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

- Company: [M/I Homes, Inc.](/companies/mho.md) (CIK 799292)
- Form: 10-Q
- Filed: 2023-10-27
- Accepted by EDGAR: Oct 27, 2023, 10:23 ET
- Period: 2023-09-30
- Accession: 0000799292-23-000120
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/799292/000079929223000120/mho-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/799292/000079929223000120/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $1.05bn | us-gaap:Revenues |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $3.06bn | us-gaap:Revenues |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $764.6m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $2.29bn | us-gaap:CostOfGoodsAndServicesSold |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $172.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $457.4m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $38.9m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $109.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $139.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $360.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $4.82 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $12.58 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $4.98 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $12.97 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 28,837,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 28,631,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $497.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $4.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $40.3m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Total assets | at 2023-09-30 | $4.00bn | us-gaap:Assets |
| Total liabilities | at 2023-09-30 | $1.58bn | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $2.43bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 84,920 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 149,800 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 September 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 third quarter of 2023 with an all-time quarterly record net income, third quarter record revenue and income before income taxes, along with strong cash flow and liquidity and low leverage. Our new contracts for the third quarter of 2023 increased 50% compared to the third quarter of 2022 as we experienced improvements in homebuyer demand as a result of the limited supply of resale and new home inventory and potential homebuyers adjusting to the interest rate environment compared to the hesitation that appeared to exist in 2022’s third quarter. Home deliveries increased during the quarter by 3% compared to the third quarter of 2022 as supply chain disruptions have eased leading to an improvement in our building cycle times. This increase resulted in a sequential increase in our gross margin compared to the second quarter of 2023.

We achieved the following record results during the third quarter and the nine months ended September 30, 2023 in comparison to the third quarter and the nine months ended September 30, 2022:

- Revenue increased 3% to $1.05 billion (a third quarter record) and increased 5% to $3.06 billion (a year-to-date record), respectively;
- Income before income taxes increased 7% to $178.0 million (a third quarter record);
- Net income increased 6% to $139.0 million (an all-time quarterly record);
- New contracts increased 50% to 2,021 from 1,349 (second highest third quarter in Company history);
- Average sales price of homes delivered increased 3% to $486,000 (a year-to-date record) for the nine months ended September 30, 2023;
- Number of homes delivered increased 3% to 2,096 homes (second highest third quarter in Company history) and increased 2% to 6,093 homes (second highest year-to-date record in Company history), respectively; and
- Shareholders’ equity of $2.43 billion (a record high for the Company).

In addition to the results described above, our financial services operations also achieved strong income before income taxes for the third quarter and the first nine months 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 third quarter of 2023 improved to 3.4 per month compared to 2.6 per month for the prior year’s third quarter as a result of the 50% increase in the number of new contracts during the quarter compared to prior year, partially offset by a smaller increase in our average community count to 200 for the third quarter of 2023 from 173 for the third quarter of 2022. We plan to open additional new communities during the remainder of 2023, increasing our community count by approximately 15% from the end of 2022.

### Summary of Company Financial Results

Income before income taxes for the third quarter of 2023 increased 7% from $166.6 million in the third quarter of 2022 to a third quarter record $178.0 million in 2023. We achieved an all-time quarterly record net income of $139.0 million, or $4.82 per diluted share, in 2023's third quarter, compared to net income of $131.6 million, or $4.67 per diluted share, in 2022's third quarter. Our effective tax rate was 21.9% in 2023’s third quarter compared to 21.0% in 2022. For the nine months ended September 30, 2023, income before income taxes decreased slightly from $471.0 million in the nine months ended September 30, 2022 to $469.3 million in 2023. We achieved net income of $360.1 million, or $12.58 per diluted share, during 2023’s first nine-month period compared to net income of $360.3 million, or $12.59 per diluted share, in the nine months ended September 30, 2022. Our effective tax rate was 23.3% in 2023's first nine months compared to 23.5% in the same period in 2022.

During the quarter ended September 30, 2023, we achieved record third quarter total revenue of $1.05 billion, of which $1.01 billion was from homes delivered, $14.4 million was from land sales and $23.6 million was from our financial services operations. Revenue from homes delivered increased 2% in 2023's third quarter compared to the same period in 2022 driven primarily by a 3% increase in the number of homes delivered (70 units), offset partially by a 1% decrease in the average sales price of homes delivered ($6,000 per home delivered). Revenue from land sales increased $8.4 million from the third quarter of 2022 due to more land sales in the current year compared to the prior year. Revenue from our financial services segment increased 17% to $23.6 million in the third 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 third quarter of 2022, and an increase in loans sold during the period. For the nine months ended September 30, 2023, we recorded year-to-date record total revenue of $3.06 billion, of which $2.96 billion was from homes delivered, $23.3 million was from land sales and $74.1 million was from our financial services operations. Revenue from homes delivered increased 4% in the nine months ended September 30, 2023 compared to the same period in 2022 driven primarily by a 3% increase in the average sales price of homes delivered ($12,000 per home delivered), in addition to a 2% increase in the number of homes delivered (111 units). Revenue from land sales increased $10.4 million from the nine months ended September 30, 2022 due to increased land sales in 2023's first nine months compared to the prior year. Revenue from our financial services segment increased 17% to $74.1 million in the first nine months of 2023 as a result of an increase in the average loan amount, higher margins on loans sold during the period compared to the nine months ended September 30, 2022, and an increase in loans sold during the period.

Total gross margin (total revenue less total land and housing costs) increased $9.8 million in the third quarter of 2023 compared to the third quarter of 2022 as a result of a $6.3 million improvement in the gross margin of our homebuilding operations (housing gross margin and land sales gross margin) and a $3.5 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) improved $5.6 million and our housing gross margin percentage remained flat at 25.4%. The increase in gross margin dollars primarily resulted from the 3% increase in homes delivered. 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 $0.8 million in the third quarter of 2023 compared to the third quarter of 2022 as a result of more land sales in the current year third quarter compared to the prior year. The gross margin of our financial services operations increased $3.5 million in the third quarter of 2023 compared to the third quarter of 2022 as a result of higher margins on and an increased number of loans sold, an increase in the average loan amount during the third quarter of 2023 compared to the third quarter of 2022, and an increase in the number of loan originations. Total gross margin increased $5.2 million in the nine months ended September 30, 2023 compared to the same period in 2022 as a result of a $10.5 million improvement in the gross margin of our financial services operations partially offset by a $5.3 million decline in the gross margin of our homebuilding operations. With respect to our homebuilding gross margin, our gross margin on homes delivered declined $5.4 million and our housing gross margin percentage declined 130 basis points from 24.8% in prior year’s first nine months to 23.5% in 2023's first nine months. These decreases are primarily due to the mix of homes delivered, offset partially by the 3% increase in the average sales price of homes delivered and the 2% increase in the number of homes delivered. Our gross margin on land sales improved $0.1 million in 2023's first nine months compared to the same period in 2022. The gross margin of our financial services operations increased $10.5 million in the nine months ended September 30,

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 nine months of 2023 compared to the first nine months of 2022, and an increase in the number of loan originations.

We opened 56 new communities during the nine months ended September 30, 2023 and closed 48 communities. Headwinds from supply chain issues and regulatory delays impacted development completions and model openings which delayed planned community openings.

For the three months ended September 30, 2023, selling, general and administrative expense increased $5.0 million, and increased as a percentage of revenue from 10.3% in the third quarter of 2022 to 10.5% in the third quarter of 2023. Selling expense increased $7.4 million from 2022's third quarter and increased as a percentage of revenue to 5.1% in 2023's third quarter from 4.6% for the same period in 2022. Variable selling expense for sales commissions contributed $6.5 million to the increase due to the higher number of homes delivered as well as higher co-op rates during the period compared to prior year. Non-variable selling expense increased $0.9 million primarily as a result of increased costs associated with our sales offices and models. General and administrative expense decreased $2.4 million compared to the third quarter of 2022 and improved as a percentage of revenue from 5.8% in the third quarter of 2022 to 5.3% in the third quarter of 2023. The decrease in general and administrative expense was primarily due to a $1.0 million decrease in compensation-related expenses, a $0.5 million decrease in land-related expenses, and a $0.9 million decrease in miscellaneous expenses. For the nine months ended September 30, 2023, selling, general and administrative expense increased $20.9 million, and increased as a percentage of revenue from 10.2% in the nine months ended September 30, 2022 to 10.4% in the nine months ended September 30, 2023. Selling expense increased $20.7 million from the nine months ended September 30, 2022 and increased as a percentage of revenue to 5.1% in 2023's first nine months from 4.6% for the same period in 2022. Variable selling expense for sales commissions contributed $17.4 million to the increase due to the higher number of homes delivered during the first nine months of 2023 and the increase in the average sales price of homes delivered as well as higher co-op rates during the period compared to prior year. Non-variable selling expense increased $3.3 million primarily as a result of increased costs associated with our sales offices and models. General and administrative expense increased $0.2 million compared to the nine months ended September 30, 2022 but improved as a percentage of revenue from 5.6% in the nine months ended September 30, 2022 to 5.3% in the nine months ended September 30, 2023. The dollar increase in general and administrative expense was primarily due to an increase in compensation-related expenses offset, in part, by an increase in land-related expenses.

### Outlook

Housing market conditions improved over the second and third quarter of 2023 compared to the same period in 2022. However, the housing market remains subject to uncertainty as a result of mortgage interest rates, which rose to a 25-year high and over 60 basis points to over 8% since the end of the third quarter of 2023. Also contributing to the uncertainty are various macroeconomic conditions, including labor and material costs and availability, inflation, and the economic concerns of our potential homebuyers. The extent to which these factors will impact our business is unpredictable. We believe that we are well positioned to manage through the uncertain economic conditions with our affordable product offerings, lot supply and planned new community openings. We remain sensitive to potential 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. Our strong balance sheet and liquidity position should also provide us with flexibility through changing economic 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 nine months ended September 30, 2023, we invested $247.6 million in land acquisitions and $352.6 million in land development compared to $289.6 million and $349.2 million, respectively, during the first nine months of 2022. We invested in fewer land acquisitions in the nine months ended September 30, 2023 compared to prior year’s first nine-month period due to existing owned inventory levels and the timing of land purchases during the first nine months of 2023. In the nine months ended September 30, 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 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.

We ended the third quarter of 2023 with approximately 44,800 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 3% decrease from our approximately 46,100 lots under control at the end of last year’s third quarter.

We opened 56 communities and closed 48 communities in the nine months ended September 30, 2023, ending the third quarter with 204 active communities, compared to 178 at the end of last year’s third 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 11% by the end of 2023.

While we believe the fourth quarter of 2023 may be challenging compared to the market conditions during the first nine months of 2023, we believe that we are well positioned with a strong balance sheet to manage through the current economic environment.

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

*(In thousands)*

| Revenue: | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Northern homebuilding | **$348,240** | $415,741 | **$1,114,856** | $1,242,341 |
| Southern homebuilding | **674,540** | 577,088 | **1,871,920** | 1,608,468 |
| Financial services (a) | **23,591** | 20,099 | **74,138** | 63,584 |
| Total revenue | **$1,046,371** | $1,012,928 | **$3,060,914** | $2,914,393 |
| Gross margin: |  |  |  |  |
| Northern homebuilding | **$72,983** | $89,295 | **$215,972** | $260,695 |
| Southern homebuilding | **185,159** | 162,521 | **484,433** | 445,032 |
| Financial services (a) | **23,591** | 20,099 | **74,138** | 63,584 |
| Total gross margin | **$281,733** | $271,915 | **$774,543** | $769,311 |
| Selling, general and administrative expense: |  |  |  |  |
| Northern homebuilding | **$29,221** | $29,672 | **$86,197** | $86,778 |
| Southern homebuilding | **49,532** | 43,210 | **141,282** | 121,404 |
| Financial services (a) | **11,120** | 10,866 | **32,956** | 30,810 |
| Corporate | **19,729** | 20,872 | **56,732** | 57,254 |
| Total selling, general and administrative expense | **$109,602** | $104,620 | **$317,167** | $296,246 |
| Operating income (loss): |  |  |  |  |
| Northern homebuilding | **$43,762** | $59,623 | **$129,775** | $173,917 |
| Southern homebuilding | **135,627** | 119,311 | **343,151** | 323,628 |
| Financial services (a) | **12,471** | 9,233 | **41,182** | 32,774 |
| Less: Corporate selling, general and administrative expense | **(19,729)** | (20,872) | **(56,732)** | (57,254) |
| Total operating income | **$172,131** | $167,295 | **$457,376** | $473,065 |
| Interest (income) expense - net: |  |  |  |  |
| Northern homebuilding | **$(48)** | $2 | **$(141)** | $2 |
| Southern homebuilding | **—** | (651) | **(205)** | (653) |
| Financial services (a) | **2,593** | 1,350 | **7,504** | 3,169 |
| Corporate | **(8,379)** | — | **(19,051)** | (453) |
| Total interest (income) expense - net | **$(5,834)** | $701 | **$(11,893)** | $2,065 |
| Other expense (income) | **1** | — | (34) | (17) |
| Income before income taxes | **$177,964** | $166,594 | **$469,303** | $471,017 |

(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 September 30, 2023 and December 31, 2022:

*(In thousands)*

|  | At September 30, 2023 Northern | Southern |  | Corporate, Financial Services and Unallocated | Total |
| --- | ---: | ---: | --- | ---: | ---: |
| Deposits on real estate under option or contract | **$8,062** | **$41,533** |  | **$—** | **$49,595** |
| Inventory (a) | **1,046,578** | **1,644,355** |  | **—** | **2,690,933** |
| Investments in joint venture arrangements | **—** | **44,866** |  | **—** | **44,866** |
| Other assets | **34,366** | **109,798** | (b) | **1,073,810** | **1,217,974** |
| Total assets | **$1,089,006** | **$1,840,552** |  | **$1,073,810** | **$4,003,368** |

*(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 nine months ended September 30, 2023 and 2022:

*(Dollars in thousands)*

| Northern Region | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Homes delivered | **741** | 850 | **2,321** | 2,610 |
| New contracts, net | **885** | 466 | **2,662** | 2,378 |
| Backlog at end of period | **1,397** | 1,658 | **1,397** | 1,658 |
| Average sales price of homes delivered | **$466** | $489 | **$479** | $475 |
| Average sales price of homes in backlog | **$521** | $517 | **$521** | $517 |
| Aggregate sales value of homes in backlog | **$727,190** | $856,410 | **$727,190** | $856,410 |
| Housing revenue | **$345,635** | $415,740 | **$1,111,751** | $1,240,406 |
| Land sale revenue | **$2,605** | $1 | **$3,105** | $1,935 |
| Operating income homes (a) | **$43,609** | $59,621 | **$129,622** | $173,758 |
| Operating (loss) income land | **$153** | $2 | **$153** | $159 |
| Number of average active communities | **101** | 90 | **101** | 91 |
| Number of active communities, end of period | **101** | 91 | **101** | 91 |
| **Southern Region** |  |  |  |  |
| Homes delivered | **1,355** | 1,176 | **3,772** | 3,372 |
| New contracts, net | **1,136** | 883 | **3,727** | 3,305 |
| Backlog at end of period | **2,036** | 2,878 | **2,036** | 2,878 |
| Average sales price of homes delivered | **$489** | $486 | **$491** | $474 |
| Average sales price of homes in backlog | **$503** | $543 | **$503** | $543 |
| Aggregate sales value of homes in backlog | **$1,024,252** | $1,562,881 | **$1,024,252** | $1,562,881 |
| Housing revenue | **$662,721** | $571,103 | **$1,851,749** | $1,597,506 |
| Land sale revenue | **$11,819** | $5,985 | **$20,171** | $10,962 |
| Operating income homes (a) | **$133,665** | $117,963 | **$340,300** | $320,879 |
| Operating income land | **$1,962** | $1,348 | **$2,851** | $2,749 |
| Number of average active communities | **99** | 83 | **98** | 83 |
| Number of active communities, end of period | **103** | 87 | **103** | 87 |
| **Total Homebuilding Regions** |  |  |  |  |
| Homes delivered | **2,096** | 2,026 | **6,093** | 5,982 |
| New contracts, net | **2,021** | 1,349 | **6,389** | 5,683 |
| Backlog at end of period | **3,433** | 4,536 | **3,433** | 4,536 |
| Average sales price of homes delivered | **$481** | $487 | **$486** | $474 |
| Average sales price of homes in backlog | **$510** | $533 | **$510** | $533 |
| Aggregate sales value of homes in backlog | **$1,751,442** | $2,419,291 | **$1,751,442** | $2,419,291 |
| Housing revenue | **$1,008,356** | $986,843 | **$2,963,500** | $2,837,912 |
| Land sale revenue | **$14,424** | $5,986 | **$23,276** | $12,897 |
| Operating income homes (a) | **$177,274** | $177,584 | **$469,922** | $494,637 |
| Operating income land | **$2,115** | $1,350 | **$3,004** | $2,908 |
| Number of average active communities | **200** | 173 | **199** | 174 |
| Number of active communities, end of period | **204** | 178 | **204** | 178 |

(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 September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Number of loans originated | **1,469** | 1,263 | **4,008** | 3,877 |
| Value of loans originated | **$578,205** | $486,588 | **$1,588,199** | $1,482,628 |
| Revenue | **$23,591** | $20,099 | **$74,138** | $63,584 |
| Less: Selling, general and administrative expenses | **11,120** | 10,866 | **32,956** | 30,810 |
| Less: Interest expense | **2,593** | 1,350 | **7,504** | 3,169 |
| Income before income taxes | **$9,878** | $7,883 | **$33,678** | $29,605 |

29

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 nine months ended September 30, 2023 and 2022:

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Northern | **10.1%** | 15.6% | **9.9%** | 10.1% |
| Southern | **9.8%** | 17.7% | **11.9%** | 11.6% |
| Total cancellation rate | **9.9%** | 17.0% | **11.1%** | 11.0% |

### Seasonality

Typically, our homebuilding operations experience significant seasonality and quarter-to-quarter variability in homebuilding activity levels. In general, homes delivered increase 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 September 30, 2023 Compared to Three Months Ended September 30, 2022

***Northern Region.*** During the three months ended September 30, 2023, homebuilding revenue in our Northern region decreased $67.5 million, from $415.7 million in the third quarter of 2022 to $348.2 million in the third quarter of 2023. This 16% decrease in homebuilding revenue was primarily the result of a 13% decrease in the number of homes delivered (109 less units), in addition to a 5% decrease in the average sales price of homes delivered ($23,000 per home delivered) due to the mix of homes being delivered, offset partially by a $2.6 million increase in land sale revenue. Operating income in our Northern region decreased $15.9 million from $59.6 million in the third quarter of 2022 to $43.8 million during the quarter ended September 30, 2023. This decrease in operating income was the result of a $16.3 million decline in our gross margin offset partially by a $0.5 million decrease in selling, general and administrative expense. With respect to our homebuilding gross margin, our housing gross margin declined $16.5 million and our housing gross margin percentage declined 40 basis points to 21.1% in the third quarter of 2023 from 21.5% in the prior year’s third quarter. These declines were primarily due to the decrease in the number of homes delivered in addition to the mix of homes being delivered compared to prior year. Our land sale gross margin improved $0.2 million in the third 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 $0.5 million, from $29.7 million for the quarter ended September 30, 2022 to $29.2 million for the quarter ended September 30, 2023 but increased as a percentage of revenue to 8.4% in 2023's third quarter from 7.1% in 2022's third quarter. The decrease in selling, general and administrative expense was attributable to a $1.1 million decrease in general and administrative expense primarily as a result of a $0.6 million decrease in land-related expenses and a $0.5 million decrease in compensation-related expenses, partially offset by a $0.6 million increase in selling expense primarily as a result of an increase in sales commissions driven by the increase in new contracts during the period.

During the three months ended September 30, 2023, we experienced a 90% increase in new contracts in our Northern region, from 466 in the third quarter of 2022 to 885 in the third quarter of 2023. The increase in new contracts was primarily due to the increase in our average communities compared to prior year. Homes in backlog decreased 16% from 1,658 homes at September 30, 2022 to 1,397 homes at September 30, 2023. The decrease in backlog was primarily a result of improved cycle time allowing us to deliver homes in backlog at a faster rate compared to last year. Average sales price in backlog increased to $521,000 at September 30, 2023 compared to $517,000 at September 30, 2022 primarily due to the mix of homes being sold. During the third quarter of 2023, we opened seven new communities in our Northern region compared to five during the third quarter of 2022. Our monthly absorption rate in our Northern region improved to 2.9 per community in the third quarter of 2023 compared to 1.7 per community in 2022's third quarter due to the increase in new contracts during the quarter, partially offset by a smaller increase in our average communities compared to prior year.

***Southern Region.*** During the three month period ended September 30, 2023, homebuilding revenue in our Southern region increased $97.5 million, from $577.1 million in the third quarter of 2022 to $674.5 million in the third quarter of 2023. This 17% increase in homebuilding revenue was the result of a 15% increase in the number of homes delivered (179 more units) due to increased availability of inventory homes and a 1% increase in the average sales price of homes delivered ($3,000 per home delivered). Operating income in our Southern region increased $16.3 million from $119.3 million in the third quarter of 2022 to $135.6 million during the quarter ended September 30, 2023. This increase in operating income was the result of a $22.6 million improvement in our gross margin offset partially by a $6.3 million increase in selling, general, and administrative expense. With respect to our homebuilding gross margin, our housing gross margin improved $22.0 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, offset partially by increased construction and lots costs and the mix of homes being delivered. Our housing gross margin percentage declined, however, from 28.2% in prior year’s third quarter to 27.6% in the third quarter of 2023, primarily due to the mix of homes being delivered, offset partially by the increase in average sales price of homes delivered compared to prior year. Our land sale gross margin improved $0.6 million in the third quarter of 2023 compared to the third 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 $6.3 million from $43.2 million in the third quarter of 2022 to $49.5 million in the third quarter of 2023 but declined as a percentage of revenue to 7.3% from 7.5% in the third quarter of 2022. The increase in selling, general and administrative expense was attributable to a $6.5 million increase in selling expense primarily due to a $6.0 million increase in variable selling expenses resulting from increases in sales commissions produced by the higher number of homes delivered as well as a $0.5 million increase in non-variable selling expense primarily as a result of increased costs associated with our sales offices and models. This increase in selling, general and administrative expense was partially offset by a $0.2 million decrease in general and administrative expense, which was primarily related to a decrease in other miscellaneous expenses.

During the three months ended September 30, 2023, we experienced a 29% increase in new contracts in our Southern region, from 883 in the third quarter of 2022 to 1,136 in the third quarter of 2023, which was primarily due to our increased community count compared to prior year. Homes in backlog decreased 29% from 2,878 homes at September 30, 2022 to 2,036 homes at September 30, 2023 primarily as a result of improved cycle time allowing us to deliver homes in backlog at a faster rate compared to last year. Average sales price in backlog decreased to $503,000 at September 30, 2023 from $543,000 at September 30, 2022 primarily due to increased sales discounts offered and the mix of homes being sold. During the three months ended September 30, 2023, we opened 15 new communities in our Southern region compared to opening 20 communities during 2022's third quarter. Our monthly absorption rate in our Southern region improved to 3.8 per community in the third quarter of 2023 compared to 3.6 per community in the third quarter of 2022 as a result of the 29% increase in new contracts during the quarter, partially offset by a smaller increase in our average communities compared to prior year.

***Financial Services.*** Revenue from our mortgage and title operations increased 17% to $23.6 million in the third quarter of 2023 from $20.1 million in the third quarter of 2022 due to an increase in the average loan amount from $385,000 in the quarter ended September 30, 2022 to $394,000 in the quarter ended September 30, 2023, higher margins on loans sold during the period compared to prior year’s third quarter, and a 16% increase in the number of loan originations from 1,263 in 2022's third quarter to 1,469 in the third quarter of 2023.

Our financial services segment experienced a $3.2 million increase in operating income in the third quarter of 2023 compared to 2022's third quarter, which was primarily due to the increase in revenue discussed above offset, in part, by a $0.3 million increase in selling, general and administrative expense compared to the third quarter of 2022, which was primarily the result of a $0.3 million increase in other miscellaneous expenses.

At September 30, 2023, M/I Financial provided financing services in all of our markets. Approximately 86% of our homes delivered during the third quarter of 2023 were financed through M/I Financial, compared to 76% in the third 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 $1.2 million from $20.9 million for the third quarter of 2022 to $19.7 million for the third quarter of 2023. This decrease primarily resulted from a $0.7 million decrease in payroll related expenses and a $0.5 million decrease in charitable contributions.

***Interest (Income) Expense - net.*** The Company earned $5.8 million of interest income - net for the three months ended September 30, 2023 compared to incurring $0.7 million of interest expense - net for the three months ended September 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 21.9% for the three months ended September 30, 2023 and 21.0% for the three months ended September 30, 2022. The increase in the effective rate from the three months ended September 30, 2022 was primarily attributable to the $6.2 million decrease in tax benefit from energy efficient home credits for 2023, partially offset by a $3.0 million increase in tax benefit from equity compensation and a $1.6 million decrease in tax expense from permanent adjustments for 2023.

### Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

***Northern Region.*** During the nine months ended September 30, 2023, homebuilding revenue in our Northern region decreased $127.5 million, from $1.24 billion in the nine months ended September 30, 2022 to $1.11 billion in the nine months ended September 30, 2023. This 10% decrease in homebuilding revenue was primarily the result of an 11% decrease in the number of homes delivered (289 less units) due to lower beginning backlog for the current year compared to the prior year as our cycle times haves improved, offset partially by a $1.2 million increase in land sale revenue and a 1% increase in the average sales price of homes delivered ($4,000 per home delivered). Operating income in our Northern region decreased $44.1 million, from $173.9 million during the nine months ended September 30, 2022 to $129.8 million during the nine months ended September 30, 2023. The decrease in operating income was primarily the result of a $44.7 million decrease in our gross margin offset partially by a $0.6 million decrease in selling, general and administrative expense. With respect to our homebuilding gross margin, our housing gross margin declined $44.7 million, and our housing gross margin percentage declined 160 basis points from 21.0% in the nine months ended September 30, 2022 to 19.4% for the same period in 2023, primarily due to the mix of homes being delivered in addition to the decrease in the number of homes delivered. Our land sale gross margin remained flat in the nine months ended September 30, 2023 compared to the same period in 2022.

Selling, general and administrative expense decreased $0.6 million, from $86.8 million for the nine months ended September 30, 2022 to $86.2 million for the nine months ended September 30, 2023, but increased as a percentage of revenue to 7.7% in the first nine months of 2023 compared to 7.0% in the same period in 2022. The decrease in selling, general and administrative expense was attributable to a $2.1 million decrease in general and administrative expense, which was primarily related to a $1.0 million decrease in compensation-related expenses and $1.1 million decrease in other miscellaneous expenses. This was partially offset by a $1.5 million increase in selling expense, primarily attributable to a $0.7 million increase in variable selling expenses resulting from increases in sales commissions produced by the higher number of homes delivered and an $0.8 million increase in costs associated with our sales offices and models.

During the nine months ended September 30, 2023, we experienced a 12% increase in new contracts in our Northern region, from 2,378 in the nine months ended September 30, 2022 to 2,662 in the first nine months of 2023 primarily due to the increase in our average number of communities compared to prior year and improved absorption rate. Homes in backlog decreased 16% from 1,658 at September 30, 2022 to 1,397 homes at September 30, 2023 primarily due to improved cycle time allowing us to deliver homes in backlog at a faster rate compared to last year. Average sales price in backlog increased to $521,000 at September 30, 2023 compared to $517,000 at September 30, 2022 primarily due to the mix of homes being sold. During the nine months ended September 30, 2023, we opened 27 new communities in our Northern region compared to 25 new communities opened during the nine months ended September 30, 2022. Our monthly absorption rate in our Northern region improved slightly to 2.94 per community in the nine months ended September 30, 2023 from 2.90 per community in the same period in 2022 as a result of the increase in the number of new contracts during the period compared to prior year, offset, in part, by a smaller increase in the number of average active communities.

***Southern Region.*** During the nine months ended September 30, 2023, homebuilding revenue in our Southern region increased $263.5 million from $1.61 billion in the nine months ended September 30, 2022 to $1.87 billion in the nine months ended September 30, 2023. This 16% increase in homebuilding revenue was the result of a 12% increase in the number of homes delivered (400 more units) due to increased availability of inventory homes and improved cycle times on our backlog homes, a 4% increase in the average sales price of homes delivered ($17,000 per home delivered) primarily due to the mix of homes delivered, and a $9.2 million increase in land sale revenue. Operating income in our Southern region increased 6% from $323.6 million in the nine months ended September 30, 2022 to $343.2 million during the nine months ended September 30,

2023\. This increase in operating income was the result of a $39.4 million improvement in our gross margin, offset partially by a $19.9 million increase in selling, general, and administrative expense. With respect to our homebuilding gross margin, our gross margin on homes delivered improved $39.3 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, offset partially by increased construction and lot costs partially offset by the mix of homes delivered. Our housing gross margin percentage declined 170 basis points from 27.7% in the nine months ended September 30, 2022 to 26.0% in the same period in 2023, however, 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 improved $0.1 million in the nine months ended September 30, 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 $19.9 million from $121.4 million in the nine months ended September 30, 2022 to $141.3 million in the nine months ended September 30, 2023 and remained flat as a percentage of revenue at 7.5% for both periods. The increase in selling, general and administrative expense was attributable to a $19.0 million increase in selling expense primarily due to a $16.6 million increase in variable selling expenses resulting from increases in sales commissions produced by the higher number of homes delivered and a $2.4 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 $0.9 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 nine months ended September 30, 2023, we experienced a 13% increase in new contracts in our Southern region, from 3,305 in the nine months ended September 30, 2022 to 3,727 in the first nine months of 2023 primarily due to the increase in our average number of communities compared to prior year. Homes in backlog decreased 29% from 2,878 homes at September 30, 2022 to 2,036 homes at September 30, 2023 due primarily to improved cycle time allowing us to deliver homes in backlog at a faster rate compared to last year. Average sales price in backlog decreased from $543,000 at September 30, 2022 to $503,000 at September 30, 2023 primarily due to the mix of homes delivered. During the nine months ended September 30, 2023, we opened 29 communities in our Southern region, compared to opening 51 during the nine months ended September 30, 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 4.2 per community in the nine months ended September 30, 2023 from 4.4 per community in the nine months ended September 30, 2022 as a result of the increase in our average communities compared to prior year, partially offset by a smaller increase in new contracts during the period.

***Financial Services.*** Revenue from our mortgage and title operations increased 17% from $63.6 million in the nine months ended September 30, 2022 to $74.1 million in the nine months ended September 30, 2023 due to higher margins on loans sold during the period compared to 2022's first nine months, an increase in the average loan amount from $382,000 in the nine months ended September 30, 2022 to $396,000 in the nine months ended September 30, 2023, and a 3% increase in the number of loan originations from 3,877 in the nine months ended September 30, 2022 to 4,008 in the nine months ended September 30, 2023.

Our financial services segment experienced an $8.4 million increase in operating income in the nine months ended September 30, 2023 compared to the same period in 2022, which was primarily due to the increase in revenue discussed above, partially offset by a $2.1 million increase in selling, general and administrative expense compared to the nine months ended September 30, 2022. The increase in selling, general and administrative expense was primarily attributable to a $0.6 million increase in indemnification reserves during the period as well as a $1.5 million increase in other miscellaneous expenses.

At September 30, 2023, M/I Financial provided financing services in all of our markets. Approximately 82% of our homes delivered during the nine months ended September 30, 2023 were financed through M/I Financial, compared to 78% during the nine months ended September 30, 2022. 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 decreased $0.6 million from $57.3 million for the nine months ended September 30, 2022 to $56.7 million for the nine months ended September 30, 2023, primarily due to a decrease in miscellaneous expenses incurred during the period.

***Interest (Income) Expense - net.*** The Company earned $11.9 million of interest income - net for the nine months ended September 30, 2023 compared to incurring $2.1 million of interest expense - net for the nine months ended September 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 23.3% for the nine months ended September 30, 2023 and 23.5% for the nine months ended September 30, 2022. The decrease in the effective rate from the nine months ended September 30, 2022 was primarily attributable to a $4.6 million increase in tax benefit from equity compensation and a $1.3 million decrease in tax expense for 2023, partially offset by a $5.3 million decrease in tax benefit from energy efficient home credits for 2023.

### LIQUIDITY AND CAPITAL RESOURCES

### Overview of Capital Resources and Liquidity.

At September 30, 2023, we had $736.3 million of cash, cash equivalents and restricted cash, with $736.1 million of this amount comprised of unrestricted cash and cash equivalents, which represents a $425.5 million increase in unrestricted cash and cash equivalents from December 31, 2022. The increase in cash is primarily due to fewer houses under construction compared to prior year, house closings, the timing of land spend compared to prior year as well as a larger beginning of year balance on hand. Our principal uses of cash for the nine months ended September 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 $40.3 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 $120 million (subject to increases and decreases during certain periods) secured mortgage warehousing agreement, dated May 26, 2023 and most recently amended on October 24, 2023, with M/I Financial as borrower (the “MIF Mortgage Warehousing Agreement”); and (3) a $300 million (subject to increases and decreases during certain periods) mortgage repurchase agreement, dated October 24, 2023, with M/I Financial as borrower (the “New MIF Mortgage Repurchase Facility”).

As of September 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 $900.6 million, with $200.6 million payable within 12 months. Future interest payments associated with these notes payable totaled $182.1 million as of September 30, 2023, with $31.8 million payable within 12 months.

As of September 30, 2023, there were no borrowings outstanding and $77.4 million of letters of credit outstanding under our $650 million Credit Facility, leaving $572.6 million available. We expect to continue managing our balance sheet and liquidity carefully in the remainder of 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 the remainder of 2023 from cash receipts, excess cash balances and availability under our credit facilities.

During the nine months ended September 30, 2023, we delivered 6,093 homes, started 6,135 homes, ended the quarter with 4,600 homes under construction versus 5,800 at the end of last year’s third quarter, and spent $247.6 million on land purchases and $352.6 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 September 30, 2023, we had a total of 21,652 lots under contract, with an aggregate purchase price of approximately $1.04 billion, 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 nine-month period ended September 30, 2023, we generated $497.2 million of cash from operating activities, compared to using $14.1 million of cash in operating activities during the nine months ended September 30, 2022. The cash generated from operating activities in the first nine months of 2023 was primarily a result of net income of $360.1 million, $34.5 million of proceeds from the sale of mortgage loans net of mortgage loan originations, a $108.6 million decrease in inventory purchases due to delays and timing of land purchases and an increase of $22.3 million in accounts payable, offset, in part, by a decrease in other liabilities totaling $40.3 million. The cash used in operating activities during the nine months ended September 30, 2022 was primarily a result of a $533.0 million increase in inventory and an increase in other assets of $37.4 million, offset, in part, by net income of $360.3 million, $85.1 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 $91.8 million.

***Investing Cash Flow Activities.*** During the nine months ended September 30, 2023, we used $14.1 million of cash in investing activities, compared to using $19.1 million of cash in investing activities during the nine months ended September 30, 2022. The cash used in investing activities in the first nine months of 2023 was primarily a result of a $19.7 million increase in our investment in joint venture arrangements and a $4.6 million increase in property and equipment, offset, in part, by $10.2 million of proceeds from the sale of a portion of our mortgage servicing rights (which occurred during the second quarter of 2023). The cash used in investing activities during the nine months ended September 30, 2022 was primarily a result of a $17.4 million increase in our investment in joint venture arrangements.

***Financing Cash Flow Activities.*** During the nine months ended September 30, 2023, we used $58.4 million of cash in financing activities, compared to using $135.4 million of cash in financing activities during the nine months ended September 30, 2022. The cash used in financing activities in 2023 was primarily due to repayments of $45.1 million (net of proceeds from borrowings) under our two then-outstanding M/I Financial credit facilities and the repurchase of $40.3 million of our outstanding common shares during the first nine months of 2023, offset partially by $27.2 million in proceeds from the exercise of stock options during the nine months ended September 30, 2023. The cash used in financing activities in the first nine months of 2022 was primarily due to repayments of $76.8 million (net of proceeds from borrowings) under our two then-outstanding M/I Financial credit facilities in addition to the repurchase of $55.3 million of our outstanding common shares during the nine months ended September 30, 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 nine months ended September 30, 2023, the Company repurchased 0.5 million outstanding common shares for an aggregate purchase price of $40.3 million under the 2021 Share Repurchase Program which was funded with cash on hand. As of September 30, 2023, the Company is authorized to repurchase an additional $52.9 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 September 30, 2023 and December 31, 2022, our ratio of homebuilding debt to capital was 22% 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 then-outstanding MIF Mortgage Repurchase Facility as of September 30, 2023:

*(In thousands)*

|  | Expiration Date | Outstanding Balance | Available Amount |
| --- | --- | ---: | ---: |
| Notes payable – homebuilding (a) | (a) | $— | $572,619 |
| Notes payable – financial services (b) | (b) | $200,619 | $2,517 |

(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 $1.95 billion of availability for additional senior debt at September 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 $77.4 million of letters of credit outstanding at September 30, 2023, leaving $572.6 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 then-outstanding MIF Mortgage Repurchase Facility, each of which could be increased by pledging additional mortgage collateral, not to exceed the maximum aggregate commitment amount of M/I Financial’s warehousing agreements, which was $365 million as of September 30, 2023. The MIF Mortgage Warehousing Agreement has an expiration date of May 24, 2024 and the MIF Mortgage Repurchase Facility expired on 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 $1.48 billion at September 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 September 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 September 30, 2023:

*(Dollars in millions)*

| Financial Covenant |  | Covenant Requirement | Actual |
| --- | --- | ---: | ---: |
| Consolidated Tangible Net Worth | ≥ | $1,483.5 | $2,343.3 |
| Leverage Ratio | ≤ | 0.60 | 0.01 |
| Interest Coverage Ratio | ≥ | 1.5 to 1.0 | 20.8 to 1.0 |
| Investments in Unrestricted Subsidiaries and Joint Ventures | ≤ | $703.0 | $6.0 |
| Unsold Housing Units and Model Homes | ≤ | 2,967 | 1,382 |

### 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 October 24, 2023, M/I Financial entered into an amendment to its MIF Mortgage Warehousing Agreement which reduced our borrowing availability to $110 million through November 10, 2023. The borrowing availability under the MIF Mortgage Warehousing Agreement will increase to $120 million from November 11, 2023 through February 9, 2024 and reduce to $80 million on February 10, 2024 until maturity. The MIF Mortgage Warehousing Agreement expires on May 24, 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 September 30, 2023, there was $199.0 million outstanding under the MIF Mortgage Warehousing Agreement (which at the time had a maximum borrowing availability of $275 million) 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 Agreements, are summarized in the following table, which also sets forth M/I Financial’s compliance with such covenants as of September 30, 2023:

*(Dollars in millions)*

| Financial Covenant Leverage Ratio | ≤ | Covenant Requirement 12.0 to 1.0 | Actual 5.6 to 1.0 |
| --- | --- | ---: | ---: |
| Liquidity | ≥ | $10.0 | $36.0 |
| Adjusted Net Income | \> | $0.0 | $24.0 |
| Tangible Net Worth | ≥ | $20.0 | $40.7 |

***MIF Mortgage Repurchase Facility.*** The MIF Mortgage Repurchase Facility was used to finance eligible residential mortgage loans originated by M/I Financial and is structured as a mortgage repurchase facility. M/I Financial allowed the MIF Mortgage Repurchase Facility to expire on its scheduled expiration date of October 23, 2023 and did not renew the facility.

On October 24, 2023, M/I Financial entered into a new mortgage repurchase facility with a maximum borrowing availability of $300 million (subject to increases and decreases during certain periods) (the “New MIF Mortgage Repurchase Facility”) with an expiration date of October 22, 2024. The borrowing availability under the New MIF Mortgage Repurchase Facility is $270 million through November 10, 2023, will increase to $300 million from November 11, 2023 through February 9, 2024, will decrease to $240 million from February 10, 2024 through September 17, 2024 and will increase to $270 million from September 18, 2024 until maturity. The New MIF Mortgage Repurchase Facility is used to finance eligible residential mortgage loans originated by M/I Financial. M/I Financial pays interest on each advance under the New MIF Mortgage Repurchase Facility at a per annum rate based on Daily Adjusting One-Month Term SOFR plus a margin as defined in the repurchase agreement.. The covenants in the New MIF Mortgage Repurchase Facility are substantially similar to the covenants in the MIF Mortgage Warehousing Agreement, with the exception of the Tangible Net Worth covenant which increased from $20 million to $25 million. The New 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 New MIF Mortgage Repurchase Facility.

As of the date of this report, M/I Financial’s total maximum borrowing availability under the MIF Mortgage Warehousing Agreement and the New MIF Mortgage Repurchase Facility was $380 million.

### 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 September 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 September 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 September 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 September 30, 2023 | As of December 31, 2022 |
| --- | ---: | ---: |
| Cash | **$701,156** | $269,071 |
| Investment in joint venture arrangements | **$39,228** | $45,907 |
| Amounts due from Non-Guarantor Subsidiaries | **$5,713** | $15,772 |
| Total assets | **$3,720,839** | $3,379,932 |
| Liabilities and Shareholders’ Equity: |  |  |
| Total liabilities | **$1,350,314** | $1,359,951 |
| Shareholders’ equity | **$2,370,525** | $2,019,981 |

### Summarized Statement of Income Data

*(In thousands)*

|  | Nine Months Ended September 30, 2023 |
| --- | ---: |
| Revenues | $2,986,776 |
| Land and housing costs | $2,286,371 |
| Selling, general and administrative expense | $283,291 |
| Income before income taxes | $436,511 |
| Net income | $333,189 |

***Weighted Average Borrowings.*** For the three months ended September 30, 2023 and 2022, our weighted average borrowings outstanding were $750.5 million and $835.0 million, respectively, with a weighted average interest rate of 5.35% and 5.20%, respectively. The decrease in our weighted average borrowings related to decreased borrowings under our two then-outstanding M/I Financial credit facilities during the third 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 September 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 $77.4 million of letters of credit issued and outstanding under the Credit Facility at September 30, 2023. During the nine months ended September 30, 2023, the average daily amount of letters of credit outstanding under the Credit Facility was $81.1 million and the maximum amount of letters of credit outstanding under the Credit Facility was $94.9 million.

At September 30, 2023, M/I Financial had $199.0 million outstanding under the MIF Mortgage Warehousing Agreement. During the nine months ended September 30, 2023, the average daily amount outstanding under the MIF Mortgage Warehousing Agreement was $15.3 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 September 30, 2023, M/I Financial had $1.6 million outstanding under the then-outstanding MIF Mortgage Repurchase Facility. During the nine months ended September 30, 2023, the average daily amount outstanding under the then-outstanding MIF Mortgage Repurchase Facility was $37.5 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 3.7% in September 2023, as measured by the Consumer Price Index (CPI), up slightly from last quarter end, but down from 6.5% in December 2022 and 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 second quarter of 2023 to the third quarter of 2023. However, continued increases in inflation rates could impact our costs and potentially reduce our gross margins.

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 began to rise again in the second half of 2023, from approximately 7% during the first half of 2023, to over 8% by the end of October 2023, the highest rates since 2001. However, despite these recent rate increases, the interest rate environment has become less volatile than during the second half of 2022. 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 are making it more difficult for homebuyers to qualify for mortgages or to obtain mortgages at interest rates that are acceptable to them. Rising interest rates, as well as increased materials and labor costs, can also reduce gross margins.

## Market risk

As filed, 5,933 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, the MIF Mortgage Repurchase Facility (prior to its expiration on October 23, 2023) and the New MIF Mortgage Repurchase Facility, which permitted borrowings of up to $1.02 billion as of September 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 September 30, 2023 and December 31, 2022:

| Description of Financial Instrument (in thousands) | September 30, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Uncommitted IRLCs | **$247,239** | $262,529 |
| FMBSs related to uncommitted IRLCs | **259,000** | 341,088 |
| Whole loan contracts and related mortgage loans held for sale | **6,669** | 16,507 |
| FMBSs related to mortgage loans held for sale | **174,000** | 232,518 |
| Mortgage loans held for sale covered by FMBSs | **190,116** | 233,378 |

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

| Description of Financial Instrument (in thousands) | September 30, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Mortgage loans held for sale | **$207,181** | $242,539 |
| Forward sales of mortgage-backed securities | **7,517** | (3,005) |
| Interest rate lock commitments | **47** | 787 |
| Whole loan contracts | **(681)** | (377) |
| Total | **$214,064** | $239,944 |

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

| Description (in thousands) | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Mortgage loans held for sale | **$(1,710)** | $(4,396) | **$(873)** | $(7,271) |
| Forward sales of mortgage-backed securities | **4,655** | 24,952 | **10,522** | 22,199 |
| Interest rate lock commitments | **(1,701)** | (13,015) | **(740)** | (15,708) |
| Whole loan contracts | **(397)** | (209) | **(303)** | (97) |
| Total gain (loss) recognized | **$847** | $7,332 | **$8,606** | $(877) |

41

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 September 30, 2023. Because the MIF Mortgage Warehousing Agreement is, and MIF Mortgage Repurchase Facility was, 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 September 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 9/30/2023 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Fixed rate | $210,272 | — | — | — | — | — | $210,272 | $207,181 |
| Weighted average interest rate | 6.52% | — | — | — | — | — | 6.52% |  |
| LIABILITIES: |  |  |  |  |  |  |  |  |
| Long-term debt — fixed rate | — | — | — | — | — | $700,000 | $700,000 | $602,875 |
| Weighted average interest rate | — | — | — | — | — | 4.52% | 4.52% |  |
| Short-term debt — variable rate | $200,619 | — | — | — | — | — | $200,619 | $200,619 |
| Weighted average interest rate | 7.07% | — | — | — | — | — | 7.07% |  |

42

## Controls and procedures

As filed, 1,683 characters.

Item 5. Other Information - During the three months ended September 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as such terms are defined in Item 408(a) of Regulation S-K.

On October 24, 2023, M/I Financial entered into a First Amendment to the Fourth Amended and Restated Mortgage Warehousing Agreement dated May 26, 2023 (“First Amendment”). The First Amendment, among other things, reduced the maximum borrowing availability to $120 million, subject to increases and decreases during certain periods. In addition, M/I Financial allowed the MIF Mortgage Repurchase Facility to expire on its scheduled expiration date of October 23, 2023 and did not renew the facility. On October 24, 2023, M/I Financial entered into the New MIF Mortgage Repurchase Facility with a maximum borrowing availability of $300 million (subject to increases and decreases during certain periods) with an expiration date of October 22, 2024.

For more information regarding the First Amendment and the New MIF Mortgage Repurchase Facility, please refer to Note 8, “Debt” to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and “Liquidity and Capital Resources - Notes Payable - Financial Services” included in Part I, Item 2 of this Quarterly Report on Form 10-Q.

The foregoing summary is qualified in its entirety by reference to the First Amendment and the New MIF Mortgage Repurchase Facility, copies of which are filed as Exhibit 10.1 and Exhibit 10.2, respectively, to this Quarterly Report on Form 10-Q and incorporated herein by reference.

Filed Oct 27, 2023.
Source: SEC EDGAR, the filing index for accession 0000799292-23-000120. Last ingested by Listed: Oct 30, 2026, 16:11 ET. No prices; not investment advice.