires on May 26, 2023. Interest on amounts borrowed under the MIF Mortgage Warehousing Agreement is payable at a per annum rate equal to the one-month BSBY rate (adjusting daily) (subject to a floor of 0.25%) plus a spread of 190 basis points.

As is typical for similar credit facilities in the mortgage origination industry, at closing, the expiration of the MIF Mortgage Warehousing Agreement was set at approximately one year and is under consideration for extension annually by the participating lenders. We expect to extend the MIF Mortgage Warehousing Agreement on or prior to the current expiration date of May 26, 2023, but we cannot provide any assurance that we will be able to obtain such an extension.

The MIF Mortgage Warehousing Agreement is secured by certain mortgage loans originated by M/I Financial that are being “warehoused” prior to their sale to investors. The MIF Mortgage Warehousing Agreement provides for limits with respect to certain loan types that can secure outstanding borrowings. There are currently no guarantors of the MIF Mortgage Warehousing Agreement.

As of December 31, 2022, there was $200.9 million outstanding under the MIF Mortgage Warehousing Agreement and M/I Financial was in compliance with all covenants thereunder. The financial covenants, as more fully described and defined in the MIF Mortgage Warehousing Agreement, are summarized in the following table, which also sets forth M/I Financial’s compliance with such covenants as of December 31, 2022:

*(Dollars in millions)*

| Financial Covenant Leverage Ratio | ≤ | Covenant Requirement 12.0 to 1.0 | Actual 8.4 to 1.0 |
| --- | --- | ---: | ---: |
| Liquidity | ≥ | $10.0 | $42.4 |
| Adjusted Net Income | \> | $0.0 | $21.7 |
| Tangible Net Worth | ≥ | $20.0 | $33.9 |

***MIF Mortgage Repurchase Facility.*** The MIF Mortgage Repurchase Facility is used to finance eligible residential mortgage loans originated by M/I Financial and is structured as a mortgage repurchase facility. The MIF Mortgage Repurchase Facility provides for a maximum borrowing availability of $90 million. The MIF Mortgage Repurchase Facility expires on October 23, 2023. As is typical for similar credit facilities in the mortgage origination industry, at closing, the expiration of the MIF

Mortgage Repurchase Facility was set at approximately one year, and is under consideration for extension annually by the participating lender.

M/I Financial pays interest on each advance under the MIF Mortgage Repurchase Facility at a per annum rate equal to One-Month Term SOFR (subject to an all-in floor of 2.375% or 2.75% based on the type of loan) plus 150 or 200 basis points depending on loan type. The covenants in the MIF Mortgage Repurchase Facility are substantially similar to the covenants in the MIF Mortgage Warehousing Agreement. The MIF Mortgage Repurchase Facility provides for limits with respect to certain loan types that can secure outstanding borrowings, which are substantially similar to the restrictions in the MIF Mortgage Warehousing Agreement. There are no guarantors of the MIF Mortgage Repurchase Facility. As of December 31, 2022, there was $44.9 million outstanding under the MIF Mortgage Repurchase Facility. M/I Financial was in compliance with all financial covenants under the MIF Mortgage Repurchase Facility as of December 31, 2022.

### Senior Notes.

***3.95% Senior Notes.*** On August 23, 2021, the Company issued $300.0 million aggregate principal amount of 3.95% Senior Notes due 2030. The 2030 Senior Notes contain certain covenants, as more fully described and defined in the indenture governing the 2030 Senior Notes, which limit the ability of the Company and the restricted subsidiaries to, among other things: incur certain liens securing indebtedness without equally and ratably securing the 2030 Senior Notes and the guarantees thereof; enter into certain sale and leaseback transactions; and consolidate or merge with or into other companies, liquidate or sell or otherwise dispose of all or substantially all of the Company’s assets. These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2030 Senior Notes. As of December 31, 2022, the Company was in compliance with all terms, conditions, and covenants under the indenture.

***4.95% Senior Notes.*** On January 22, 2020, the Company issued $400.0 million aggregate principal amount of 4.95% Senior Notes due 2028. The 2028 Senior Notes contain certain covenants, as more fully described and defined in the indenture governing the 2028 Senior Notes, which limit the ability of the Company and the restricted subsidiaries to, among other things: incur additional indebtedness; make certain payments, including dividends, or repurchase any shares, in an aggregate amount exceeding our “restricted payments basket”; make certain investments; and create or incur certain liens, consolidate or merge with or into other companies, or liquidate or sell or transfer all or substantially all of our assets. These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2028 Senior Notes. As of December 31, 2022, the Company was in compliance with all terms, conditions, and covenants under the indenture.

See Note 11 to our Consolidated Financial Statements for more information regarding the 2030 Senior Notes and the 2028 Senior Notes.

### Supplemental Financial Information.

As of December 31, 2022, M/I Homes, Inc. had $300.0 million aggregate principal amount of its 2030 Senior Notes and $400.0 million aggregate principal amount of its 2028 Senior Notes outstanding.

The 2030 Senior Notes and the 2028 Senior Notes are fully and unconditionally guaranteed, on a joint and several basis, by all of M/I Homes, Inc.’s subsidiaries (the “Subsidiary Guarantors”) with the exception of subsidiaries that are primarily engaged in the business of mortgage financing, title insurance or similar financial businesses relating to the homebuilding and home sales business, certain subsidiaries that are not 100%-owned by M/I Homes, Inc. or another subsidiary, and other subsidiaries designated as Unrestricted Subsidiaries (as defined in the indentures governing the 2030 Senior Notes and the 2028 Senior Notes), subject to limitations on the aggregate amount invested in such Unrestricted Subsidiaries in accordance with the terms of the Credit Facility and the indentures governing the 2030 Senior Notes and the 2028 Senior Notes (the “Non-Guarantor Subsidiaries”). The Subsidiary Guarantors of the 2030 Senior Notes, the 2028 Senior Notes and the Credit Facility are the same and are listed on Exhibit 22 to this Form 10-K.

Each Subsidiary Guarantor is a direct or indirect 100%-owned subsidiary of M/I Homes, Inc. The guarantees are senior unsecured obligations of each Subsidiary Guarantor and rank equally in right of payment with all existing and future unsecured senior indebtedness of such Subsidiary Guarantor. The guarantees are effectively subordinated to any existing and future secured indebtedness of such Subsidiary Guarantor with respect to any assets comprising security or collateral for such indebtedness.

The guarantees are “full and unconditional,” as those terms are used in Regulation S-X, Rule 3-10(b)(3), except that the indentures governing the 2030 Senior Notes and the 2028 Senior Notes provide that a Subsidiary Guarantor’s guarantee will be released if: (1) all of the assets of such Subsidiary Guarantor have been sold or otherwise disposed of in a transaction in compliance with the terms of the applicable indenture; (2) all of the Equity Interests (as defined in the applicable indenture) held by M/I Homes, Inc. and the Restricted Subsidiaries (as defined in the applicable Indenture) of such Subsidiary Guarantor have been sold or otherwise disposed of to any person other than M/I Homes, Inc. or a Restricted Subsidiary in a transaction in compliance with the terms of the applicable indenture; (3) the Subsidiary Guarantor is designated an Unrestricted Subsidiary (or otherwise ceases to be a Restricted Subsidiary (including by way of liquidation or merger)) in compliance with the terms of the applicable indenture; (4) M/I Homes, Inc. exercises its legal defeasance option or covenant defeasance option under the applicable indenture; or (5) all obligations under the applicable indenture are discharged in accordance with the terms of the applicable indenture.

The enforceability of the obligations of the Subsidiary Guarantors under their guarantees may be subject to review under applicable federal or state laws relating to fraudulent conveyance or transfer, voidable preference and similar laws affecting the rights of creditors generally. In certain circumstances, a court could void the guarantees, subordinate amounts owing under the guarantees or order other relief detrimental to the holders of the 2030 Senior Notes and the 2028 Senior Notes.

The following tables present summarized financial information on a combined basis for M/I Homes, Inc. and the Subsidiary Guarantors. Transactions between M/I Homes, Inc. and the Subsidiary Guarantors have been eliminated and the summarized financial information does not reflect M/I Homes, Inc.’s or the Subsidiary Guarantors’ investment in, and equity in earnings from, the Non-Guarantor Subsidiaries.

### Summarized Balance Sheet Data

*(In thousands)*

| Assets: | December 31, 2022 |
| --- | ---: |
| Cash | **$269,071** |
| Investment in joint venture arrangements | **$45,907** |
| Amounts due from Non-Guarantor Subsidiaries | **$15,772** |
| Total assets | **$3,379,932** |
| Liabilities and Shareholders’ Equity: |  |
| Total liabilities | **$1,359,951** |
| Shareholders’ equity | **$2,019,981** |

### Summarized Statement of Income Data

*(In thousands)*

|  | Year Ended December 31, 2022 |
| --- | ---: |
| Revenues | **$4,045,198** |
| Land and housing costs | **$3,069,199** |
| Selling, general and administrative expense | **$363,393** |
| Income before income taxes | **$597,126** |
| Net income | **$459,059** |

**Weighted Average Borrowings.** In 2022 and 2021, our weighted average borrowings outstanding were $811.0 million and $716.7 million, respectively, with a weighted average interest rate of 4.96% and 5.55%, respectively. The increase in our weighted average borrowings related to increased borrowings under our two M/I Financial credit facilities during 2022 compared to 2021 due to an increase in average loan amounts in 2022. The decrease in our weighted average borrowing rate was due to lower interest rates on our credit facilities in 2022 compared to the prior year.

At both December 31, 2022 and December 31, 2021, we had no borrowings outstanding under the Credit Facility. During the twelve months ended December 31, 2022, the average daily amount outstanding under the Credit Facility was $9.0 million and the maximum amount outstanding under the Credit Facility was $82.5 million which occurred during September. During the twelve months ended December 31, 2021, the average daily amount outstanding and the maximum amount outstanding under the Credit Facility were both zero. Based on our currently anticipated spending on home construction, overhead expenses, share repurchases and land acquisition and development in 2023, offset by expected cash receipts from home deliveries and other sources, we may borrow under the Credit Facility during 2023, but do not expect the peak amount outstanding to exceed approximately $100 million. The actual amount borrowed in 2023 (and the estimated peak amount outstanding) and the related timing will be subject to numerous factors, which are subject to significant variation as a result of the timing and amount of land and house construction expenditures, payroll and other general and administrative expenses, and cash receipts from home deliveries. The amount borrowed will also be impacted by other cash receipts and payments, any capital markets transactions or other additional financings by the Company, any repayments or redemptions of outstanding debt, any additional share repurchases under the 2021 Share Repurchase Program and any other extraordinary events or transactions. The Company may also experience significant variation in cash and Credit Facility balances from week to week due to the timing of such receipts and payments.

There were $94.9 million of letters of credit issued and outstanding under the Credit Facility at December 31, 2022. During 2022, the average daily amount of letters of credit outstanding under the Credit Facility was $92.6 million and the maximum amount of letters of credit outstanding under the Credit Facility was $107.8 million.

At December 31, 2022, M/I Financial had $200.9 million outstanding under the MIF Mortgage Warehousing Agreement. During 2022, the average daily amount outstanding under the MIF Mortgage Warehousing Agreement was $60.4 million and the maximum amount outstanding was $200.9 million, which occurred during December, while the temporary increase provision was in effect and the maximum borrowing availability was $300 million.

At December 31, 2022, M/I Financial had $44.9 million outstanding under the MIF Mortgage Repurchase Facility. During 2022, the average daily amount outstanding under the MIF Mortgage Repurchase Facility was $40.5 million and the maximum amount outstanding was $80.4 million, which occurred during October.

***Universal Shelf Registration.*** In June 2022, the Company filed a universal shelf registration statement with the SEC, which registration statement became effective upon filing and will expire in June 2025. Pursuant to the registration statement, the Company may, from time to time, offer debt securities, common shares, preferred shares, depositary shares, warrants to purchase debt securities, common shares, preferred shares, depositary shares or units of two or more of those securities, rights to purchase debt securities, common shares, preferred shares or depositary shares, stock purchase contracts and units. The timing and amount of offerings, if any, will depend on market and general business conditions.

### INTEREST RATES AND INFLATION

Our business is significantly affected by general economic conditions within the United States and, particularly, by the impact of interest rates and inflation. The annual rate of inflation in the United States was 6.5% in December 2022, as measured by the Consumer Price Index (CPI), down slightly from 9.1% in June 2022 which was the highest inflation rate we have experienced in 40 years. As a result of the high inflation rates during 2022, we have experienced an increase in the costs of land, materials and labor that we have been able to pass along to the consumer. However, inflation has also reduced the purchasing power of potential homebuyers and has negatively impacted their ability and desire to buy a home and our ability to pass along our increased costs to our homebuyers.

Beginning in the second half of 2022, the pace of sales across the homebuilding industry declined significantly from the unprecedented levels experienced over the previous two years as a result of the sharp increase in mortgage interest rates from approximately 3% in December 2021 to around 6.5% at the end of 2022, the highest rates in over a decade, as well as significant inflation in the broader economy, and the substantial rise in home prices. These macroeconomic trends have pressured housing affordability, negatively impacted homebuyer sentiment and impacted the costs of financing land development activities and housing construction. The higher mortgage interest rates and the high rate of inflation are making it more difficult for homebuyers to qualify for mortgages or to obtain mortgages at interest rates that are acceptable to them. Rising interest rates, as well as increased materials and labor costs, can also reduce gross margins.

## Market risk

As filed, 5,708 characters.

Our primary market risk results from fluctuations in interest rates. We are exposed to interest rate risk through borrowings under our revolving credit facilities, consisting of the Credit Facility, the MIF Mortgage Warehousing Agreement, and the MIF Mortgage Repurchase Facility which permitted borrowings of up to $1.04 billion at December 31, 2022, subject to availability constraints. Additionally, M/I Financial is exposed to interest rate risk associated with its mortgage loan origination services.

***Interest Rate Lock Commitments:*** Interest rate lock commitments (“IRLCs”) are extended to certain homebuying customers who have applied for a mortgage loan and meet certain defined credit and underwriting criteria. Typically, the IRLCs will have a duration of less than six months; however, in certain markets, the duration could extend to nine months.

Some IRLCs are committed to a specific third party investor through the use of whole loan delivery commitments matching the exact terms of the IRLC loan. Uncommitted IRLCs are considered derivative instruments and are fair value adjusted, with the resulting gain or loss recorded in current earnings.

***Forward Sales of Mortgage-Backed Securities:*** Forward sales of mortgage-backed securities (“FMBSs”) are used to protect uncommitted IRLC loans against the risk of changes in interest rates between the lock date and the funding date. FMBSs related to uncommitted IRLCs are classified and accounted for as non-designated derivative instruments and are recorded at fair value, with gains and losses recorded in current earnings.

***Mortgage Loans Held for Sale:*** Mortgage loans held for sale consist primarily of single-family residential loans collateralized by the underlying property. During the period between when a loan is closed and when it is sold to an investor, the interest rate risk is covered through the use of a whole loan contract or by FMBSs. The FMBSs are classified and accounted for as non-designated derivative instruments, with gains and losses recorded in current earnings.

The table below shows the notional amounts of our financial instruments at December 31, 2022 and 2021:

| Description of Financial Instrument (in thousands) | December 31, 2022 | 2021 |
| --- | ---: | ---: |
| Whole loan contracts and related committed IRLCs | **$—** | $782 |
| Uncommitted IRLCs | **262,529** | 228,831 |
| FMBSs related to uncommitted IRLCs | **341,088** | 223,000 |
| Whole loan contracts and related mortgage loans held for sale | **16,507** | 3,785 |
| FMBSs related to mortgage loans held for sale | **232,518** | 251,000 |
| Mortgage loans held for sale covered by FMBSs | **233,378** | 263,088 |

The table below shows the measurement of assets and liabilities at December 31, 2022 and 2021:

| Description of Financial Instrument (in thousands) | December 31, 2022 | 2021 |
| --- | ---: | ---: |
| Mortgage loans held for sale | **$242,539** | $275,655 |
| Forward sales of mortgage-backed securities | **(3,005)** | 4,477 |
| Interest rate lock commitments | **787** | (487) |
| Whole loan contracts | **(377)** | (62) |
| Total | **$239,944** | $279,583 |

The following table sets forth the amount of gain (loss) recognized on assets and liabilities for the years ended December 31, 2022, 2021 and 2020:

| Description (in thousands) | Year Ended December 31, 2022 | 2021 | 2020 |
| --- | ---: | ---: | ---: |
| Mortgage loans held for sale | **$407** | $(2,586) | $318 |
| Forward sales of mortgage-backed securities | **(7,482)** | 6,117 | (1,304) |
| Interest rate lock commitments | **1,282** | (2,143) | 964 |
| Whole loan contracts | **(323)** | 353 | (360) |
| Total (loss) gain recognized | **$(6,116)** | $1,741 | $(382) |

46

The following table provides the expected future cash flows and current fair values of borrowings under our credit facilities and mortgage loan origination services that are subject to market risk as interest rates fluctuate, as of December 31, 2022. Because the MIF Mortgage Warehousing Agreement and MIF Mortgage Repurchase Facility are effectively secured by certain mortgage loans held for sale which are typically sold within 30 to 45 days, their outstanding balances are included in the most current period presented. The interest rates for our variable rate debt represent the weighted average interest rates in effect at December 31, 2022. For fixed-rate debt, changes in interest rates generally affect the fair market value of the debt instrument, but not our earnings or cash flow. Conversely, for variable-rate debt, changes in interest rates generally do not affect the fair market value of the debt instrument, but do affect our earnings and cash flow. We do not have the obligation to prepay fixed-rate debt prior to maturity, and, as a result, interest rate risk and changes in fair market value should not have a significant impact on our fixed-rate debt until we are required or elect to refinance it.

*(Dollars in thousands)*

| ASSETS: Mortgage loans held for sale: | Expected Cash Flows by Period 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter | Total | Fair Value 12/31/2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Fixed rate | $250,216 | — | — | — | — | — | $250,216 | $242,539 |
| Weighted average interest rate | 5.43% | — | — | — | — | — | 5.43% |  |
| LIABILITIES: |  |  |  |  |  |  |  |  |
| Long-term debt — fixed rate | — | — | — | — | — | $700,000 | $700,000 | $594,250 |
| Weighted average interest rate | — | — | — | — | — | 4.52% | 4.52% |  |
| Short-term debt — variable rate | $245,741 | — | — | — | — | — | $245,741 | $245,741 |
| Weighted average interest rate | 6.18% | — | — | — | — | — | 6.18% |  |

47

## Controls and procedures

As filed, 2,539 characters.

### Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

An evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) was performed by the Company’s management, with the participation of the Company’s principal executive officer and principal financial officer, as required by Rule 13a-15(b) under the Exchange Act. Based on that evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K.

### Management’s Annual Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

The Company’s management, with the participation of the principal executive officer and the principal financial officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in *Internal Control – Integrated Framework (2013).* Based on this assessment, management believes that, as of December 31, 2022, the Company’s internal control over financial reporting was effective.

The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by Deloitte & Touche LLP, our independent registered public accounting firm, as stated in its attestation report included on page 81 of this Annual Report on Form 10-K.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Filed Feb 17, 2023.
Source: SEC EDGAR, the filing index for accession 0000799292-23-000037. Last ingested by Listed: Oct 30, 2026, 16:11 ET. No prices; not investment advice.