# M/I Homes, Inc.: Form 10-Q for the period ended Jun 30, 2023

- Company: [M/I Homes, Inc.](/companies/mho.md) (CIK 799292)
- Form: 10-Q
- Filed: 2023-07-28
- Accepted by EDGAR: Jul 28, 2023, 11:01 ET
- Period: 2023-06-30
- Accession: 0000799292-23-000091
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/799292/000079929223000091/mho-20230630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/799292/000079929223000091/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-04-01 to 2023-06-30 | $1.01bn | us-gaap:Revenues |
| Revenue | 6 months, 2023-01-01 to 2023-06-30 | $2.01bn | us-gaap:Revenues |
| Cost of revenue | 3 months, 2023-04-01 to 2023-06-30 | $755.8m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2023-01-01 to 2023-06-30 | $1.52bn | us-gaap:CostOfGoodsAndServicesSold |
| Operating income | 3 months, 2023-04-01 to 2023-06-30 | $150.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-01-01 to 2023-06-30 | $285.2m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-04-01 to 2023-06-30 | $37.4m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2023-01-01 to 2023-06-30 | $70.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | $118.0m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-01-01 to 2023-06-30 | $221.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-04-01 to 2023-06-30 | $4.12 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2023-01-01 to 2023-06-30 | $7.77 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-04-01 to 2023-06-30 | $4.25 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-01-01 to 2023-06-30 | $7.98 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-04-01 to 2023-06-30 | 28,624,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2023-01-01 to 2023-06-30 | 28,469,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2023-01-01 to 2023-06-30 | $417.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2023-01-01 to 2023-06-30 | $2.1m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 6 months, 2023-01-01 to 2023-06-30 | $15.2m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Total assets | at 2023-06-30 | $3.86bn | us-gaap:Assets |
| Total liabilities | at 2023-06-30 | $1.56bn | us-gaap:Liabilities |
| Shareholders' equity | at 2023-06-30 | $2.30bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 84,252 characters.

### RESULTS OF OPERATIONS

### OVERVIEW

M/I Homes, Inc. and subsidiaries (the “Company” or “we”) is one of the nation’s leading builders of single-family homes having sold over 147,800 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; Ft. 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:

- Information Relating to Forward-Looking Statements;
- Application of Critical Accounting Estimates and Policies;
- Results of Operations;
- Discussion of Our Liquidity and Capital Resources; and
- Impact of Interest Rates and Inflation.

### FORWARD-LOOKING STATEMENTS

Certain information included in this report or in other materials we have filed or will file with the Securities and Exchange Commission (the “SEC”) (as well as information included in oral statements or other written statements made or to be made by us) contains or may contain forward-looking statements, including, but not limited to, statements regarding our future financial performance and financial condition. Words such as “expects,” “anticipates,” “envisions,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements involve a number of risks and uncertainties. Any forward-looking statements that we make herein and in future reports and statements are not guarantees of future performance, and actual results may differ materially from those in such forward-looking statements as a result of various risk factors, including, without limitation, factors relating to the economic environment, interest rates, availability of resources, competition, market concentration, land development activities, construction defects, product liability and warranty claims and various governmental rules and regulations. See “Item 1A. Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”), as the same may be updated from time to time in our subsequent filings with the SEC, for more information regarding those risk factors.

Any forward-looking statement speaks only as of the date made. Except as required by applicable law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in our subsequent reports on Forms 10-K, 10-Q and 8-K should be consulted. This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995, and all of our forward-looking statements are expressly qualified in their entirety by the cautionary statements contained or referenced in this section.

### 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 Note 1 (Summary of Significant Accounting Policies) to our consolidated financial statements included in our 2022 Form 10-K for additional information about our accounting policies.

We believe that there have been no significant changes to our critical accounting policies during the quarter ended June 30, 2023 as compared to those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2022 Form 10-K.

### RESULTS OF OPERATIONS

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 | Ft. Myers/Naples, Florida |
| Cincinnati, Ohio | Orlando, Florida |
| Columbus, Ohio | Sarasota, Florida |
| Indianapolis, Indiana | Tampa, 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 |

### Overview

We ended the second quarter of 2023 with stronger-than-expected revenues and home deliveries, strong cash flow and liquidity, and low leverage. Our new contracts for the quarter increased 21% compared to the second quarter of 2022 as we continued to see improvements in homebuyer demand that began during the first quarter of 2023 as potential homebuyers face a limited supply of resale and new home inventory and are also accepting the “new normal” higher interest rate levels compared to a year ago. In addition, supply chain disruptions have eased leading to a slight improvement in our building cycle times and lower building costs which resulted in a sequential increase in our gross margin compared to the first quarter of 2023. While there remains uncertainty in the broader U.S. economy, we believe a healthy demand for housing exists today, aided by slightly lower home prices, builder incentives and interest rate buy-downs.

We achieved the following results during the second quarter and first half of 2023 in comparison to the second quarter and first half of 2022:

- Revenue decreased 3% to $1.01 billion (second highest second quarter in Company history) and increased 6% to $2.01 billion (a year-to-date record), respectively;
- New contracts increased 21% to 2,197 from 1,820 and increased 1% to 4,368 from 4,334, respectively;
- Average sales price of homes delivered increased 3% to $493,000 (a second quarter record) and increased 4% to $489,000 (a year-to-date record), respectively;
- Number of homes delivered decreased 7% to 1,990 homes (second highest second quarter in Company history) and increased 1% to 3,997 homes (second highest first half in Company history), respectively; and
- Shareholders’ equity of $2.30 billion (a record high for the Company).

These results reflect the continued demand for new homes as potential homebuyers have adjusted to higher interest rates while also facing limited resale supply and are reentering the housing market despite continuing affordability and economic recession concerns. We also believe that the incentives, interest rate buy-downs and price reductions we have offered in certain locations as well as seasonal trends have further encouraged demand. We continue to believe long-term housing market fundamentals remain strong, including favorable demographics and a limited supply of new and resale inventory.

In addition to the results described above, our financial services operations also achieved strong income before income taxes for the second quarter and the first half of 2023, benefiting from higher margins and an increase in the average loan amount.

Our company-wide absorption pace of sales per community for the second quarter of 2023 improved to 3.7 per month compared to 3.5 per month for the prior year’s second quarter as a result of the 21% increase in the number of new contracts during the quarter compared to prior year, partially offset by our increased average community count to 198 for the second quarter of 2023 from 172 for the second quarter of 2022. We plan to open a number of new communities in 2023, increasing our community count by approximately 15% from the end of 2022. However, given the uncertainty in the housing market as a result of current economic conditions, we may choose to delay the development and opening of some new communities to match homebuyer demand in the remainder of 2023.

### Summary of Company Financial Results

Income before income taxes for the second quarter of 2023 decreased 15% from $182.2 million in the second quarter of 2022 to $155.4 million in 2023. We achieved second quarter net income of $118.0 million, or $4.12 per diluted share, in 2023's second quarter, compared to net income of $136.8 million, or $4.79 per diluted share, in 2022's second quarter. Our effective tax rate was 24.0% in 2023’s second quarter compared to 24.9% in 2022. For the first half of 2023, income before income taxes decreased 4.3% from $304.4 million in the first half of 2022 to $291.3 million in 2023. We achieved net income of $221.1 million, or $7.77 per diluted share, during 2023’s first half compared to net income of $228.7 million, or $7.93 per diluted share, in the six months ended June 30, 2022. Our effective tax rate was 24.1% in 2023's first half compared to 24.9% in the same period in 2022.

During the quarter ended June 30, 2023, we recorded second quarter total revenue of $1.01 billion, of which $980.2 million was from homes delivered, $8.5 million was from land sales and $25.3 million was from our financial services operations. Revenue from homes delivered decreased 4% in 2023's second quarter compared to the same period in 2022 driven primarily by a 7% decrease in the number of homes delivered (143 units), offset partially by a 3% increase in the average sales price of homes delivered ($16,000 per home delivered). Revenue from land sales increased $5.2 million from the second quarter of 2022 due to more land sales in the current year compared to the prior year. Revenue from our financial services segment increased 30% to $25.3 million in the second quarter of 2023 as a result of an increase in the average loan amount, higher margins on loans sold during the period compared to the second quarter of 2022, and an increase in loans sold during the period. For the first half of 2023, we recorded year-to-date record total revenue of $2.01 billion, of which $1.96 billion was from homes delivered, $8.9 million was from land sales and $50.5 million was from our financial services operations. Revenue from homes delivered increased 6% in the first half of 2023 compared to the same period in 2022 driven primarily by a 4% increase in the average sales price of homes delivered ($21,000 per home delivered), which was primarily in response to robust consumer demand in 2021 and early 2022 when the homes delivered during our first quarter were placed under contract, in addition to a 1% increase in the number of homes delivered (41 units). Revenue from land sales increased $1.9 million from the six months ended June 30, 2022 due to increased land sales in 2023's first six months compared to the prior year. Revenue from our financial services segment increased 16% to $50.5 million in the first half of 2023 as a result of an increase in the average loan amount, higher margins on loans sold during the period compared to the first half of 2022, and an increase in loans sold during the period.

Total gross margin (total revenue less total land and housing costs) decreased $26.1 million in the second quarter of 2023 compared to the second quarter of 2022 as a result of a $32.0 million decline in the gross margin of our homebuilding operations (housing gross margin and land sales gross margin), partially offset by a $5.9 million increase 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) decreased $32.3 million and our housing gross margin percentage declined 230 basis points from 26.0% in prior year's second quarter to 23.7% in 2023's second quarter. These decreases primarily resulted from increased construction costs as well as increased sales and financing incentives offered during the period, in addition to the 7% decrease in homes delivered, offset partially by the 3% increase in average sales price of homes delivered compared to prior year. Our housing gross margin may fluctuate from quarter to quarter depending on the mix of communities delivering homes due to the variation in margin between different communities. Our gross margin on land sales (land sale gross margin) increased $0.3 million in the second quarter of 2023 compared to the second quarter of 2022 as a result of more land sales in the current year first quarter compared to the prior year. The gross margin of our financial services operations increased $5.9 million in the second quarter of

2023 compared to the second quarter of 2022 as a result of higher margins on and an increased number of loans sold and an increase in the average loan amount during the second quarter of 2023 compared to the second quarter of 2022, partially offset by a decrease in the number of loan originations. Total gross margin decreased $4.5 million in the first half of 2023 compared to the same period in 2022 as a result of an $11.6 million decline in the gross margin of our homebuilding operations, offset partially by a $7.1 million improvement in the gross margin of our financial services operations. With respect to our homebuilding gross margin, our gross margin on homes delivered declined $11.0 million and our housing gross margin percentage declined 180 basis points from 24.4% in prior year’s first half to 22.6% in 2023's first half. These decreases primarily resulted from increased construction and lot costs, offset partially by the 4% increase in the average sales price of homes delivered and the 1% increase in the number of homes delivered. Our gross margin on land sales declined $0.6 million in 2023's first six months compared to the same period in 2022. The gross margin of our financial services operations increased $7.1 million in the first half of 2023 compared to the same period in 2022 as a result of higher margins on and an increased number of loans sold during the first half of 2023 compared to the first half of 2022 offset partially by a decrease in the number of loan originations. Our housing gross margin may fluctuate from quarter to quarter depending on the mix of communities delivering homes, due to the variation in margin between different communities.

Headwinds from supply chain issues and regulatory delays have impacted development completions and model openings which have delayed planned community openings. We opened 34 new communities during the first half of 2023 and closed 35 communities.

For the three months ended June 30, 2023, selling, general and administrative expense increased $6.1 million, and increased as a percentage of revenue from 9.7% in the second quarter of 2022 to 10.6% in the second quarter of 2023. Selling expense increased $5.7 million from 2022's second quarter and increased as a percentage of revenue to 5.1% in 2023's second quarter from 4.4% for the same period in 2022. Variable selling expense for sales commissions contributed $4.3 million to the increase due to the increased average sales price of homes delivered during the second quarter of 2023. Non-variable selling expense increased $1.4 million primarily as a result of increased costs associated with our sales offices and models. General and administrative expense increased $0.4 million compared to the second quarter of 2022 and increased as a percentage of revenue from 5.3% in the second quarter of 2022 to 5.5% in the second quarter of 2023. The increase in general and administrative expense was primarily due to a $0.6 million increase in compensation-related expenses and a $0.6 million increase in professional fees, partially offset by a $0.8 million decrease in land-related expenses. For the six months ended June 30, 2023, selling, general and administrative expense increased $15.9 million, and increased as a percentage of revenue from 10.1% in the six months ended June 30, 2022 to 10.3% in the first six months of 2023. Selling expense increased $13.3 million from the first half of 2022 and increased as a percentage of revenue to 5.0% in 2023's first half from 4.6% for the same period in 2022. Variable selling expense for sales commissions contributed $10.8 million to the increase due to the higher number of homes delivered during the first half of 2023 and the increase in the average sales price of homes delivered. Non-variable selling expense increased $2.5 million primarily as a result of increased costs associated with our sales offices and models. General and administrative expense increased $2.6 million compared to the first half of 2022 but decreased as a percentage of revenue from 5.5% in the six months ended June 30, 2022 to 5.3% in the first six months of 2023. The dollar increase in general and administrative expense was primarily due to an increase in compensation-related expenses.

### Outlook

Housing market conditions improved over the course of the second quarter of 2023 when compared to the past year. However, uncertainty remains as a result of mortgage interest rates recently increasing to their highest level this year and various macroeconomic conditions, including the 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 uncertain market conditions, 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 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 emphasize the following strategic business objectives throughout the remainder of 2023 and into 2024:

- managing our land spend and inventory levels;
- improving our build cycle time;
- 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 the first six months of 2023, we invested $141.7 million in land acquisitions and $201.3 million in land development. We invested in fewer land acquisitions in the first half of 2023 compared to prior year’s first half due to uncertainty in demand for new homes in the first quarter of 2023. In the first half of 2023, we invested more in land development than in land acquisitions in order to finish lots needed to start homes and allow us to open new communities. 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. However, as a result of the impacts of current market conditions and municipality delays, we are not providing land spending estimates for 2023 at this time.

We ended the second quarter of 2023 with approximately 41,300 lots under control, which represents approximately a 5-year supply of lots based on the past twelve months of homes delivered, including certain lots that we anticipate selling to third parties. This represents a 14% decrease from our approximately 47,800 lots under control at the end of last year’s second quarter.

We opened 34 communities and closed 35 communities in the first half of 2023, ending the second quarter with 195 active communities, compared to 168 at the end of last year’s second quarter. Although the timing of opening new communities and closing existing communities is subject to substantial variation, we expect to grow our community count by approximately 15% by the end of 2023.

While we believe the remainder of 2023 will be challenging compared to the strong market conditions during the first half of 2022 and the previous few years, we also 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.

The following table shows, by segment: revenue; gross margin; selling, general and administrative expense; operating income (loss); and interest expense (income) - net for the three and six months ended June 30, 2023 and 2022:

*(In thousands)*

| Revenue: | Three Months Ended June 30, 2023 | 2022 | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Northern homebuilding | **$383,886** | $472,814 | **$766,616** | $826,600 |
| Southern homebuilding | **604,861** | 548,466 | **1,197,380** | 1,031,380 |
| Financial services (a) | **25,266** | 19,374 | **50,547** | 43,485 |
| Total revenue | **$1,014,013** | $1,040,654 | **$2,014,543** | $1,901,465 |
| Gross margin: |  |  |  |  |
| Northern homebuilding | **$76,489** | $104,292 | **$142,989** | $171,400 |
| Southern homebuilding | **156,429** | 160,621 | **299,274** | 282,511 |
| Financial services (a) | **25,266** | 19,374 | **50,547** | 43,485 |
| Total gross margin | **$258,184** | $284,287 | **$492,810** | $497,396 |
| Selling, general and administrative expense: |  |  |  |  |
| Northern homebuilding | **$29,636** | $30,214 | **$56,976** | $57,106 |
| Southern homebuilding | **46,517** | 40,597 | **91,750** | 78,194 |
| Financial services (a) | **11,523** | 9,766 | **21,836** | 19,944 |
| Corporate | **19,849** | 20,845 | **37,003** | 36,382 |
| Total selling, general and administrative expense | **$107,525** | $101,422 | **$207,565** | $191,626 |
| Operating income (loss): |  |  |  |  |
| Northern homebuilding | **$46,853** | $74,078 | **$86,013** | $114,294 |
| Southern homebuilding | **109,912** | 120,024 | **207,524** | 204,317 |
| Financial services (a) | **13,743** | 9,608 | **28,711** | 23,541 |
| Less: Corporate selling, general and administrative expense | **(19,849)** | (20,845) | **(37,003)** | (36,382) |
| Total operating income | **$150,659** | $182,865 | **$285,245** | $305,770 |
| Interest (income) expense - net: |  |  |  |  |
| Northern homebuilding | **$(47)** | $— | **$(93)** | $— |
| Southern homebuilding | **(203)** | — | **(205)** | (2) |
| Financial services (a) | **2,584** | 941 | **4,911** | 1,819 |
| Corporate | **(7,004)** | (248) | **(10,672)** | (453) |
| Total interest (income) expense - net | **$(4,670)** | $693 | **$(6,059)** | $1,364 |
| Other income | **(28)** | (1) | (35) | (17) |
| Income before income taxes | **$155,357** | $182,173 | **$291,339** | $304,423 |

(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.

The following tables show total assets by segment at June 30, 2023 and December 31, 2022:

*(In thousands)*

|  | At June 30, 2023 Northern | Southern |  | Corporate, Financial Services and Unallocated | Total |
| --- | ---: | ---: | --- | ---: | ---: |
| Deposits on real estate under option or contract | **$7,923** | **$46,596** |  | **$—** | **$54,519** |
| Inventory (a) | **975,315** | **1,657,180** |  | **—** | **2,632,495** |
| Investments in joint venture arrangements | **—** | **41,988** |  | **—** | **41,988** |
| Other assets | **40,315** | **119,319** | (b) | **973,113** | **1,132,747** |
| Total assets | **$1,023,553** | **$1,865,083** |  | **$973,113** | **$3,861,749** |

*(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 |

(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 three and six months ended June 30, 2023 and 2022:

*(Dollars in thousands)*

| Northern Region | Three Months Ended June 30, 2023 | 2022 | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Homes delivered | **783** | 1,000 | **1,580** | 1,760 |
| New contracts, net | **949** | 722 | **1,777** | 1,912 |
| Backlog at end of period | **1,253** | 2,042 | **1,253** | 2,042 |
| Average sales price of homes delivered | **$490** | $471 | **$485** | $469 |
| Average sales price of homes in backlog | **$504** | $507 | **$504** | $507 |
| Aggregate sales value of homes in backlog | **$630,985** | $1,036,239 | **$630,985** | $1,036,239 |
| Housing revenue | **$383,486** | $470,880 | **$766,116** | $824,666 |
| Land sale revenue | **$400** | $1,934 | **$500** | $1,934 |
| Operating income homes (a) | **$46,857** | $73,921 | **$86,013** | $114,137 |
| Operating (loss) income land | **$(4)** | $157 | **$—** | $157 |
| Number of average active communities | **102** | 91 | **101** | 91 |
| Number of active communities, end of period | **100** | 89 | **100** | 89 |
| **Southern Region** |  |  |  |  |
| Homes delivered | **1,207** | 1,133 | **2,417** | 2,196 |
| New contracts, net | **1,248** | 1,098 | **2,591** | 2,422 |
| Backlog at end of period | **2,255** | 3,171 | **2,255** | 3,171 |
| Average sales price of homes delivered | **$494** | $483 | **$492** | $467 |
| Average sales price of homes in backlog | **$509** | $527 | **$509** | $527 |
| Aggregate sales value of homes in backlog | **$1,146,672** | $1,670,347 | **$1,146,672** | $1,670,347 |
| Housing revenue | **$596,712** | $547,026 | **$1,189,028** | $1,026,403 |
| Land sale revenue | **$8,149** | $1,440 | **$8,352** | $4,977 |
| Operating income homes (a) | **$109,016** | $119,590 | **$206,635** | $202,916 |
| Operating income land | **$896** | $434 | **$889** | $1,401 |
| Number of average active communities | **96** | 81 | **96** | 82 |
| Number of active communities, end of period | **95** | 79 | **95** | 79 |
| **Total Homebuilding Regions** |  |  |  |  |
| Homes delivered | **1,990** | 2,133 | **3,997** | 3,956 |
| New contracts, net | **2,197** | 1,820 | **4,368** | 4,334 |
| Backlog at end of period | **3,508** | 5,213 | **3,508** | 5,213 |
| Average sales price of homes delivered | **$493** | $477 | **$489** | $468 |
| Average sales price of homes in backlog | **$507** | $519 | **$507** | $519 |
| Aggregate sales value of homes in backlog | **$1,777,657** | $2,706,586 | **$1,777,657** | $2,706,586 |
| Housing revenue | **$980,198** | $1,017,906 | **$1,955,144** | $1,851,069 |
| Land sale revenue | **$8,549** | $3,374 | **$8,852** | $6,911 |
| Operating income homes (a) | **$155,873** | $193,511 | **$292,648** | $317,053 |
| Operating income land | **$892** | $591 | **$889** | $1,558 |
| Number of average active communities | **198** | 172 | **197** | 173 |
| Number of active communities, end of period | **195** | 168 | **195** | 168 |

(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.

*(Dollars in thousands)*

| Financial Services | Three Months Ended June 30, 2023 | 2022 | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Number of loans originated | **1,281** | 1,343 | **2,539** | 2,614 |
| Value of loans originated | **$515,533** | $516,259 | **$1,009,994** | $996,040 |
| Revenue | **$25,266** | $19,374 | **$50,547** | $43,485 |
| Less: Selling, general and administrative expenses | **11,523** | 9,766 | **21,836** | 19,944 |
| Less: Interest expense | **2,584** | 941 | **4,911** | 1,819 |
| Income before income taxes | **$11,159** | $8,667 | **$23,800** | $21,722 |

28

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 three and six months ended June 30, 2023 and 2022:

|  | Three Months Ended June 30, 2023 | 2022 | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Northern | **9.1%** | 11.6% | **9.9%** | 8.6% |
| Southern | **11.4%** | 10.9% | **12.7%** | 9.2% |
| Total cancellation rate | **10.4%** | 11.2% | **11.6%** | 8.9% |

### Seasonality

Typically, our homebuilding operations experience significant seasonality and quarter-to-quarter variability in homebuilding activity levels. In general, homes delivered increase substantially in the second half of the year compared to the first 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 loan originations correspond with the delivery of homes in our homebuilding operations.

### Year Over Year Comparison

### Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

***Northern Region.*** During the three months ended June 30, 2023, homebuilding revenue in our Northern region decreased $88.9 million, from $472.8 million in the second quarter of 2022 to $383.9 million in the second quarter of 2023. This 19% decrease in homebuilding revenue was primarily the result of a 22% decrease in the number of homes delivered (217 less units) due to industry conditions discussed above in our Overview section in addition to a lower beginning backlog for the second quarter of 2023 compared to the second quarter of 2022, partially offset by a 4% increase in the average sales price of homes delivered ($19,000 per home delivered). Operating income in our Northern region decreased $27.2 million from $74.1 million in the second quarter of 2022 to $46.9 million during the quarter ended June 30, 2023. This decrease in operating income was the result of a $27.8 million decline in our gross margin partially offset by a $0.6 million decrease in selling, general and administrative expense. With respect to our homebuilding gross margin, our housing gross margin declined $27.6 million and our housing gross margin percentage declined 220 basis points to 19.9% in the second quarter of 2023 from 22.1% in the prior year’s second quarter. These declines were primarily due to increased construction and lot costs and the decrease in the number of homes delivered noted above, offset partially by the increase in average sales price of homes delivered compared to prior year. Our land sale gross margin declined $0.2 million in the second quarter of 2023 compared to the same period in 2022 as a result of the mix of lots sold in the current year compared to the prior year.

Selling, general and administrative expense decreased $0.6 million, from $30.2 million for the quarter ended June 30, 2022 to $29.6 million for the quarter ended June 30, 2023, and increased as a percentage of revenue to 7.7% in 2023's second quarter from 6.4% in 2022's second quarter. The decrease in selling, general and administrative expense was primarily attributable to a decrease in compensation-related expenses and a slight decline in variable selling expenses resulting from decreases in sales commissions produced by the lower number of homes delivered.

During the three months ended June 30, 2023, we experienced a 31% increase in new contracts in our Northern region, from 722 in the second quarter of 2022 to 949 in the second quarter of 2023. The increase in new contracts was primarily due to the increase in our average communities compared to prior year in addition to improved demand. Homes in backlog decreased 39% from 2,042 homes at June 30, 2022 to 1,253 homes at June 30, 2023. The decrease in backlog was primarily a result of difficult comps versus last year. Average sales price in backlog decreased to $504,000 at June 30, 2023 compared to $507,000 at June 30, 2022 primarily due to increased sales discounts offered and the mix of homes being sold. During the second quarter of 2023, we opened nine new communities in our Northern region compared to five during the second quarter of 2022. Our monthly absorption rate in our Northern region improved to 3.1 per community in the second quarter of 2023 compared to 2.6 per community in 2022's second quarter due to the increase in new contracts during the quarter.

***Southern Region.*** During the three month period ended June 30, 2023, homebuilding revenue in our Southern region increased $56.4 million, from $548.5 million in the second quarter of 2022 to $604.9 million in the second quarter of 2023. This 10% increase in homebuilding revenue was the result of an 2% increase in the average sales price of homes delivered ($11,000 per home delivered) and a 7% increase in the number of homes delivered (74 more units) due to increased availability of inventory homes. Operating income in our Southern region decreased $10.1 million from $120.0 million in the second quarter of 2022 to $109.9 million during the quarter ended June 30, 2023. This decrease in operating income was the result of a $4.2 million decline in our gross margin and a $5.9 million increase in selling, general, and administrative expense. With respect to our homebuilding gross margin, our housing gross margin declined $4.7 million and our housing gross margin percentage declined from 29.3% in prior year’s second quarter to 26.1% in the second quarter of 2023. These declines were largely due to increased construction and lot costs, offset partially by the increase in average sales price of homes delivered compared to prior year and the increase in the number of homes delivered compared to prior year. Our land sale gross margin improved $0.5 million in the second quarter of 2023 compared to the second quarter of 2022 as a result of the mix of lots sold in the current year compared to the prior year.

Selling, general and administrative expense increased $5.9 million from $40.6 million in the second quarter of 2022 to $46.5 million in the second quarter of 2023 and increased as a percentage of revenue to 7.7% from 7.4% in the second quarter of 2022. The increase in selling, general and administrative expense was attributable to a $5.9 million increase in selling expense primarily due to a $5.0 million increase in variable selling expenses resulting from increases in sales commissions produced by the higher number of homes delivered as well as a $0.9 million increase in non-variable selling expense primarily as a result of increased costs associated with our sales offices and models.

During the three months ended June 30, 2023, we experienced a 14% increase in new contracts in our Southern region, from 1,098 in the second quarter of 2022 to 1,248 in the second quarter of 2023. The increase in new contracts was primarily due to our increased community count compared to prior year in addition to improved demand. Homes in backlog decreased 29% from 3,171 homes at June 30, 2022 to 2,255 homes at June 30, 2023 primarily as a result of difficult comps versus last year. Average sales price in backlog decreased to $509,000 at June 30, 2023 from $527,000 at June 30, 2022 primarily due to increased sales discounts offered and the mix of homes being sold. During the three months ended June 30, 2023, we opened six new communities in our Southern region compared to opening 15 communities during 2022's second quarter. Our monthly absorption rate in our Southern region declined slightly to 4.4 per community in the second quarter of 2023 compared to 4.6 per community in the second quarter of 2022 as a result of the increase in our average communities compared to prior year, partially offset by the 14% increase in new contracts compared to prior year.

***Financial Services.*** Revenue from our mortgage and title operations increased 30% to $25.3 million in the second quarter of 2023 from $19.4 million in the second quarter of 2022 due to an increase in the average loan amount from $384,000 in the quarter ended June 30, 2022 to $402,000 in the quarter ended June 30, 2023, higher margins on loans sold during the period compared to prior year’s second quarter, partially offset by a 5% decrease in the number of loan originations from 1,343 in 2022's second quarter to 1,281 in the second quarter of 2023.

Our financial services segment experienced a $4.1 million increase in operating income in the second quarter of 2023 compared to 2022's second quarter, which was primarily due to the increase in revenue discussed above offset, in part, by a $1.8 million increase in selling, general and administrative expense compared to the second quarter of 2022, which was primarily the result of a $0.8 million increase in indemnification write-offs and a $1.0 million increase in other miscellaneous expenses.

At June 30, 2023, M/I Financial provided financing services in all of our markets. Approximately 81% of our homes delivered during the second quarter of 2023 were financed through M/I Financial, compared to 77% in the second quarter of 2022. Capture rate is influenced by financing availability and competition in the mortgage market, and can fluctuate from quarter to quarter.

***Corporate Selling, General and Administrative Expense.*** Corporate selling, general and administrative expense decreased $1.0 million from $20.8 million for the second quarter of 2022 to $19.8 million for the second quarter of 2023. This decrease primarily resulted from a $0.5 million decrease in charitable contributions and a $0.5 million decrease in miscellaneous expenses.

***Interest (Income) Expense - net.*** The Company earned $4.7 million of interest income - net for the three months ended June 30, 2023 compared to incurring $0.7 million of interest expense - net for the three months ended June 30, 2022. This was primarily due to a higher average cash balance on hand compared to prior year.

***Income Taxes.*** Our overall effective tax rate was 24.0% for the three months ended June 30, 2023 and 24.9% for the three months ended June 30, 2022. The decrease in the effective rate from the three months ended June 30, 2022 was primarily attributable to a $1.0 million increase in tax benefit from equity compensation for 2023.

### Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

***Northern Region.*** During the first half of 2023, homebuilding revenue in our Northern region decreased $60.0 million, from $826.6 million in the first six months of 2022 to $766.6 million in the first six months of 2023. This 7% decrease in homebuilding revenue was primarily the result of a 10% decrease in the number of homes delivered (180 less units) due to lower beginning backlog for the current year compared to the prior year, and a $1.4 million decrease in land sale revenue, offset partially by a 3% increase in the average sales price of homes delivered ($16,000 per home delivered). Operating income in our Northern region decreased $28.3 million, from $114.3 million during the first half of 2022 to $86.0 million during the six months ended June 30, 2023. The decrease in operating income was primarily the result of a $28.4 million decrease in our gross margin offset partially by a $0.1 million decrease in selling, general and administrative expense. With respect to our homebuilding gross margin, our housing gross margin declined $28.3 million, and our housing gross margin percentage declined 210 basis points from 20.8% in the first six months of 2022 to 18.7% for the same period in 2023, primarily due to increased construction and lot costs, offset partially by the increase in average sales price of homes delivered compared to prior year. Our land sale gross margin declined $0.2 million in the first half of 2023 compared to the same period in 2022 as a result of the mix of lots sold in the current year compared to the prior year.

Selling, general and administrative expense decreased $0.1 million, from $57.1 million for the six months ended June 30, 2022 to $57.0 million for the six months ended June 30, 2023, but increased as a percentage of revenue to 7.4% in the first half of 2023 compared to 6.9% in the same period in 2022. The decrease in selling, general and administrative expense was attributable to a $1.0 million decrease in general and administrative expense, which was primarily related to a $0.5 million decrease in compensation-related expenses and $0.5 million decrease in other miscellaneous expenses, partially offset by a $0.9 million increase in selling expense primarily as a result of increased costs associated with our sales offices and models.

During the six months ended June 30, 2023, we experienced a 7% decrease in new contracts in our Northern region, from 1,912 in the six months ended June 30, 2022 to 1,777 in the first half of 2023. Homes in backlog also decreased 39% from 2,042 at June 30, 2022 to 1,253 homes at June 30, 2023. The decreases in new contracts and backlog were primarily due to overall decline in demand compared to prior year. Average sales price in backlog decreased to $504,000 at June 30, 2023 compared to $507,000 at June 30, 2022 primarily due to increased sales discounts offered and the mix of homes being sold. During the six months ended June 30, 2023, we opened 20 new communities in our Northern region, the same as we open during the first half of 2022. Our monthly absorption rate in our Northern region declined to 2.9 per community in the six months ended June 30, 2023 from 3.5 per community in the same period in 2022 as a result of the decrease in the number of new contracts during the period compared to prior year and the increase in the number of average active communities.

***Southern Region.*** During the six months ended June 30, 2023, homebuilding revenue in our Southern region increased $166.0 million from $1.03 billion in the first half of 2022 to $1.20 billion in the first half of 2023. This 16% increase in homebuilding revenue was the result of a 5% increase in the average sales price of homes delivered ($25,000 per home delivered), a 10% increase in the number of homes delivered (221 more units) due to increased availability of inventory homes, and a $3.4 million increase in land sale revenue. Operating income in our Southern region increased 2% from $204.3 million in the first half of 2022 to $207.5 million during the six months ended June 30, 2023. This increase in operating income was the result of a $16.8 million improvement in our gross margin, offset partially by a $13.6 million increase in selling, general, and administrative expense. With respect to our homebuilding gross margin, our gross margin on homes delivered improved $17.3 million, due primarily to the increase in average sale price of homes delivered and the increase in the number of homes delivered during the period. Our housing gross margin percentage declined 230 basis points from 27.4% in the six months ended June 30, 2022 to 25.1% in the same period in 2023, primarily due to increased construction and lot costs, offset partially by the increase in average sales price of homes delivered compared to prior year. Our land sale gross margin declined $0.5 million in the first half of 2023 compared to the same period in 2022 as a result of the mix of lots sold in the current year compared to the prior year.

Selling, general and administrative expense increased $13.6 million from $78.2 million in the first half of 2022 to $91.8 million in the first half of 2023 and increased as a percentage of revenue to 7.7% from 7.6% for the first half of 2022. The increase in selling, general and administrative expense was attributable to a $12.6 million increase in selling expense primarily due to a

$10.6 million increase in variable selling expenses resulting from increases in sales commissions produced by the higher number of homes delivered as well as a $2.0 million increase in non-variable selling expenses primarily related to costs associated with our sales offices and models. The increase in selling, general and administrative expense was also attributable to a $1.0 million increase in general and administrative expense, which was primarily related to an increase in compensation-related expenses due to our strong financial performance during the period.

During the six months ended June 30, 2023, we experienced a 7% increase in new contracts in our Southern region, from 2,422 in the six months ended June 30, 2022 to 2,591 in the first half of 2023 primarily due to the increase in our average number of communities compared to prior year. Homes in backlog decreased 29% from 3,171 homes at June 30, 2022 to 2,255 homes at June 30, 2023 due primarily to difficult comps compared to prior year. Average sales price in backlog decreased from $527,000 at June 30, 2022 to $509,000 at June 30, 2023 primarily due to increased sales discounts offered and the mix of homes being sold. During the six months ended June 30, 2023, we opened 14 communities in our Southern region, compared to opening 31 during the first half of 2022. The decline was a result of delayed land acquisitions and development spend due to market conditions beginning in the second half of 2022, in addition to delays in approvals for entitlements and permits, and construction and supply chain disruptions, all of which delayed community openings during the period. Our monthly absorption rate in our Southern region declined to 4.5 per community in the first half of 2023 from 4.9 per community in the first half of 2022 as a result of the increase in our average communities compared to prior year.

***Financial Services.*** Revenue from our mortgage and title operations increased 16% from $43.5 million in the first half of 2022 to $50.5 million in the first half of 2023 due to higher margins on loans sold during the period compared to 2022's first half and an increase in the average loan amount from $381,000 in the six months ended June 30, 2022 to $398,000 in the six months ended June 30, 2023, offset partially by a 3% decrease in the number of loan originations from 2,614 in the first half of 2022 to 2,539 in the first half of 2023.

Our financial services segment experienced a $5.2 million increase in operating income in the first half of 2023 compared to the same period in 2022, which was primarily due to the increase in revenue discussed above, partially offset by a $1.9 million increase in selling, general and administrative expense compared to the first half of 2022. The increase in selling, general and administrative expense was primarily attributable to a decrease in compensation-related expenses.

At June 30, 2023, M/I Financial provided financing services in all of our markets. Approximately 79% of our homes delivered during both the first half of 2023 and 2022 were financed through M/I Financial. Capture rate is influenced by financing availability and can fluctuate from quarter to quarter.

***Corporate Selling, General and Administrative Expense.*** Corporate selling, general and administrative expense increased $0.6 million from $36.4 million for the six months ended June 30, 2022 to $37.0 million for the six months ended June 30, 2023, primarily due to an increase in miscellaneous expenses incurred during the period.

***Interest (Income) Expense - net.*** The Company earned $6.1 million of interest income - net for the six months ended June 30, 2023 compared to incurring $1.4 million of interest expense - net for the six months ended June 30, 2022. This was primarily due to a higher average cash balance on hand compared to prior year.

***Income Taxes.*** Our overall effective tax rate was 24.1% for the six months ended June 30, 2023 and 24.9% for the six months ended June 30, 2022. The decrease in the effective rate from the six months ended June 30, 2022 was primarily attributable to a $1.6 million increase in tax benefit from equity compensation and a $0.9 million increase in tax benefit for energy efficient homes credit taken during the first half of 2023 compared to the same period in 2022 (due to the timing of the IRA enactment as described further in Note 10).

### LIQUIDITY AND CAPITAL RESOURCES

### Overview of Capital Resources and Liquidity.

At June 30, 2023, we had $668.3 million of cash, cash equivalents and restricted cash, with $667.4 million of this amount comprised of unrestricted cash and cash equivalents, which represents a $356.8 million increase in unrestricted cash and cash equivalents from December 31, 2022. The increase in cash is primarily due to lower land spend than in prior year, fewer houses under construction compared to prior year, house closings, as well as a larger beginning of year balance on hand, Our principal uses of cash for the six months ended June 30, 2023 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 $15.2 million of our outstanding common shares under our 2021 Share Repurchase Program (as defined below). In order to fund these uses of cash, we used proceeds from home deliveries, the sale of mortgage loans, the sale of mortgage servicing rights, excess cash balances, borrowings under our credit facilities, and other sources of liquidity.

The Company is a party to three primary credit agreements: (1) a $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) a $200 million secured mortgage warehousing agreement, dated May 26, 2023, with M/I Financial as borrower (the “MIF Mortgage Warehousing Agreement”); and (3) a $90 million mortgage repurchase agreement, dated October 30, 2017, as amended on October 24, 2022, with M/I Financial as borrower (the “MIF Mortgage Repurchase Facility”).

As of June 30, 2023, 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 in an aggregate principal amount of $886.4 million, with $186.4 million payable within 12 months. Future interest payments associated with these notes payable totaled $182.1 million as of June 30, 2023, with $31.8 million payable within 12 months.

As of June 30, 2023, there were no borrowings outstanding and $81.2 million of letters of credit outstanding under our $650 million Credit Facility, leaving $568.8 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, excess cash balances and availability under our credit facilities.

During the first half of 2023, we delivered 3,997 homes, started 3,981 homes, ended the quarter with 4,500 homes under construction versus 6,300 at the end of last year’s second quarter, and spent $141.7 million on land purchases and $201.3 million on land development.

We are actively acquiring and developing lots in our markets to replenish our lot supply and 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 June 30, 2023, we had a total of 17,894 lots under contract, with an aggregate purchase price of approximately $848.3 million, to be acquired during the remainder of 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. We use these arrangements to secure 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.

***Operating Cash Flow Activities.*** During the six-month period ended June 30, 2023, we generated $417.7 million of cash from operating activities, compared to generating $78.5 million of cash from operating activities during the first half of 2022. The cash generated in operating activities in the first half of 2023 was primarily a result of net income of $221.1 million, $52.5 million of proceeds from the sale of mortgage loans net of mortgage loan originations, a $157.0 million decrease in inventory purchases due to delays and timing of land purchases and an increase of $36.1 million in accounts payable, offset, in part, by a decrease in accrued compensation and other liabilities totaling $62.0 million. The cash generated from operating activities in first half of 2022 was primarily a result of net income of $228.7 million, $78.3 million of proceeds from the sale of mortgage loans net of mortgage loan originations, and an increase in accounts payable, customer deposits and other liabilities totaling $122.7 million offset, in part, by a $336.5 million increase in inventory, a decrease in accrued compensation of $13.4 million and an increase in other assets of $9.9 million.

***Investing Cash Flow Activities.*** During the first half of 2023, we used $2.8 million of cash from investing activities, compared to using $11.5 million of cash from investing activities during the first half of 2022. The cash used in investing activities in the first half of 2023 was primarily a result of a $10.5 million increase in our investment in joint venture arrangements and a $2.1 million increase in property and equipment, offset, in part, by $9.8 million of proceeds from the sale of a portion of our mortgage servicing rights during the second quarter of 2023. The cash used in investing activities during the first half of 2022 was primarily a result of a $10.9 million increase in our investment in joint venture arrangements.

***Financing Cash Flow Activities.*** During the six months ended June 30, 2023, we used $58.1 million of cash from financing activities, compared to using $114.7 million of cash from financing activities during the first six months of 2022. The cash used in financing activities in 2023 was primarily due to repayments of $59.3 million (net of proceeds from borrowings) under our two M/I Financial credit facilities and the repurchase of $15.2 million of our outstanding common shares during the first half of 2023, offset partially by $16.6 million in proceeds from the exercise of stock options during the first half of 2023. The cash used in financing activities in first half of 2022 was primarily due to repayments of $71.6 million (net of proceeds from borrowings) under our two M/I Financial credit facilities and the repurchase of $40.2 million of our outstanding common shares during the first half of 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 (the “2021 Share Repurchase Program”). On February 17, 2022, the Company announced that its Board of Directors approved an increase to its 2021 Share Repurchase Program, for a total of $200 million authorized for repurchases. During the first half of 2023, the Company repurchased 0.2 million outstanding common shares for an aggregate purchase price of $15.2 million under the 2021 Share Repurchase Program which was funded with cash on hand. As of June 30, 2023, the Company is authorized to repurchase an additional $77.9 million of outstanding common shares under the 2021 Share Repurchase Program (see Note 12 to our financial statements for more information).

Based on current market conditions, expected capital needs and availability, and the current market price of the Company’s common shares, we expect to continue repurchasing shares during the remainder of 2023. The timing and amount of any future purchases under the 2021 Share Repurchase Program will be 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 June 30, 2023 and December 31, 2022, our ratio of homebuilding debt to capital was 23% and 25%, 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 and home delivery 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 June 30, 2023:

*(In thousands)*

|  | Expiration Date | Outstanding Balance | Available Amount |
| --- | --- | ---: | ---: |
| Notes payable – homebuilding (a) | (a) | $— | $568,840 |
| Notes payable – financial services (b) | (b) | $186,396 | $2,379 |

(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 $1.81 billion of availability for additional senior debt at June 30, 2023. 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 $81.2 million of letters of credit outstanding at June 30, 2023, leaving $568.8 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, which was $290 million as of June 30, 2023. The MIF Mortgage Warehousing Agreement has an expiration date of May 24, 2024 and the MIF Mortgage Repurchase Facility has an expiration date of October 23, 2023.

### Notes Payable - Homebuilding.

***Homebuilding Credit Facility.*** The Credit Facility provides for an aggregate commitment amount of $650 million and also includes an 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. The Credit Facility matures on December 9, 2026. Interest on amounts borrowed under the Credit Facility is payable at multiple interest rate options, including one, three, or six month adjusted term secured overnight financing rate (“SOFR”) (subject to a floor of 0.25%) plus a margin of 175 basis points (subject to adjustment in subsequent quarterly periods based on the Company’s 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 $1.42 billion at June 30, 2023 (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 and model homes, 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 (as defined in the Credit Facility), 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 June 30, 2023, 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 June 30, 2023:

*(Dollars in millions)*

| Financial Covenant |  | Covenant Requirement | Actual |
| --- | --- | ---: | ---: |
| Consolidated Tangible Net Worth | ≥ | $1,418.0 | $2,214.9 |
| Leverage Ratio | ≤ | 0.60 | 0.04 |
| Interest Coverage Ratio | ≥ | 1.5 to 1.0 | 20.6 to 1.0 |
| Investments in Unrestricted Subsidiaries and Joint Ventures | ≤ | $664.5 | $6.0 |
| Unsold Housing Units and Model Homes | ≤ | 2,942 | 1,214 |

### 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. On May 26, 2023, M/I Financial amended and restated the MIF Mortgage Warehousing Agreement which, among other things, extended the expiration date to May 24, 2024, and replaced the Bloomberg Short Term Bank Yield Index (“BSBY”) rate with the SOFR rate. The MIF Mortgage Warehousing Agreement provides for a maximum borrowing availability of $200 million, which increases to $275 million from September 18, 2023 to November 10, 2023 and increases to $300 million from November 11, 2023 to February 9, 2024. Interest on amounts borrowed under the MIF Mortgage Warehousing Agreement is payable at a per annum rate equal to the one-month SOFR rate (adjusting daily subject to a floor of 0.50%) plus a spread of 165 basis points.

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 June 30, 2023, there was $134.5 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 June 30, 2023:

*(Dollars in millions)*

| Financial Covenant Leverage Ratio | ≤ | Covenant Requirement 12.0 to 1.0 | Actual 5.8 to 1.0 |
| --- | --- | ---: | ---: |
| Liquidity | ≥ | $10.0 | $37.1 |
| Adjusted Net Income | \> | $0.0 | $22.8 |
| Tangible Net Worth | ≥ | $20.0 | $37.1 |

***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 annually by the participating lender. The current lender or M/I Financial may choose not to extend the MIF Mortgage Repurchase Facility on or prior to the current expiration date of October 23, 2023.

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 June 30, 2023, there was $51.9 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 June 30, 2023.

### 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 June 30, 2023, 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 June 30, 2023, the Company was in compliance with all terms, conditions, and covenants under the indenture.

See Note 8 to our financial statements for more information regarding the 2030 Senior Notes and the 2028 Senior Notes.

### Supplemental Financial Information.

As of June 30, 2023, 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.

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: | As of June 30, 2023 | As of December 31, 2022 |
| --- | ---: | ---: |
| Cash | **$629,824** | $269,071 |
| Investment in joint venture arrangements | **$36,348** | $45,907 |
| Amounts due from Non-Guarantor Subsidiaries | **$8,047** | $15,772 |
| Total assets | **$3,594,200** | $3,379,932 |
| Liabilities and Shareholders’ Equity |  |  |
| Total liabilities | **$1,349,039** | $1,359,951 |
| Shareholders’ equity | **$2,245,161** | $2,019,981 |

### Summarized Statement of Income Data

*(In thousands)*

|  | Six Months Ended June 30, 2023 |
| --- | ---: |
| Revenues | $1,963,996 |
| Land and housing costs | $1,521,733 |
| Selling, general and administrative expense | $185,119 |
| Income before income taxes | $268,114 |
| Net income | $202,064 |

***Weighted Average Borrowings.*** For the three months ended June 30, 2023 and 2022, our weighted average borrowings outstanding were $757.5 million and $781.9 million, respectively, with a weighted average interest rate of 5.32% and 4.86%, respectively. The decrease in our weighted average borrowings related to decreased borrowings under our two M/I Financial credit facilities during the second quarter of 2023 compared to the same period in 2022. The increase in our weighted average borrowing rate was due to higher interest rates on our credit facilities in 2023 compared to the prior year.

At both June 30, 2023 and December 31, 2022, we had no borrowings outstanding under the Credit Facility. Based on our currently anticipated spending on home construction, overhead expenses and land acquisition and development during the remainder of 2023, offset by expected cash receipts from home deliveries and other sources, we do not expect to incur borrowings under the Credit Facility during the remainder of 2023. To the extent we elect to borrow under the Credit Facility during the remainder of 2023, the actual amount borrowed 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 $81.2 million of letters of credit issued and outstanding under the Credit Facility at June 30, 2023. During the six months ended June 30, 2023, the average daily amount of letters of credit outstanding under the Credit Facility was $80.6 million and the maximum amount of letters of credit outstanding under the Credit Facility was $94.9 million.

At June 30, 2023, M/I Financial had $134.5 million outstanding under the MIF Mortgage Warehousing Agreement. During the six months ended June 30, 2023, the average daily amount outstanding under the MIF Mortgage Warehousing Agreement was $17.1 million and the maximum amount outstanding was $200.9 million, which occurred during January 2023 while the temporary increase provision was in effect and the maximum borrowing availability was $300.0 million.

At June 30, 2023, M/I Financial had $51.9 million outstanding under the MIF Mortgage Repurchase Facility. During the six months ended June 30, 2023, the average daily amount outstanding under the MIF Mortgage Repurchase Facility was $36.9 million and the maximum amount outstanding was $59.1 million, which occurred during May 2023.

***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 approximately 3% in June 2023, as measured by the Consumer Price Index (CPI), down from 6.5% in December 2022 and down from 9.1% in June 2022 (which was the highest inflation rate experienced in 40 years). As a result of the high inflation rates during 2022, we 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. As the rate of inflation declined during 2023, our costs began to stabilize, as evidenced by our sequential increase in gross margin from the first quarter of 2023 to the second quarter of 2023.

Beginning in the second half of 2022, the pace of sales across the homebuilding industry declined significantly from the unprecedented levels experienced in the two years prior 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. Interest rates have appeared to stabilize in 2023 at approximately 7% as rate increases moderated. 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, although we have seen a recovery in demand over the last two quarters as a result of potential homebuyers re-entering the market after becoming more accustomed to the higher interest rate environment, along with the limited supply of new and resale inventory. Rising interest rates, as well as increased materials and labor costs, can also reduce gross margins.

## Market risk

As filed, 5,850 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 $940 million as of June 30, 2023, 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 June 30, 2023 and December 31, 2022:

| Description of Financial Instrument (in thousands) | June 30, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Whole loan contracts and related committed IRLCs | **$937** | $— |
| Uncommitted IRLCs | **222,123** | 262,529 |
| FMBSs related to uncommitted IRLCs | **212,000** | 341,088 |
| Whole loan contracts and related mortgage loans held for sale | **10,412** | 16,507 |
| FMBSs related to mortgage loans held for sale | **175,000** | 232,518 |
| Mortgage loans held for sale covered by FMBSs | **182,057** | 233,378 |

The table below shows the measurement of assets and liabilities at June 30, 2023 and December 31, 2022:

| Description of Financial Instrument (in thousands) | June 30, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Mortgage loans held for sale | **$190,845** | $242,539 |
| Forward sales of mortgage-backed securities | **2,862** | (3,005) |
| Interest rate lock commitments | **1,739** | 787 |
| Whole loan contracts | **(274)** | (377) |
| Total | **$195,172** | $239,944 |

The following table sets forth the amount of (loss) gain recognized on assets and liabilities for the three and six months ended June 30, 2023 and 2022:

| Description (in thousands) | Three Months Ended June 30, 2023 | 2022 | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Mortgage loans held for sale | **$(3,139)** | $3,081 | **$836** | $(2,875) |
| Forward sales of mortgage-backed securities | **4,632** | (16,312) | **5,867** | (2,753) |
| Interest rate lock commitments | **(2,537)** | 4,536 | **961** | (2,693) |
| Whole loan contracts | **474** | (13) | **94** | 112 |
| Total (loss) gain recognized | **$(570)** | $(8,708) | **$7,758** | $(8,209) |

39

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 June 30, 2023. 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 June 30, 2023. 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 6/30/2023 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Fixed rate | $191,440 | — | — | — | — | — | $191,440 | $190,845 |
| Weighted average interest rate | 5.89% | — | — | — | — | — | 5.89% |  |
| LIABILITIES: |  |  |  |  |  |  |  |  |
| Long-term debt — fixed rate | — | — | — | — | — | $700,000 | $700,000 | $630,250 |
| Weighted average interest rate | — | — | — | — | — | 4.52% | 4.52% |  |
| Short-term debt — variable rate | $186,396 | — | — | — | — | — | $186,396 | $186,396 |
| Weighted average interest rate | 6.77% | — | — | — | — | — | 6.77% |  |

40

## Controls and procedures

As filed, 937 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) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended) was performed by the Company’s management, with the participation of the Company’s principal executive officer and principal financial officer. 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 report.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Filed Jul 28, 2023.
Source: SEC EDGAR, the filing index for accession 0000799292-23-000091. Last ingested by Listed: Oct 30, 2026, 16:11 ET. No prices; not investment advice.