M/I Homes, Inc.: Form 10-Q for the period ended Jun 30, 2025

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 164,300 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 including changes in trade policy affecting business such as new or increased tariffs, as well as the potential impact of retaliatory tariffs and other penalties. See “Item 1A. Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 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 2024 Form 10-K for additional information about our accounting policies.

We believe that there have been no significant changes to our critical accounting policies during the quarter ended June 30, 2025 as compared to those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2024 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:

Overview

During the first half of 2025, housing market conditions continued to experience headwinds from challenging macroeconomic conditions, including elevated mortgage interest rates, higher lot costs, limited availability of affordable housing and general economic uncertainty. Due to these uncertainties, we have experienced a decline in buyer urgency despite an increase in traffic. To address affordability and spur demand, we offered various sales incentives and mortgage interest rate buydowns to homebuyers which negatively impacted our profitability despite achieving a second quarter record for homes delivered. Against this backdrop, our performance in the second quarter and the first half of 2025 fell short of the record levels achieved in 2024 but remained generally in line with our expectations. Our results during the second quarter and first half of 2025 in comparison to the second quarter and first half of 2024 were as follows:

• Revenue increased 5% to $1.16 billion (second quarter record) and decreased 1% to $2.14 billion, respectively
• Number of homes delivered increased 6% to 2,348 homes (second quarter record) and decreased 1% to 4,324 homes, respectively
• Income before income taxes decreased 18% to $160.1 million and decreased 18% to $306.2 million, respectively
• Gross margins decreased 320 basis points to 24.7% and decreased 230 basis points to 25.2%, respectively
• Net income decreased 17% to $121.2 million and decreased 18% to $232.5 million, respectively
• New contracts decreased 8% to 2,078 from 2,255 and decreased 9% to 4,370 from 4,802, respectively
• Shareholders’ equity of $3.1 billion (all time record), a 12% increase from a year ago, with book

value per common share increasing to a record high $117 per share

• Homebuilding debt to capital was 18% and 20%, respectively

In addition to the results described above, our financial services operations achieved a quarterly record for revenue and strong income before income taxes for the first half of 2025, benefiting from higher margins, improved capture rate and an increase in loans originated.

Our company-wide absorption pace of sales per community for the second quarter of 2025 declined to 3.0 per month compared to 3.5 per month for the prior year’s second quarter as a result of the macroeconomic conditions described above. We plan to open additional new communities during the remainder of 2025 and increase our average community count by about 5% from 2024.

Summary of Company Financial Results

Income before income taxes for the second quarter of 2025 decreased $34.0 million from $194.1 million in the second quarter of 2024 to $160.1 million in 2025. Net income was $121.2 million, or $4.42 per diluted share, in 2025's second quarter, compared to $146.7 million, or $5.12 per diluted share, in 2024's second quarter. Our effective tax rate was 24.3% in 2025’s second quarter compared to 24.4% in 2024. For the first half of 2025, income before income taxes decreased $68.2 million from $374.4 million in the first half of 2024 to $306.2 million in 2025. We achieved net income of $232.5 million, or $8.40 per diluted share, during the six months ended June 30, 2025 compared to net income of $284.8 million, or $9.90 per diluted share, in the six months ended June 30, 2024. Our effective tax rate was 24.1% in 2025's first half compared to 23.9% in the same period in 2024

During the quarter ended June 30, 2025, our total revenue was $1.16 billion, of which $1.13 billion was from homebuilding and $31.5 million was from our financial services operations. Revenue from homebuilding increased 5% in 2025's second quarter compared to the same period in 2024 driven primarily by a 6% increase in the number of homes delivered (124 units) offset in part by a 1% decrease in the average sales price of homes delivered ($3,000 per home delivered). Our revenue and average sales price reflect a $47.1 million reduction for incentives and closing costs in 2025’s second quarter compared to a $30.9 million reduction for incentives and closing costs in 2024’s second quarter. Revenue from our financial services segment increased 2% to $31.5 million in the second quarter of 2025 as a result of higher margins on loans sold, improved capture rate and an increase in loans originated during the period compared to the second quarter of 2024. For the first half of 2025, we recorded year-to-date total revenue of $2.14 billion, of which $2.06 billion was from homes delivered and $63.0 million was from our financial services operations. Revenue from homes delivered decreased 1% in the first half of 2025 compared to the same period in 2024 driven primarily by a 1% decrease in the number of homes delivered (58 units) partially offset by a slight increase in the average sales price of homes delivered ($1,000 per home delivered). Our revenue and average sales price reflect an $87.1 million reduction for incentives and closing costs in 2025’s first half compared to a $57.6 million reduction for incentives and closing costs in 2024’s first half. Revenue from our financial services segment increased 9% to $63.0 million in the first half of 2025 compared to the first half of 2024 as a result of an increase in the average loan amount, improved capture rate, higher margins on loans sold during the period and an increase in loans sold during the period.

Total gross margin (total revenue less total land and housing costs) decreased $22.7 million in the second quarter of 2025 compared to the second quarter of 2024 as a result of a $23.3 million decline in the gross margin of our homebuilding operations partially offset by a $0.7 million increase in the gross margin of our financial services operations. Our homebuilding gross margin percentage declined by 320 basis points to 22.6% in the second quarter of 2025 from 25.8% in the second quarter of 2025. The decline in gross margin dollars primarily resulted from the $16.7 million increase in lot costs and a $8.7 million increase in interest rate buydowns offered partially offset by a 6% increase in homes delivered in 2025 compared to 2024. Our homebuilding 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 and incentives used to encourage demand due to market conditions. The gross margin of our financial services operations increased $0.7 million in the second quarter of 2025 compared to the second quarter of 2024 as a result of higher margins on loans sold, improved capture rate and an increase in the number of loan originations. Total gross margin decreased $53.2 million in the first half of 2025 compared to the same period in 2024 as a result of a $58.5 million decline in the gross margin of our homebuilding operations offset, in part, by a $5.3 million improvement in the gross margin of our financial services operations. This decrease in the gross margin of our homebuilding operations is primarily due to a 1% decrease in the number of homes delivered, a $33.6 million increase in lot costs and an $18.5 million increase in interest rate buydowns. The gross margin of our financial services operations increased $5.3 million in the first half of 2025 compared to the same period in 2024 as a result of higher margins on loans sold, an increased number of loans sold and an increase in the number of loan originations during the first half of 2025 compared to the first half of 2024.

We opened 50 new communities during the first half of 2025 and closed 36 communities. We sell a variety of home types in various communities and markets, each of which yields a different gross margin. The timing of the openings of new replacement communities as well as underlying lot costs varies from year to year. The mix of communities delivering homes may cause fluctuations in our new contracts, absorption pace and housing gross margin from year to year.

For the three months ended June 30, 2025, selling, general and administrative expense increased $8.4 million, and increased as a percentage of revenue from 11.0% in the second quarter of 2024 to 11.3% in the second quarter of 2025. Selling expense increased $5.2 million from 2024's second quarter and increased as a percentage of revenue to 5.5% in 2025's second quarter from 5.3% for the same period in 2024. The dollar increase in selling expense related to a $4.2 million increase in sales and realtor commissions due to the increase in the homes delivered during the period compared to prior year and a $0.9 million increase in costs associated with our sales offices, including compensation-related expenses in the second quarter of 2025. General and administrative expense increased $3.3 million in the second quarter of 2025 compared to second quarter of 2024 and remained consistent as a percentage of revenue at 5.8% in both the second quarter of 2024 and the second quarter of 2025. The dollar increase in general and administrative expense was primarily due to a $1.3 million increase in compensation-related expenses, a $1.0 million increase in land related expenses, a $0.5 million increase in costs associated with information systems and a $0.5 million increase in miscellaneous expenses. For the six months ended June 30, 2025, selling, general and administrative expense increased $10.2 million, and increased as a percentage of revenue from 10.8% in the six months ended June 30, 2024 to 11.4% in the first six months of 2025. Selling expense increased $4.0 million from the first half of 2024 and increased as a percentage of revenue to 5.4% in 2025's first half from 5.2% for the same period in 2024. The dollar increase in selling expense in the second quarter of 2025 related to a $3.6 million increase in costs associated with our sales offices, including compensation-related and advertising expenses, and a $1.1 million increase in realtor commissions offset in part by a $0.7 million decrease in sales commissions. General and administrative expense increased $6.2 million compared to the first half of 2024 and increased as a percentage of revenue from 5.6% in the six months ended June 30, 2024 to 5.9% in the first six months of 2025. The increase in general and administrative expense was primarily due to a $3.5 million increase in compensation-related expenses due to higher average headcount and incentives, a $1.4 million increase in computer costs, a $1.2 million increase in land-related expenses, and a $0.1 million increase in various other expenses.

Outlook

The housing market continues to be challenged by persistent macroeconomic challenges including elevated mortgage interest rates, affordability concerns and general economic uncertainties such as tariffs, inflation, job security and recession concerns. Despite these headwinds, we remain optimistic about our business.

Although we do not believe that tariffs announced by the U.S. and other countries in the first quarter affected our costs during the first half of 2025, we continue to closely monitor the potential impacts of tariffs on our supply chain. In addition, we did not experience any labor disruptions related to immigration enforcement during the first half of 2025. We believe the long-term fundamentals of the housing market remain strong, supported by favorable demographic trends, increasing household formations, and a continued undersupply of both new and resale homes.

We anticipate that the softer market conditions in the housing market during the first half of 2025 will persist throughout the remainder of the year. We believe that these conditions have weighed on consumer confidence and extended the homebuying decision timeline compared to recent years. In response to these conditions, we are controlling overhead, managing land investments and development expenditures prudently, maintaining pricing discipline, and offering targeted incentives to support overall affordability to support demand, drive order activity, and reduce cancellations. However, the impact that current housing market conditions (including the macroeconomic challenges, tariffs and labor considerations discussed above) will ultimately have on our business remains uncertain and unpredictable. As such, past performance should not be viewed as a reliable indicator of future results in the current housing market environment.

Despite these challenges, we believe we are well-positioned to navigate this period of uncertainty. Our backlog remains healthy—though lower than the prior year—with an average sales price 4% higher than at the end of the first half of 2024. We also believe that our strong balance sheet and ample liquidity provide us with the flexibility to respond effectively to evolving market conditions. Nevertheless, we recognize that continued success will require agility, and we cannot guarantee that our strategic objectives will remain effective as housing market conditions evolve.

We expect to emphasize the following strategic business objectives throughout the remainder of 2025:

• Promote sales through interest rate buydowns and/or other incentives where necessary
• Manage our land spend and inventory levels
• Manage our construction cycle times
• Open new communities
• Manage overhead spend
• Maintain a strong balance sheet and liquidity levels
• Emphasize customer service, product quality and design, and premier locations

During the first six months of 2025, we invested $247.7 million in land acquisitions and $240.6 million in land development compared to $226.8 million and $263.9 million, respectively, during the first six months of 2024. We invested in more land acquisitions in the first half of 2025 compared to the first half of 2024 as a result of the land supply needs of our divisions. 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 second quarter of 2025 with approximately 50,500 lots under control, which represents an approximately six-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 an 2% increase from our approximately 49,500 lots under control at the end of last year’s second quarter.

We opened 50 communities and closed 36 communities in the first half of 2025, ending the second quarter with 234 active communities, compared to 211 at the end of last year’s second quarter. Although the timing of opening new communities and closing existing communities is subject to substantial variation, we expect to grow our average community count by approximately 5% by the end of 2025.

The following table shows, by segment: revenue; cost of sales; selling, general and administrative expense; operating income; and interest (income) expense - net for the three and six months ended June 30, 2025 and 2024:

(In thousands)

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

The following tables show total assets by segment at June 30, 2025 and December 31, 2024:

(In thousands)

(In thousands)

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

(b) Includes development reimbursements from local municipalities.

Reportable Segments

The following table presents, by reportable segment, selected operating and financial information as of and for the three and six months ended June 30, 2025 and 2024:

(Dollars in thousands)

(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)

30

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 of communities between periods.

Cancellation Rates

The following table sets forth the cancellation rates for each of our homebuilding segments for the three and six months ended June 30, 2025 and 2024:

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 June 30, 2025 Compared to Three Months Ended June 30, 2024

Northern Region. During the three months ended June 30, 2025, revenue in our Northern region increased $23.5 million, from $464.8 million in the second quarter of 2024 to $488.3 million in the second quarter of 2025. This increase in revenue was primarily the result of a 3% increase in the average sales price of homes being delivered and a 2% increase in number of homes delivered. Operating income in our Northern region increased $3.2 million from $72.8 million in the second quarter of 2024 to $76.0 million during the quarter ended June 30, 2025. This increase in operating income was the result of a $4.3 million improvement in our gross margin, offset in part by a $1.1 million increase in selling, general and administrative expense. Our gross margin improved $4.3 million to $111.3 million in the second quarter of 2025 from $107.0 million in the second quarter of 2024. Our gross margin percentage declined 20 basis points to 22.8% from 23.0% in the prior year’s second quarter primarily due to the $2.5 million increase in lot costs and $2.9 million increase in incentives offered on homes delivered compared to prior year.

Selling, general and administrative expense increased $1.1 million, from $34.1 million for the quarter ended June 30, 2024 to $35.2 million for the quarter ended June 30, 2025 and declined 10 basis points as a percentage of revenue to 7.2% in 2025's second quarter from 7.3% in 2024's second quarter. The increase in selling, general and administrative expense was attributable to a $0.7 million increase in general and administrative expense primarily related to land-related expenses and a $0.4 million increase in selling expense. The increase in selling expense was due to a $0.1 million increase in sales and realtor commissions produced by the higher number of homes delivered and a $0.3 million increase in costs associated with our sales offices, including compensation.

During the three months ended June 30, 2025, we experienced an 13% decrease in new contracts in our Northern region from 1,002 in the second quarter of 2024 to 873 in the second quarter of 2025. Homes in backlog decreased 21% from 1,618 homes at June 30, 2024 to 1,281 homes at June 30, 2025. The decreases in new contracts and backlog were primarily a result of weakened market demand compared to prior year. Average sales price in backlog increased approximately 7% to $563,000 at June 30, 2025 compared to $527,000 at June 30, 2024 primarily due to the mix of homes being sold. During the three months ended June 30, 2025, we opened 8 new communities in our Northern region compared to opening three during 2024's second quarter. Our monthly absorption rate in our Northern region was 3.0 per community in the second quarter of 2025 compared to 3.5 in the second quarter of 2024 due to a decrease in new contracts.

Southern Region. During the three month period ended June 30, 2025, revenue in our Southern region increased $28.7 million, from $614.2 million in the second quarter of 2024 to $642.9 million in the second quarter of 2025. This 5% increase in revenue was the result of an 8% increase in the number of homes delivered (108 units) offset, in part by a 3% decrease in the average sales price of homes delivered (14,000 per home delivered). Operating income in our Southern region decreased $35.5 million from $119.8 million in the second quarter of 2024 to $84.3 million in the first quarter of 2025. This decrease in operating income was the result of a $27.7 million decline in our gross margin and a $7.8 million increase in selling, general, and administrative expense. Our gross margin declined $27.7 million, due primarily to the decrease in average sales price for homes delivered as a result of increased incentives offered partially offset by an increase in the number of homes delivered compared to prior year. Our gross margin percentage declined 550 basis points from 27.9% in prior year’s second quarter to 22.4% in the second quarter of 2025, primarily due to the mix of homes being delivered, $14.2 million increase in lot costs and $5.5 million increase in incentives offered on homes delivered.

Selling, general and administrative expense increased $7.8 million from $51.8 million in the second quarter of 2024 to $59.6 million in the second quarter of 2025 and increased 90 basis points as a percentage of revenue to 9.3% in the second quarter of 2025 from 8.4% in the second quarter of 2024. General and administrative expense increased $3.0 million due to a $1.0 million increase in compensation-related expenses, a $1.2 million increase in land-related expenses, and a $0.8 million increase in miscellaneous expenses. Selling expense increased $4.8 million due to a $4.1 million increase in realtor and sales commissions and a $0.7 million increase in costs related to our sales office, including compensation.

During the three months ended June 30, 2025, our new contracts decreased in our Southern region from 1,253 in the second quarter of 2024 to 1,205 in the second quarter of 2025, which was primarily due to weakened market demand. Homes in backlog decreased by 28% from 1,804 homes at June 30, 2024 to 1,296 homes at June 30, 2025, primarily as a result of weakened demand and a shift in demand to inventory homes which offer incentives compared to last year. Average sales price in backlog increased to $543,000 at June 30, 2025 from $538,000 at June 30, 2024 primarily due to the mix of homes being sold. During the three months ended June 30, 2025, we opened 15 new communities in our Southern region compared to opening 14 communities during 2024's second quarter. Our monthly absorption rate in our Southern region declined to 3.1 per community in the second quarter of 2025 compared to 3.5 per community in the second quarter of 2024 as a result of a decrease in new contracts.

Financial Services. Revenue from our mortgage and title operations increased 2% to $31.5 million (a second quarter record) in the second quarter of 2025 from $30.8 million in the second quarter of 2024 due to higher margins on loans sold and capture rate during the period compared to prior year’s second quarter, a 15% increase in the number of loan originations from 1,618 in 2024's second quarter to 1,865 in the second quarter of 2025, and an increase in the average loan amount from $395,000 in the quarter ended June 30, 2024 to $403,000 in the quarter ended June 30, 2025.

Our financial services segment experienced a $0.3 million decrease in operating income in the second quarter of 2025 compared to 2024's second quarter, which was primarily due to a $1.0 million increase in selling, general and administrative expense compared to the second quarter of 2024, which was primarily the result of an increase in compensation-related expenses offset in part by the increase in revenue.

At June 30, 2025, M/I Financial provided financing services in all of our markets. Approximately 92% of our homes delivered during the second quarter of 2025 were financed through M/I Financial, compared to approximately 87% in the second quarter of 2024. 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 $1.6 million from $23.7 million for the second quarter of 2024 to $22.1 million for the second quarter of 2025. This decrease resulted from a $1.7 million decrease in compensation-related expenses offset in part by miscellaneous expenses.

Interest Income, net of Interest Expense. The Company earned $4.4 million of interest income - net for the three months ended June 30, 2025 compared to $7.3 million for the three months ended June 30, 2024. This decrease was primarily due to a lower average cash balance on hand compared to prior year.

Income Taxes. Our overall effective tax rate was 24.3% for the three months ended June 30, 2025 and 24.4% for the three months ended June 30, 2024.

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

Northern Region. During the first half of 2025, homebuilding revenue in our Northern region increased $25.3 million, from $873.3 million in the first six months of 2024 to $898.6 million in the first six months of 2025. This 3% increase in revenue was primarily the result of a $4.5 million increase in land sale revenue and an increase in the average sales price of homes delivered ($12,000 per home delivered). Operating income in our Northern region increased $5.7 million, from $130.9 million during the first half of 2024 to $136.6 million during the six months ended June 30, 2025. The increase in operating income was primarily the result of a $6.4 million increase in our gross margin offset partially by a $0.7 million increase in selling, general and administrative expense. Our gross margin improved $6.4 million, and our gross margin percentage improved 10 basis points from 22.4% in the first six months of 2024 to 22.5% for the same period in 2025, primarily due to the mix of homes being delivered and the increase in land sales offset, in part, by a $6.7 million increase in incentives offered and $4.9 million increase in lot costs.

Selling, general and administrative expense increased $0.7 million, from $64.9 million for the six months ended June 30, 2024 to $65.6 million for the six months ended June 30, 2025, and declined 10 basis points as a percentage of revenue to 7.3% in 2025's second quarter from 7.4% in 2024's second quarter. The increase in selling, general and administrative expense was attributable to a $0.4 million increase in selling expense, primarily attributable to a $1.1 million increase in costs associated with our sales offices and models offset in part by a $0.7 million decrease in sales and realtor commissions. The increase in selling, general and administrative expense was also attributable to a $0.3 million increase in general and administrative expense, which was primarily related to computer related expenses and other miscellaneous expenses.

During the six months ended June 30, 2025, we experienced a 10% decrease in new contracts in our Northern region, from 2,164 in the six months ended June 30, 2024 to 1,938 in the first half of 2025. Homes in backlog decreased 21% from 1,618 at June 30, 2024 to 1,281 homes at June 30, 2025. The decrease in new contracts and homes in backlog was primarily due to decline in buyer urgency. Average sales price in backlog increased to $563,000 at June 30, 2025 compared to $527,000 at June 30, 2024 primarily due to the mix of homes being sold. During the six months ended June 30, 2025, we opened 24 new communities in our Northern region compared to 10 new communities opened during the first half of 2024. Our monthly absorption rate in our Northern region declined to 3.4 per community in the six months ended June 30, 2025 from 3.7 per community in the same period in 2024 as a result of increased community count.

Southern Region. During the six months ended June 30, 2025, homebuilding revenue in our Southern region decreased $48.4 million from $1.23 billion in the first half of 2024 to $1.18 billion in the first half of 2025. This 4% decrease in homebuilding revenue was the result of a 2% decrease in the average sales price of homes delivered ($7,000 per home delivered) primarily due to the mix of homes delivered and a 2% decrease in the number of homes delivered (57 units). Operating income in our Southern region decreased 31% from $237.6 million in the first half of 2024 to $164.7 million during the six months ended June 30, 2025. This decrease in operating income was the result of a $64.9 million decline in our gross margin and a $8.0 million increase in selling, general, and administrative expense. Our gross margin percentage declined 440 basis points from 27.7% in the six months ended June 30, 2024 to 23.3% in the same period in 2025 primarily due to a decrease in the number of homes delivered that were impacted by a $28.7 million increase in lot costs and an $11.7 increase in incentives offered.

Selling, general and administrative expense increased $8.0 million from $101.6 million in the first half of 2024 to $109.6 million in the first half of 2025 and increased as a percentage of revenue to 9.3% compared to 8.3% in the first half of 2024. The increase in selling, general and administrative expense was also attributable to a $4.2 million increase in general and administrative expense, which was primarily related to a $1.3 million increase in compensation-related expenses due to our increased headcount, a $1.7 million increase in land-related expenses, and a $1.2 million increase in other miscellaneous expenses. The increase in selling, general and administrative expense was attributable to a $3.8 million increase in selling expense primarily due to a $2.1 million increase related to costs associated with our sales offices, including advertising and compensation and a $1.7 million increase in realtor commissions.

During the six months ended June 30, 2025, we experienced an 8% decrease in new contracts in our Southern region, from 2,638 in the six months ended June 30, 2024 to 2,432 in the first half of 2025 primarily due to weakened demand compared to prior year. Homes in backlog decreased 28% from 1,804 homes at June 30, 2024 to 1,296 homes at June 30, 2025 due primarily to improved construction cycle times allowing us to deliver homes in backlog at a faster rate compared to last year in addition to increased availability of inventory homes compared to prior year. Average sales price in backlog increased from $538,000 at June 30, 2024 to $543,000 at June 30, 2025 primarily due to the mix of homes delivered. During the six months ended June 30, 2025, we opened 26 communities in our Southern region, compared to opening 28 during the first half of 2024. Our monthly absorption rate in our Southern region declined to 3.1 per community in the first half of 2025 from 3.8 per community in the first half of 2024 as a result of increased community count.

Financial Services. Revenue from our mortgage and title operations increased 9% from $57.7 million in the first half of 2024 to $63.0 million in the first half of 2025 due to higher margins on loans sold during the period and improved capture rate compared to 2024's first half, proceeds from the sale of mortgage servicing rights, and a 7% increase in the number of loan originations from 3,174 in the first half of 2024 to 3,395 in the first half of 2025, and an increase in the average loan amount from $391,000 in the six months ended June 30, 2024 to $404,000 in the six months ended June 30, 2025.

Our financial services segment experienced a $3.2 million increase in operating income in the first half of 2025 compared to the same period in 2024, which was primarily due to the increase in revenue discussed above, partially offset by a $2.0 million increase in selling, general and administrative expense compared to the first half of 2024. The increase in selling, general and administrative expense was primarily attributable to a $1.6 million increase in compensation related expenses, a $0.3 million increase in indemnification reserves during the period, and a $0.1 million increase in other miscellaneous expenses.

At June 30, 2025, M/I Financial provided financing services in all of our markets. Approximately 92% of our homes delivered during the first half of 2025 were financed through M/I Financial, compared to 88% during the six months ended June 30, 2024. 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 $0.4 million from $41.4 million for the six months ended June 30, 2024 to $41.0 million for the six months ended June 30, 2025, primarily due to a $1.7 million decrease in compensation-related expenses, a $0.1 million decrease in advertising expenses, offset in part by a $0.7 million increase in computer-related costs and a $0.7 million increase in miscellaneous expenses incurred during the period.

Interest Income, net of Interest Expense. The Company earned $9.6 million of interest income - net for the six months ended June 30, 2025 compared to $14.3 million for the six months ended June 30, 2024. This decrease was primarily due to a lower average cash balance on hand compared to prior year.

Income Taxes. Our overall effective tax rate was 24.1% for the six months ended June 30, 2025 and 23.9% for the six months ended June 30, 2024. The increase in the effective rate from the six months ended June 30, 2024 was primarily attributable to a $1.3 million decrease in tax benefit from equity compensation in 2025.

LIQUIDITY AND CAPITAL RESOURCES

Overview of Capital Resources and Liquidity.

At June 30, 2025, we had $800.4 million of cash, cash equivalents and restricted cash, with approximately $800.2 million of this amount comprised of unrestricted cash and cash equivalents, which represents a $21.3 million decrease in unrestricted cash and cash equivalents from December 31, 2024. This decrease in cash is primarily due to the decline in home deliveries and the timing of land spend compared to prior year partially offset by a larger beginning of year balance on hand. Our principal uses of cash for the six months ended June 30, 2025 were investment in land and land development, construction of homes, mortgage loan originations, investment in joint ventures, operating expenses, short-term working capital, debt service requirements, including the repayment of amounts outstanding under our credit facilities, and the repurchase of $100.2 million of our outstanding common shares under our share repurchase programs. 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 MIF Mortgage Repurchase Facility (as defined below), and other sources of liquidity.

The Company is a party to two 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; and (2) a $300 million mortgage repurchase agreement, dated October 24, 2023, as amended (the “MIF Mortgage Repurchase Facility”), with M/I Financial as borrower.

As of June 30, 2025, 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 $975.9 million, with $275.9 million payable within 12 months. Future interest payments associated with these notes payable totaled $118.9 million as of June 30, 2025, with $31.9 million payable within 12 months.

As of June 30, 2025, there were no borrowings outstanding and $88.5 million of letters of credit outstanding under our $650 million Credit Facility, leaving $561.5 million available. We expect to continue to manage our balance sheet and liquidity carefully during the remainder of 2025 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 2025 from cash receipts, excess cash balances and availability under our credit facilities.

During the first half of 2025, we delivered 4,324 homes, started 4,698 homes, ended the quarter with 5,062 homes under construction compared to 5,033 at the end of last year’s second quarter, and spent $247.7 million on land purchases and $240.6 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 June 30, 2025, we had a total of 25,957 lots under contract, with an aggregate purchase price of approximately $1.56 billion, to be acquired during the remainder of 2025 through 2031.

Our off-balance sheet arrangements relating to our homebuilding operations include joint venture arrangements, land option agreements, guarantees and indemnifications associated with acquiring and developing land, and the issuance of letters of credit and completion bonds. We use these arrangements to secure the most desirable lots on which to build homes for our homebuyers in a manner that we believe reduces the overall risk to the Company.

Operating Cash Flow Activities. During the six-month period ended June 30, 2025, we generated $102.6 million of cash from operating activities, compared to generating $143.3 million of cash from operating activities during the first half of 2024. The cash provided by operating activities in the first half of 2025 was primarily a result of net income of $232.5 million, and an increase of $96.7 million in accounts payable, customer deposits and other liabilities, proceeds from the sale of mortgage loans which exceeded mortgage loan originations by $8.1 million, offset, in part, by a $183.6 million increase in inventory purchases, an increase in other assets of $22.0 million, and a decrease in accrued compensation totaling $35.8 million. The cash generated in operating activities during the first half of 2024 was primarily a result of net income of $284.8 million, and an increase of $86.6 million in accounts payable, customer deposits and other liabilities, offset, in part, by a $143.9 million increase in inventory purchases and payments for mortgage loan originations which exceeded the proceeds from the sale of mortgage loans by $54.4 million and a decrease in accrued compensation totaling $25.4 million.

Investing Cash Flow Activities. During the first half of 2025, we used $15.2 million of cash in investing activities, compared to using $27.5 million of cash in investing activities during the first half of 2024. The cash used in investing activities in the first half of 2025 was primarily a result of a $18.4 million increase in our investment in joint venture arrangements and a $3.9 million increase in property and equipment, offset, in part, by $7.1 million of proceeds from the sale of a portion of our mortgage servicing rights. The cash used in investing activities during the first half of 2024 was primarily a result of a $29.0 million increase in our investment in joint venture arrangements and a $5.8 million increase in property and equipment, offset, in part, by $7.2 million of proceeds from the sale of a portion of our mortgage servicing rights.

Financing Cash Flow Activities. During the six months ended June 30, 2025, we used $108.6 million of cash in financing activities, compared to using $11.1 million of cash in financing activities during the first six months of 2024. The cash used in financing activities in 2025 was primarily due to the repurchase of $100.2 million of our outstanding common shares during the first half of 2025, and repayments (net of borrowings) under our MIF Mortgage Repurchase Facility of $10.2 million offset partially by $1.9 million in proceeds from the exercise of stock options during the first half of 2025. The cash used by financing activities in 2024 was primarily due to the repurchase of $75.6 million of our outstanding common shares during the first half of 2024, offset partially by proceeds from borrowings (net of payments) under our MIF Mortgage Repurchase Facility of $56.9 million and $7.5 million in proceeds from the exercise of stock options during the first half of 2024.

On February 11, 2025, the Company announced that its Board of Directors authorized a new share repurchase program pursuant to which the Company was permitted to purchase up to $250 million of its outstanding common shares (the “2025 Share Repurchase Program”), which replaced the 2024 Share Repurchase Program. During the first half of 2025, the Company repurchased 0.9 million outstanding common shares for an aggregate purchase price of $100.2 million under the 2025 Share Repurchase Program which was funded with cash on hand. As of June 30, 2025, the Company is authorized to repurchase an additional $149.8 million of outstanding common shares under the 2025 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 common shares during the remainder of 2025. The timing and amount of any future purchases under the 2025 Share Repurchase Program will be based on a variety of factors, including the market price of the Company’s common shares, business considerations, general market and economic conditions and legal requirements.

At June 30, 2025 and December 31, 2024, our ratio of homebuilding debt to capital was 18% and 19%, calculated as the carrying value of our outstanding homebuilding debt (which consists of borrowings under our Credit Facility, our 2030 Senior Notes and our 2028 Senior Notes) 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 and the MIF Mortgage Repurchase Facility as of June 30, 2025:

(In thousands)

(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 $2.35 billion of availability for additional senior debt at June 30, 2025. 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 $88.5 million of letters of credit outstanding at June 30, 2025, leaving $561.5 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 Repurchase Facility, which may be increased by pledging additional mortgage collateral, not to exceed the maximum aggregate commitment amount of M/I Financial's repurchase agreement as of June 30, 2025, which was $300 million. The MIF Mortgage Repurchase Facility has an expiration date of October 21, 2025.

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 $1.90 billion at June 30, 2025 (subject to increase over time based on earnings and proceeds from equity offerings), (2) a leverage ratio not in excess of 60%, and (3) either a minimum Interest Coverage Ratio of 1.5 to 1.0 or a minimum amount of available liquidity. In addition, the Credit Facility contains covenants that limit the Company’s number of unsold housing units and model homes, as well as the amount of Investments in Unrestricted Subsidiaries and Joint Ventures (each as defined in the Credit Facility).

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

As of June 30, 2025, the Company was in compliance with all covenants of the Credit Facility, including financial covenants. The following table summarizes the most significant restrictive covenant thresholds under the Credit Facility and our compliance with such covenants as of June 30, 2025:

(Dollars in millions)

Notes Payable - Financial Services.

MIF Mortgage Repurchase Facility. The MIF Mortgage Repurchase Facility is used to finance eligible residential mortgage loans originated by M/I Financial. The MIF Mortgage Repurchase Facility provides for a maximum borrowing availability of $300 million and expires October 21, 2025.

M/I Financial pays interest on each advance under the 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 MIF Mortgage Repurchase Facility provides for limits with respect to certain loan types that can secure outstanding borrowings. The MIF Mortgage Repurchase Facility also contains certain financial covenants each of which is defined in the repurchase agreement. There are no guarantors of the MIF Mortgage Repurchase Facility.

As is typical for similar credit facilities in the mortgage origination industry, at closing, the expiration of the MIF Mortgage Repurchase Facility was set at approximately one year and is under consideration for extension annually by the participating lenders. We expect to extend the MIF Mortgage Repurchase Facility on or prior to the current expiration date of October 21, 2025, but we cannot provide any assurance that we will be able to obtain such an extension.

As of June 30, 2025, there was approximately $276 million outstanding under the MIF Mortgage Repurchase Facility and M/I Financial was in compliance with all covenants thereunder. The financial covenants, as more fully described and defined in the MIF Mortgage Repurchase Facility, are summarized in the following table, which also sets forth M/I Financial’s compliance with such covenants as of June 30, 2025:

(Dollars in millions)

37

Senior Notes.

3.95% Senior Notes. On August 23, 2021, the Company issued $300 million aggregate principal amount of 3.95% Senior Notes due 2030. The 2030 Senior Notes contain certain covenants, as more fully described and defined in the indenture governing the 2030 Senior Notes, which limit the ability of the Company and the restricted subsidiaries to, among other things: incur certain liens securing indebtedness without equally and ratably securing the 2030 Senior Notes and the guarantees thereof; enter into certain sale and leaseback transactions; and consolidate or merge with or into other companies, liquidate or sell or otherwise dispose of all or substantially all of the Company’s assets. These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2030 Senior Notes. As of June 30, 2025, 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 million aggregate principal amount of 4.95% Senior Notes due 2028. The 2028 Senior Notes contain certain covenants, as more fully described and defined in the indenture governing the 2028 Senior Notes, which limit the ability of the Company and the restricted subsidiaries to, among other things: incur additional indebtedness; make certain payments, including dividends, or repurchase any shares, in an aggregate amount exceeding our “restricted payments basket”; make certain investments; and create or incur certain liens, consolidate or merge with or into other companies, or liquidate or sell or transfer all or substantially all of our assets. These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2028 Senior Notes. As of June 30, 2025, the Company was in compliance with all terms, conditions, and covenants under the indenture.

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

Supplemental Financial Information.

As of June 30, 2025, M/I Homes, Inc. had $300 million aggregate principal amount of its 2030 Senior Notes and $400 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)

Summarized Statement of Income Data

(In thousands)

Weighted Average Borrowings. For the three months ended June 30, 2025 and 2024, our weighted average borrowings outstanding were $722.7 million and $718.7 million, respectively, with a weighted average interest rate of 5.29% and 5.33% for the three months ended June 30, 2025 and 2024, respectively. The increase in our weighted average borrowings related to increased average borrowings under the MIF Mortgage Repurchase Facility during the second quarter of 2025 compared to the same period in 2024.

At both June 30, 2025 and December 31, 2024, we had no borrowings outstanding under the Credit Facility. To the extent we elect to borrow under the Credit Facility during the remainder of 2025, 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 2025 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 $88.5 million of letters of credit issued and outstanding under the Credit Facility at June 30, 2025. During the six months ended June 30, 2025, the average daily amount of letters of credit outstanding under the Credit Facility was $75.7 million and the maximum amount of letters of credit outstanding under the Credit Facility was $88.5 million.

At June 30, 2025, M/I Financial had approximately $275.9 million outstanding under the MIF Mortgage Repurchase Facility. During the six months ended June 30, 2025, the average daily amount outstanding under the MIF Mortgage Repurchase Facility was $22.7 million and the maximum amount outstanding was $286.2 million, which occurred during January.

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 expired in June 2025.

INTEREST RATES AND INFLATION

Our business is significantly affected by general economic conditions within the United States and, particularly, by the impacts of interest rates and inflation. These macroeconomic trends have pressured housing affordability, negatively impacted homebuyer sentiment and impacted the costs of financing land development activities and housing construction.

The annual rate of inflation in the United States was 2.7% in June 2025, as measured by the Consumer Price Index, up slightly from prior quarter, and down from 3.0% in June 2024. As the rate of inflation has declined from 2022’s historic levels, our costs have remained stable. However, continued increases in inflation rates could impact our costs, potentially reduce our gross margins, reduce the purchasing power of potential homebuyers, and negatively impact their ability and desire to buy a home.

Elevated mortgage interest rates have also made it more difficult for homebuyers to qualify for mortgages or obtain mortgages at interest rates that are acceptable to them. Mortgage interest rates continue to hover between 6% and 7%, which is comparable with prior year. We plan to continue to address these elevated rates in 2025 by offering interest rate buydowns to potential homebuyers. We believe that offering mortgage interest rate buydown incentives may cause otherwise hesitant potential homebuyers to decide to enter the homebuying market due to the improved affordability of obtaining a mortgage, and we believe we are well prepared to address increased demand in our markets with our current land position and open communities. However, offering sales incentives, such as interest rate buydowns, may reduce our margins further in 2025 compared to 2024.

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 and the MIF Mortgage Repurchase Facility, which permitted borrowings of up to $950 million as of June 30, 2025, 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 twelve months.

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

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

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

The table below shows the notional amounts of our financial instruments at June 30, 2025 and December 31, 2024:

The table below shows the measurement of assets and liabilities at June 30, 2025 and December 31, 2024:

The following table sets forth the amount of (loss) gain recognized on assets and liabilities for the three and six months ended June 30, 2025 and 2024:

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 June 30, 2025. Because the MIF Mortgage Repurchase Facility is effectively secured by certain mortgage loans held for sale which are typically sold within 30 to 45 days, their outstanding balances are included in the most current period presented. The interest rates for our variable rate debt represent the weighted average interest rates in effect at June 30, 2025. 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)

42

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

An evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended) was performed by the Company’s management, with the participation of the Company’s principal executive officer and principal financial officer. Based on that evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our business is subject to a variety of risks and uncertainties. These risks are described elsewhere in this Quarterly Report on Form 10-Q, including in Management’s Discussion and Analysis of Financial Condition and Results of Operations above, or in our other filings with the SEC, including Part I, Item 1A of our 2024 Form 10-K. There have been no material changes to the risk factors disclosed our 2024 Form 10-K.