City

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2022~~March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-8951

M.D.C. HOLDINGS, INC.

(Exact name of Registrant as specified in its charter)


Delaware			84-0622967
(State or other jurisdiction of incorporation or organization)			(I.R.S. employer identification no.)


4350 South Monaco Street, Suite 500									80237
Denver, Colorado									(Zip code)
(Address of principal executive offices)

(303) 773-1100

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $.01 par value

MDC

New York Stock Exchange

6% Senior Notes due January 2043

MDC 43

New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-Accelerated Filer

☐

Smaller Reporting Company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~July 26, 2022, 71,156,158~~April 28, 2023, 73,117,639 shares of M.D.C. Holdings, Inc. common stock were outstanding.

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M.D.C. HOLDINGS, INC.

FORM 10-Q

FOR THE QUARTER ENDED ~~June 30, 2022~~March 31, 2023

INDEX


		Page No.
Part I. Financial Information:

Item 1.	Unaudited Consolidated Financial Statements:

	Consolidated Balance Sheets at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022	1

	Consolidated Statements of Operations and Comprehensive Income for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~	2

	Consolidated Statements of Changes in Stockholders’ Equity for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~	3

	Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~	4

	Notes to Unaudited Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2324

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38

Item 4.	Controls and Procedures	39

Part II. Other Information:

Item 1.	Legal Proceedings	40

Item 1A.	Risk Factors	40

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40

Item 6.	Exhibits	41

~~Signature~~Signatures		41

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PART I. FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements

M.D.C. HOLDINGS, INC.

Consolidated Balance Sheets


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(unaudited)					(unaudited)
		(Dollars in thousands, except per share amounts)					(Dollars in thousands, except share and per share amounts)
ASSETS	ASSETS					ASSETS
Homebuilding:	Homebuilding:					Homebuilding:
Cash and cash equivalents	Cash and cash equivalents	$	475,254	$	485,839	Cash and cash equivalents	$	781,738	$	696,075
Restricted cash	Restricted cash	5,994		12,799		Restricted cash	2,268		3,143
Marketable securities						Marketable securities	691,767		443,712
Trade and other receivables	Trade and other receivables	121,202		98,580		Trade and other receivables	67,865		116,364
Inventories:	Inventories:					Inventories:
Housing completed or under construction	Housing completed or under construction	2,385,563		1,917,616		Housing completed or under construction	1,585,951		1,722,061
Land and land under development	Land and land under development	1,717,022		1,843,235		Land and land under development	1,671,824		1,793,718
Total inventories	Total inventories	4,102,585		3,760,851		Total inventories	3,257,775		3,515,779
Property and equipment, net	Property and equipment, net	61,574		60,561		Property and equipment, net	63,787		63,730
Deferred tax asset, net	Deferred tax asset, net	16,735		17,942		Deferred tax asset, net	46,528		49,252
Prepaids and other assets	Prepaids and other assets	95,956		106,562		Prepaids and other assets	66,721		70,007
Total homebuilding assets	Total homebuilding assets	4,879,300		4,543,134		Total homebuilding assets	4,978,449		4,958,062
Financial Services:	Financial Services:					Financial Services:
Cash and cash equivalents	Cash and cash equivalents	114,989		104,821		Cash and cash equivalents	20,985		17,877

Marketable securities						Marketable securities	117,610		117,388
Mortgage loans held-for-sale, net	Mortgage loans held-for-sale, net	190,070		282,529		Mortgage loans held-for-sale, net	166,252		229,513
Other assets	Other assets	48,468		33,044		Other assets	32,525		40,432
Total financial services assets	Total financial services assets	353,527		420,394		Total financial services assets	337,372		405,210
Total Assets	Total Assets	$	5,232,827	$	4,963,528	Total Assets	$	5,315,821	$	5,363,272
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Homebuilding:	Homebuilding:					Homebuilding:
Accounts payable	Accounts payable	$	186,252	$	149,488	Accounts payable	$	119,351	$	109,218
Accrued and other liabilities	Accrued and other liabilities	397,349		370,910		Accrued and other liabilities	342,167		383,406
Revolving credit facility	Revolving credit facility	10,000		10,000		Revolving credit facility	10,000		10,000
Senior notes, net	Senior notes, net	1,482,174		1,481,781		Senior notes, net	1,482,779		1,482,576
Total homebuilding liabilities	Total homebuilding liabilities	2,075,775		2,012,179		Total homebuilding liabilities	1,954,297		1,985,200
Financial Services:	Financial Services:					Financial Services:
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	107,170		97,903		Accounts payable and accrued liabilities	100,876		110,536
Mortgage repurchase facility	Mortgage repurchase facility	175,565		256,300		Mortgage repurchase facility	130,527		175,752
Total financial services liabilities	Total financial services liabilities	282,735		354,203		Total financial services liabilities	231,403		286,288
Total Liabilities	Total Liabilities	2,358,510		2,366,382		Total Liabilities	2,185,700		2,271,488
Stockholders' Equity	Stockholders' Equity					Stockholders' Equity
Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued or outstanding	Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued or outstanding	—		—		Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued or outstanding	—		—
Common stock, $0.01 par value; 250,000,000 shares authorized; 71,157,875 and 70,668,093 issued and outstanding at June 30, 2022 and December 31, 2021, respectively		712		707
Common stock, $0.01 par value; 250,000,000 shares authorized; 73,087,335 and 72,585,596 issued and outstanding at March 31, 2023 and December 31, 2022, respectively						Common stock, $0.01 par value; 250,000,000 shares authorized; 73,087,335 and 72,585,596 issued and outstanding at March 31, 2023 and December 31, 2022, respectively	731		726
Additional paid-in-capital	Additional paid-in-capital	1,719,642		1,709,276		Additional paid-in-capital	1,778,025		1,784,173
Retained earnings	Retained earnings	1,153,963		887,163		Retained earnings	1,351,042		1,306,885
Accumulated other comprehensive income						Accumulated other comprehensive income	323		—
Total Stockholders' Equity	Total Stockholders' Equity	2,874,317		2,597,146		Total Stockholders' Equity	3,130,121		3,091,784
Total Liabilities and Stockholders' Equity	Total Liabilities and Stockholders' Equity	$	5,232,827	$	4,963,528	Total Liabilities and Stockholders' Equity	$	5,315,821	$	5,363,272

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.

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M.D.C. HOLDINGS, INC.

Consolidated Statements of Operations and Comprehensive Income


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(Dollars in thousands, except per share amounts)									(Dollars in thousands, except share and per share amounts)
Homebuilding:	Homebuilding:									Homebuilding:
Home sale revenues	Home sale revenues	$	1,450,823	$	1,367,773	$	2,691,343	$	2,409,631	Home sale revenues	$	1,020,016	$	1,240,520
Home cost of sales	Home cost of sales	(1,062,016)		(1,051,181)		(1,983,394)		(1,865,069)		Home cost of sales	(840,747)		(921,378)
Inventory impairments	Inventory impairments	—		—		(660)		—		Inventory impairments	(7,800)		(660)
Total cost of sales	Total cost of sales	(1,062,016)		(1,051,181)		(1,984,054)		(1,865,069)		Total cost of sales	(848,547)		(922,038)
Gross profit	Gross profit	388,807		316,592		707,289		544,562		Gross profit	171,469		318,482
Selling, general and administrative expenses	Selling, general and administrative expenses	(133,849)		(128,861)		(263,163)		(243,854)		Selling, general and administrative expenses	(94,988)		(129,314)

Interest and other income	Interest and other income	822		868		1,577		1,835		Interest and other income	13,459		755
Other expense	Other expense	(15,509)		(1,090)		(16,933)		(1,527)		Other expense	1,059		(1,424)
Homebuilding pretax income	Homebuilding pretax income	240,271		187,509		428,770		301,016		Homebuilding pretax income	90,999		188,499

Financial Services:	Financial Services:									Financial Services:
Revenues	Revenues	36,229		33,318		65,360		78,341		Revenues	29,486		29,131
Expenses	Expenses	(18,801)		(16,440)		(35,736)		(31,545)		Expenses	(15,250)		(16,935)
Other income, net	Other income, net	1,264		1,155		2,451		2,042		Other income, net	3,734		1,187
Financial services pretax income	Financial services pretax income	18,692		18,033		32,075		48,838		Financial services pretax income	17,970		13,383

Income before income taxes	Income before income taxes	258,963		205,542		460,845		349,854		Income before income taxes	108,969		201,882
Provision for income taxes	Provision for income taxes	(69,421)		(51,190)		(122,882)		(84,812)		Provision for income taxes	(28,269)		(53,461)
Net income	Net income	$	189,542	$	154,352	$	337,963	$	265,042	Net income	$	80,700	$	148,421

Other comprehensive income (loss) net of tax:										Other comprehensive income (loss) net of tax:
Unrealized gain (loss) related to available-for-sale debt securities										Unrealized gain (loss) related to available-for-sale debt securities	$	323	$	—
Other comprehensive income (loss)										Other comprehensive income (loss)	323		—
Comprehensive income	Comprehensive income	$	189,542	$	154,352	$	337,963	$	265,042	Comprehensive income	$	81,023	$	148,421

Earnings per share:	Earnings per share:									Earnings per share:
Basic	Basic	$	2.66	$	2.19	$	4.75	$	3.76	Basic	$	1.10	$	2.09
Diluted	Diluted	$	2.59	$	2.11	$	4.61	$	3.62	Diluted	$	1.08	$	2.02

Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Basic	Basic	70,841,476		70,291,057		70,804,019		70,044,326		Basic	72,647,659		70,766,146
Diluted	Diluted	72,881,012		72,715,273		72,945,748		72,754,141		Diluted	74,021,989		72,938,414

Dividends declared per share	Dividends declared per share	$	0.50	$	0.40	$	1.00	$	0.77	Dividends declared per share	$	0.50	$	0.50

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.

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M.D.C. HOLDINGS, INC.

Consolidated Statements of Changes in Stockholders’ Equity

(Dollars in thousands, except share amounts)


		Six Months Ended June 30, 2022															Three Months Ended March 31, 2023
		Common Stock			Additional Paid-in Capital				Retained Earnings					Total			Common Stock				Additional Paid-in Capital				Retained Earnings				Accumulated Other Comprehensive Income				Total
		Shares	Amount										Shares					Amount
Balance at December 31, 2021		70,668,093	$	707			$	1,709,276			$	887,163					$	2,597,146
Balance at December 31, 2022																Balance at December 31, 2022	72,585,596		$	726			$	1,784,173			$	1,306,885			$	—			$	3,091,784
Net income	Net income	—	—		—				148,421					148,421		Net income	—		—		—				80,700				—				80,700
Other comprehensive income (loss)																Other comprehensive income (loss)	—		—		—				—				323				323
Shares issued under stock-based compensation programs, net	Shares issued under stock-based compensation programs, net	498,921	5		(12,633)				—					(12,628)		Shares issued under stock-based compensation programs, net	503,022		5		(11,745)				—				—				(11,740)
Cash dividends declared	Cash dividends declared	—	—		—				(35,583)					(35,583)		Cash dividends declared	—		—		—				(36,543)				—				(36,543)
Stock-based compensation expense	Stock-based compensation expense	—	—		13,726				—					13,726		Stock-based compensation expense	—		—		5,597				—				—				5,597
Forfeiture of restricted stock	Forfeiture of restricted stock	(4,769)	—		—				—					—		Forfeiture of restricted stock	(1,283)		—		—				—				—				—
Balance at March 31, 2022		71,162,245	$	712	$	1,710,369			$	1,000,001				$	2,711,082
Net Income		—	—		—				189,542					189,542
Shares issued under stock-based compensation programs, net		(1,573)	—		(58)				—					(58)
Cash dividends declared		—	—		—				(35,580)					(35,580)
Stock-based compensation expense		—	—		9,331				—					9,331
Forfeiture of restricted stock		(2,797)	—		—				—					—
Balance at June 30, 2022		71,157,875	$	712	$	1,719,642			$	1,153,963				$	2,874,317
Balance at March 31, 2023																Balance at March 31, 2023	73,087,335		$	731	$	1,778,025			$	1,351,042			$	323			$	3,130,121


		Six Months Ended June 30, 2021															Three Months Ended March 31, 2022
		Common Stock			Additional Paid-in Capital				Retained Earnings					Total			Common Stock				Additional Paid-in Capital				Retained Earnings				Accumulated Other Comprehensive Income				Total
		Shares	Amount										Shares					Amount
Balance at December 31, 2020		64,851,126	$	649			$	1,407,597			$	711,666					$	2,119,912
Balance at December 31, 2021																Balance at December 31, 2021	70,668,093		$	707			$	1,709,276			$	887,163			$	—			$	2,597,146
Net income	Net income	—	—		—				110,690					110,690		Net income	—		—		—				148,421				—				148,421
Shares issued under stock-based compensation programs, net		221,303	2		1,007				—					1,009
Cash dividends declared		—	—		—				(25,978)					(25,978)
Stock dividends declared		5,192,776	52		279,579				(280,318)					(687)
Stock-based compensation expense		—	—		9,926				—					9,926
Balance at March 31, 2021		70,265,205	$	703	$	1,698,109			$	516,060				$	2,214,872
Net Income		—	—		—				154,352					154,352
Shares issued under stock-based compensation programs, net	Shares issued under stock-based compensation programs, net	358,993	3		(16,546)				—					(16,543)		Shares issued under stock-based compensation programs, net	498,921		5		(12,633)				—				—				(12,628)
Cash dividends declared	Cash dividends declared	—	—		—				(28,248)					(28,248)		Cash dividends declared	—		—		—				(35,583)				—				(35,583)
Stock-based compensation expense	Stock-based compensation expense	—	—		8,126				—					8,126		Stock-based compensation expense	—		—		13,726				—				—				13,726
Forfeiture of restricted stock	Forfeiture of restricted stock	(4,560)	—		—				—					—		Forfeiture of restricted stock	(4,769)		—		—				—				—				—
Balance at June 30, 2021		70,619,638	$	706	$	1,689,689			$	642,164				$	2,332,559
Balance at March 31, 2022																Balance at March 31, 2022	71,162,245		$	712	$	1,710,369			$	1,000,001			$	—			$	2,711,082

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.

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M.D.C. HOLDINGS, INC.

Consolidated Statements of Cash Flows


		Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021			2023		2022

		(Dollars in thousands)					(Dollars in thousands)
Operating Activities:	Operating Activities:					Operating Activities:
Net income	Net income	$	337,963	$	265,042	Net income	$	80,700	$	148,421
Adjustments to reconcile net income to net cash provided by (used in) operating activities:	Adjustments to reconcile net income to net cash provided by (used in) operating activities:					Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation expense	Stock-based compensation expense	24,793		18,867		Stock-based compensation expense	5,498		14,882
Depreciation and amortization	Depreciation and amortization	13,903		16,178		Depreciation and amortization	5,500		6,652
Inventory impairments	Inventory impairments	660		—		Inventory impairments	7,800		660
Deferred income tax expense (benefit)		1,207		(3,339)
Project abandonment costs						Project abandonment costs	(1,048)		1,434
Amortization of discount of marketable debt securities						Amortization of discount of marketable debt securities	(8,472)		—

Deferred income tax benefit						Deferred income tax benefit	2,617		842
Net changes in assets and liabilities:	Net changes in assets and liabilities:					Net changes in assets and liabilities:
Trade and other receivables	Trade and other receivables	(22,332)		(57,105)		Trade and other receivables	55,868		(16,677)
Mortgage loans held-for-sale, net	Mortgage loans held-for-sale, net	92,459		46,470		Mortgage loans held-for-sale, net	63,261		94,615
Housing completed or under construction	Housing completed or under construction	(468,301)		(385,698)		Housing completed or under construction	135,581		(277,187)
Land and land under development	Land and land under development	126,300		36,379		Land and land under development	115,874		107,321
Prepaids and other assets	Prepaids and other assets	(5,775)		4,695		Prepaids and other assets	3,470		(20,479)
Accounts payable and accrued and other liabilities	Accounts payable and accrued and other liabilities	70,183		70,595		Accounts payable and accrued and other liabilities	(40,485)		57,571
Net cash provided by operating activities	Net cash provided by operating activities	171,060		12,084		Net cash provided by operating activities	426,164		118,055

Investing Activities:	Investing Activities:					Investing Activities:
Purchases of marketable securities						Purchases of marketable securities	(434,374)		—
Maturities of marketable securities						Maturities of marketable securities	195,000		—

Purchases of property and equipment	Purchases of property and equipment	(13,698)		(13,447)		Purchases of property and equipment	(5,386)		(6,884)
Net cash (used in) investing activities		(13,698)		(13,447)
Net cash used in investing activities						Net cash used in investing activities	(244,760)		(6,884)

Financing Activities:	Financing Activities:					Financing Activities:
Proceeds from (payments on) mortgage repurchase facility, net		(80,735)		(37,709)
Payments on mortgage repurchase facility, net						Payments on mortgage repurchase facility, net	(45,225)		(78,069)

Proceeds from issuance of senior notes		—		347,725

Dividend payments	Dividend payments	(71,163)		(54,913)		Dividend payments	(36,543)		(35,583)
Payments of deferred financing costs		—		(819)

Issuance of shares under stock-based compensation programs, net	Issuance of shares under stock-based compensation programs, net	(12,686)		(15,534)		Issuance of shares under stock-based compensation programs, net	(11,740)		(12,628)
Net cash provided by (used in) financing activities		(164,584)		238,750
Net cash used in financing activities						Net cash used in financing activities	(93,508)		(126,280)

Net increase (decrease) in cash, cash equivalents and restricted cash	Net increase (decrease) in cash, cash equivalents and restricted cash	(7,222)		237,387		Net increase (decrease) in cash, cash equivalents and restricted cash	87,896		(15,109)
Cash, cash equivalents and restricted cash:	Cash, cash equivalents and restricted cash:					Cash, cash equivalents and restricted cash:
Beginning of period	Beginning of period	603,459		503,972		Beginning of period	717,095		603,459
End of period	End of period	$	596,237	$	741,359	End of period	$	804,991	$	588,350

Reconciliation of cash, cash equivalents and restricted cash:	Reconciliation of cash, cash equivalents and restricted cash:					Reconciliation of cash, cash equivalents and restricted cash:
Homebuilding:	Homebuilding:					Homebuilding:
Cash and cash equivalents	Cash and cash equivalents	$	475,254	$	638,547	Cash and cash equivalents	$	781,738	$	474,447
Restricted cash	Restricted cash	5,994		14,158		Restricted cash	2,268		6,400
Financial Services:	Financial Services:					Financial Services:
Cash and cash equivalents	Cash and cash equivalents	114,989		88,654		Cash and cash equivalents	20,985		107,503
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	596,237	$	741,359	Total cash, cash equivalents and restricted cash	$	804,991	$	588,350

The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.

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1. Basis of Presentation

The Unaudited Consolidated Financial Statements of M.D.C. Holdings, Inc. ("MDC," “the Company," “we,” “us,” or “our,” which ~~refers~~refer to M.D.C. Holdings, Inc. and its subsidiaries) have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Accordingly, they do not include all information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. These statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows of MDC at ~~June 30, 2022~~March 31, 2023 and for all periods presented. These statements should be read in conjunction with MDC’s Consolidated Financial Statements and Notes thereto included in MDC’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Included in these footnotes are certain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our business, financial condition, results of operations, cash flows, strategies and prospects. These forward-looking statements may be identified by terminology such as “likely,” “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained in this section are reasonable, we cannot guarantee future results. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by the forward-looking statements. 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 subsequent reports on Forms 10-K, 10-Q and 8-K should be considered.

Where necessary, reclassifications have been made to our prior period financial information to conform to the current year presentation.

2. Recently Issued Accounting Standards

~~There~~Not Yet Adopted New Accounting Standards

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2020-04, “Reference Rate Reform (Topic 848),” as amended by ASU 2021-01 in January 2021 and ASU 2022-06 in December 2022, directly addressing the effects of reference rate reform on financial reporting as a result of the cessation of the publication of certain LIBOR rates beginning December 31, 2021, with complete elimination of the publication of the LIBOR rates by June 30, 2023. The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform by virtue of referencing LIBOR or another reference rate expected to be discontinued. This guidance became effective on March 12, 2020 and can be adopted no later than December 31, 2024, with early adoption permitted. We plan to adopt this amendment in the second quarter of 2023. We are ~~no recently issued accounting standards applicable to~~currently evaluating the ~~Company.~~impact, but do not expect that the adoption of ASU 2020-04, as amended by ASU 2021-01 and ASU 2022-06, will have a material impact on our consolidated balance sheet or consolidated statement of operations and comprehensive income.

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3. Segment Reporting

An operating segment is defined as a component of an enterprise for which discrete financial information is available and is reviewed regularly by the Chief Operating Decision Maker (“CODM”), or decision-making group, to evaluate performance and make operating decisions. We have identified our CODM as two key executives—the Executive Chairman and the Chief Executive Officer (“CEO”).

We have identified each homebuilding division as an operating segment. Our homebuilding operating segments have been aggregated into the reportable segments noted below because they are similar in the following regards: (1) economic characteristics; (2) housing products; (3) class of homebuyer; (4) regulatory environments; and (5) methods used to construct and sell homes. Our homebuilding reportable segments ~~are as follows~~conducted ongoing operations in the following states:

•West (Arizona, California, Nevada, New Mexico, Oregon, Texas and Washington)

•Mountain (Colorado, Idaho and Utah)

•East ~~(Florida, mid-Atlantic, which includes~~(Alabama, Florida, Maryland, Pennsylvania, Tennessee and ~~Virginia, and Tennessee)~~Virginia)

Our financial services business consists ~~of the operations~~ of the following operating segments: (1) HomeAmerican Mortgage Corporation (“HomeAmerican”); (2) Allegiant Insurance Company, Inc., A Risk Retention Group (“Allegiant”); (3) StarAmerican Insurance Ltd. (“StarAmerican”); (4) American Home Insurance Agency, Inc.; and (5) American Home Title and Escrow Company. Due to its contributions to consolidated pretax income, we consider HomeAmerican to be a reportable segment (“mortgage operations”). The remaining operating segments have been aggregated into 1one reportable segment (“other”) because they do not individually exceed 10 percent of: (1) consolidated revenue; (2) the greater of (a) the combined reported profit of all operating segments that did not report a loss or (b) the positive value of the combined reported loss of all operating segments that reported losses; or (3) consolidated assets.

Corporate is a non-operating segment that develops and implements strategic initiatives and supports our operating divisions by centralizing key administrative functions such as finance, treasury, information technology, insurance, risk management, litigation and human resources. Corporate also provides the necessary administrative functions to support MDC as a publicly traded company. A portion of the expenses incurred by Corporate are allocated to the homebuilding operating segments based on their respective percentages of assets, and to a lesser degree, a portion of Corporate expenses are allocated to the financial services segments. A majority of Corporate’s personnel and resources are primarily dedicated to activities relating to the homebuilding segments, and, therefore, the balance of any unallocated Corporate expenses is included in the homebuilding operations section of our consolidated statements of operations and comprehensive income.

The following table summarizes revenues for our homebuilding and financial services operations:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(Dollars in thousands)									(Dollars in thousands)
Homebuilding	Homebuilding									Homebuilding
West	West	$	788,279	$	847,683	$	1,495,590	$	1,464,294	West	$	577,933	$	707,311
Mountain	Mountain	437,001		400,633		772,129		725,350		Mountain	301,155		335,128
East	East	225,543		119,457		423,624		219,987		East	140,928		198,081
Total homebuilding revenues	Total homebuilding revenues	$	1,450,823	$	1,367,773	$	2,691,343	$	2,409,631	Total homebuilding revenues	$	1,020,016	$	1,240,520

Financial Services	Financial Services									Financial Services
Mortgage operations	Mortgage operations	$	22,077	$	23,321	$	39,678	$	58,486	Mortgage operations	$	18,419	$	17,601
Other	Other	14,152		9,997		25,682		19,855		Other	11,067		11,530
Total financial services revenues	Total financial services revenues	$	36,229	$	33,318	$	65,360	$	78,341	Total financial services revenues	$	29,486	$	29,131

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The following table summarizes pretax income ~~(loss)~~ for our homebuilding and financial services operations:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(Dollars in thousands)									(Dollars in thousands)
Homebuilding	Homebuilding									Homebuilding
West	West	$	148,508	$	132,919	$	279,034	$	210,106	West	$	43,200	$	130,526
Mountain	Mountain	79,135		64,052		129,641		109,910		Mountain	25,036		50,506
East	East	34,407		10,846		65,801		18,681		East	15,309		31,394
Corporate	Corporate	(21,779)		(20,308)		(45,706)		(37,681)		Corporate	7,454		(23,927)
Total homebuilding pretax income	Total homebuilding pretax income	$	240,271	$	187,509	$	428,770	$	301,016	Total homebuilding pretax income	$	90,999	$	188,499
Financial Services	Financial Services									Financial Services
Mortgage operations	Mortgage operations	$	10,673	$	14,088	$	18,106	$	40,127	Mortgage operations	$	9,726	$	7,433
Other	Other	8,019		3,945		13,969		8,711		Other	8,244		5,950
Total financial services pretax income	Total financial services pretax income	$	18,692	$	18,033	$	32,075	$	48,838	Total financial services pretax income	$	17,970	$	13,383

Total pretax income	Total pretax income	$	258,963	$	205,542	$	460,845	$	349,854	Total pretax income	$	108,969	$	201,882

The following table summarizes total assets for our homebuilding and financial services operations. The assets in our West, Mountain and East segments consist primarily of inventory while the assets in our Corporate segment primarily include our cash and cash equivalents, marketable securities and deferred tax assets. The assets in our financial services segment consist mostly of cash and cash equivalents, marketable securities and mortgage loans held-for-sale.


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

		(Dollars in thousands)					(Dollars in thousands)
Homebuilding assets	Homebuilding assets					Homebuilding assets
West	West	$	2,653,052	$	2,472,378	West	$	2,098,329	$	2,275,144
Mountain	Mountain	1,169,938		1,072,717		Mountain	898,227		1,005,622
East	East	508,690		450,675		East	407,046		427,926
Corporate	Corporate	547,620		547,364		Corporate	1,574,847		1,249,370
Total homebuilding assets	Total homebuilding assets	$	4,879,300	$	4,543,134	Total homebuilding assets	$	4,978,449	$	4,958,062
Financial services assets	Financial services assets					Financial services assets
Mortgage operations	Mortgage operations	$	232,139	$	313,373	Mortgage operations	$	198,938	$	267,309
Other	Other	121,388		107,021		Other	138,434		137,901
Total financial services assets	Total financial services assets	$	353,527	$	420,394	Total financial services assets	$	337,372	$	405,210

Total assets	Total assets	$	5,232,827	$	4,963,528	Total assets	$	5,315,821	$	5,363,272

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4. Earnings Per Share

Accounting Standards Codification ("ASC") Topic 260, Earnings per Share ("ASC 260") requires a company that has participating security holders (for example, holders of unvested restricted stock that have non-forfeitable dividend rights) to utilize the two-class method for calculating earnings per share (“EPS”) unless the treasury stock method results in lower EPS. The two-class method is an allocation of earnings/(loss) between the holders of common stock and a company’s participating security holders. Under the two-class method, earnings/(loss) for the reporting period are allocated between common shareholders and other security holders based on their respective rights to receive distributed earnings (i.e., dividends) and undistributed earnings (i.e., net income/(loss)). Our common shares outstanding are comprised of shareholder owned common stock and shares of unvested restricted stock held by participating security holders. Basic EPS is calculated by dividing income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding, excluding participating shares in accordance with ASC 260. To calculate diluted EPS, basic EPS is adjusted to include the effect of potentially dilutive stock options outstanding and contingently issuable equity awards. The table below shows our basic and diluted EPS calculations.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(Dollars in thousands, except per share amounts)									(Dollars in thousands, except per share amounts)
Numerator	Numerator									Numerator
Net income	Net income	$	189,542	$	154,352	$	337,963	$	265,042	Net income	$	80,700	$	148,421
Less: distributed earnings allocated to participating securities	Less: distributed earnings allocated to participating securities	(161)		(133)		(355)		(291)		Less: distributed earnings allocated to participating securities	(216)		(194)
Less: undistributed earnings allocated to participating securities	Less: undistributed earnings allocated to participating securities	(689)		(589)		(1,261)		(1,067)		Less: undistributed earnings allocated to participating securities	(230)		(562)
Net income attributable to common stockholders (numerator for basic earnings per share)	Net income attributable to common stockholders (numerator for basic earnings per share)	188,692		153,630		336,347		263,684		Net income attributable to common stockholders (numerator for basic earnings per share)	80,254		147,665
Add back: undistributed earnings allocated to participating securities	Add back: undistributed earnings allocated to participating securities	689		589		1,261		1,067		Add back: undistributed earnings allocated to participating securities	230		562
Less: undistributed earnings reallocated to participating securities	Less: undistributed earnings reallocated to participating securities	(676)		(569)		(1,231)		(1,032)		Less: undistributed earnings reallocated to participating securities	(226)		(546)
Numerator for diluted earnings per share under two class method		$	188,705	$	153,650	$	336,377	$	263,719
Numerator for diluted earnings per share under two-class method										Numerator for diluted earnings per share under two-class method	$	80,258	$	147,681

Denominator	Denominator									Denominator
Weighted-average common shares outstanding	Weighted-average common shares outstanding	70,841,476		70,291,057		70,804,019		70,044,326		Weighted-average common shares outstanding	72,647,659		70,766,146
Add: dilutive effect of stock options	Add: dilutive effect of stock options	1,406,274		2,424,216		1,738,041		2,394,887		Add: dilutive effect of stock options	1,355,303		1,998,156
Add: dilutive effect of contingently issuable equity awards	Add: dilutive effect of contingently issuable equity awards	633,262		—		403,688		314,928		Add: dilutive effect of contingently issuable equity awards	19,027		174,112
Denominator for diluted earnings per share under two class method		72,881,012		72,715,273		72,945,748		72,754,141
Denominator for diluted earnings per share under two-class method										Denominator for diluted earnings per share under two-class method	74,021,989		72,938,414

Basic Earnings Per Common Share	Basic Earnings Per Common Share	$	2.66	$	2.19	$	4.75	$	3.76	Basic Earnings Per Common Share	$	1.10	$	2.09
Diluted Earnings Per Common Share	Diluted Earnings Per Common Share	$	2.59	$	2.11	$	4.61	$	3.62	Diluted Earnings Per Common Share	$	1.08	$	2.02

Diluted EPS for ~~both~~ the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 both excluded options to purchase 15,000 shares of common stock, because the effect of their inclusion would be anti-dilutive. ~~There were zero anti-dilutive options for both the three and six months ended June 30, 2021.~~

5. Fair Value Measurements

ASC Topic 820, Fair Value Measurements (“ASC 820”), defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs, other than quoted prices in active markets, that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

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The following table sets forth the fair values and methods used for measuring the fair values of financial instruments on a recurring basis, except those for which the carrying values approximate fair values:

Fair Value

Financial Instrument

Hierarchy

June 30,
2022

December 31,
2021

Financial Instrument

Hierarchy

March 31,
2023

December 31,
2022

(Dollars in thousands)

Marketable securities

Debt securities (available-for-sale)

Level 1

809,377

561,100

Mortgage loans held-for-sale, net

Level 2

190,070

282,529

Mortgage loans held-for-sale, net

Level 2

166,252

229,513

The following methods and assumptions were used to estimate the fair value of each class of financial instruments as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

Debt securities. Our debt securities consist of U.S. government treasury securities with original maturities upon acquisition of less than six months and are treated as available-for-sale investments and, as such, are recorded at fair value with all changes in fair value initially recorded through other comprehensive income. Debt securities are reviewed on a regular basis for impairment.

Mortgage loans held-for-sale, net. Our mortgage loans held-for-sale, which are measured at fair value on a recurring basis, include (1) mortgage loans held-for-sale that are under commitments to sell and (2) mortgage loans held-for-sale that are not under commitments to sell. At ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, we had ~~$134.4~~$111.3 million and ~~$157.7~~$142.9 million, respectively, of mortgage loans held-for-sale at fair value under commitments to sell. The fair value for those loans was based on quoted market prices for those mortgage loans, which are Level 2 fair value inputs. At ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, we had ~~$55.7~~$55.0 million and ~~$124.9~~$86.6 million, respectively, of mortgage loans held-for-sale that were not under commitments to sell. The fair value for those loans was primarily based upon the estimated market price received from an outside party, which is a Level 2 fair value input.

Gains (losses) on ~~sales of~~ mortgage loans, net, are included as a component of revenues in the financial services section of our consolidated statements of operations and comprehensive income. For the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023, we recorded ~~gain (loss)~~a loss on mortgage loans held-for-sale, net of ~~$(4.3) million and $(9.3)~~$2.3 million compared to ~~$28.8 million and $46.2~~$5.0 million for the same period in the prior year.

For the financial assets and liabilities that the Company does not reflect at fair value, the following methods and assumptions were used to estimate the fair value of each class of financial instruments.

Cash and cash equivalents (excluding debt securities with an original maturity of three months or less), restricted cash, trade and other receivables, prepaids and other assets, accounts payable, accrued and other liabilities and borrowings on our revolving credit facility. Fair value approximates carrying value.

Mortgage Repurchase Facility. The debt associated with our mortgage repurchase facility (see Note 18 for further discussion) is at floating rates that approximate current market rates and have relatively short-term maturities, generally within 30 days. The fair value approximates carrying value and is based on Level 2 inputs.

Senior Notes. The estimated values of the senior notes in the following table are based on Level 2 inputs, which primarily reflect estimated prices for our senior notes that were provided by multiple sources.

June 30, 2022 December 31, 2021
Carrying
Amount Fair Value Carrying
Amount Fair Value
(Dollars in thousands)
$300 million 3.850% Senior Notes due January 2030, net $ 297,821 $ 251,498 $ 297,699 $ 319,057
$350 million 2.500% Senior Notes due January 2031, net 347,269 257,216 347,126 339,185
$500 million 6.000% Senior Notes due January 2043, net 491,010 410,815 490,903 628,092
$350 million 3.966% Senior Notes due August 2061, net 346,074 200,097 346,053 337,017
Total $ 1,482,174 $ 1,119,626 $ 1,481,781 $ 1,623,351


	March 31, 2023				December 31, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value

	(Dollars in thousands)
$300 million 3.850% Senior Notes due January 2030, net	$	298,012	$	256,148	$	297,949	$	246,236
$350 million 2.500% Senior Notes due January 2031, net	347,486		272,690		347,413		255,374
$500 million 6.000% Senior Notes due January 2043, net	491,176		432,430		491,120		414,017
$350 million 3.966% Senior Notes due August 2061, net	346,105		205,959		346,094		204,014
Total	$	1,482,779	$	1,167,227	$	1,482,576	$	1,119,641

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6. Inventories

The following table sets forth, by reportable segment, information relating to our homebuilding inventories:


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

		(Dollars in thousands)					(Dollars in thousands)
Housing completed or under construction:	Housing completed or under construction:					Housing completed or under construction:
West	West	$	1,362,339	$	1,077,256	West	$	954,131	$	1,026,880
Mountain	Mountain	720,864		596,164		Mountain	455,785		511,092
East	East	302,360		244,196		East	176,035		184,089
Subtotal	Subtotal	2,385,563		1,917,616		Subtotal	1,585,951		1,722,061
Land and land under development:	Land and land under development:					Land and land under development:
West	West	1,143,752		1,235,363		West	1,065,767		1,145,119
Mountain	Mountain	403,142		435,958		Mountain	405,725		433,893
East	East	170,128		171,914		East	200,332		214,706
Subtotal	Subtotal	1,717,022		1,843,235		Subtotal	1,671,824		1,793,718
Total inventories	Total inventories	$	4,102,585	$	3,760,851	Total inventories	$	3,257,775	$	3,515,779

Our inventories are primarily associated with communities where we intend to construct and sell homes, including models and unsold homes. Costs capitalized to land and land under development primarily include: (1) land costs; (2) land development costs; (3) entitlement costs; (4) capitalized interest; (5) engineering fees; and (6) title insurance, real property taxes and closing costs directly related to the purchase of the land parcel. Components of housing completed or under construction primarily include: (1) land costs transferred from land and land under development; (2) direct construction costs associated with a house; (3) real property taxes, engineering fees, permits and other fees; (4) capitalized interest; and (5) indirect construction costs, which include field construction management salaries and benefits, utilities and other construction related costs. Land costs are transferred from land and land under development to housing completed or under construction at the point in time that construction of a home on an owned lot begins.

In accordance with ASC Topic 360, Property, Plant, and Equipment (“ASC 360”), homebuilding inventories, excluding those classified as held for sale, are carried at cost unless events and circumstances indicate that the carrying value of the underlying subdivision may not be recoverable. We evaluate inventories for impairment at each quarter end on a subdivision level basis as each such subdivision represents the lowest level of identifiable cash flows. In making this determination, we review, among other things, the following for each subdivision:

•actual and trending “Operating Margin” (which is defined as home sale revenues less home cost of sales and all incremental costs associated directly with the subdivision, including sales commissions and marketing costs);

•~~estimated future undiscounted cash flows and Operating Margin;~~

•forecasted Operating Margin for homes in backlog;

•actual and trending net home orders;

•homes available for sale;

•market information for each sub-market, including competition levels, home foreclosure levels, the size and style of homes currently being offered for sale and lot size; and

•known or probable events indicating that the carrying value may not be recoverable.

If events or circumstances indicate that the carrying value of our inventory may not be recoverable, assets are reviewed for impairment by comparing the undiscounted estimated future cash flows from an individual subdivision (including capitalized interest) to its carrying value. If the undiscounted future cash flows are less than the subdivision’s carrying value, the carrying value of the subdivision is written down to its then estimated fair value. We generally determine the estimated fair value of each subdivision by determining the present value of the estimated future cash flows at discount rates, which are Level 3 inputs, that are commensurate with the risk of the subdivision under evaluation. The evaluation for the recoverability of the carrying value of the assets for each individual subdivision can be impacted significantly by our estimates of future home sale revenues, home construction costs, and development costs per home, all of which are Level 3 inputs.

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If land is classified as held for sale, we measure it in accordance with ASC 360 at the lower of the carrying value or fair value less estimated costs to sell. In determining fair value, we primarily rely upon the most recent negotiated price, which is a Level 2 input. If a negotiated price is not available, we will consider several factors including, but not limited to, current market conditions, recent comparable sales transactions and market analysis studies, which are considered Level 3 inputs. If the fair value less estimated costs to sell is lower than the current carrying value, the land is impaired down to its estimated fair value less costs to sell.

Inventory impairments recognized by segment for the three ~~and six~~ months ended ~~ended June 30,~~March 31, 2023 and 2022 ~~and 2021~~ are shown in the table below.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022
		(Dollars in thousands)									(Dollars in thousands)
Housing Completed or Under Construction:										Housing Completed or Under Construction:
West	West	$	—	$	—	$	660	$	—	West	$	—	$	660
Mountain	Mountain	—		—		—		—		Mountain	664		—
East	East	—		—		—		—		East	—		—
Subtotal										Subtotal	664		660
Land and Land Under Development:										Land and Land Under Development:
West										West	—		—
Mountain										Mountain	7,136		—
East										East	—		—
Subtotal										Subtotal	7,136		—
Total Inventory Impairments	Total Inventory Impairments	$	—	$	—	$	660	$	—	Total Inventory Impairments	$	7,800	$	660

The table below provides quantitative data, for the periods presented, where applicable, used in determining the fair value of the impaired inventory.


		Impairment Data					Quantitative Data			Impairment Data					Quantitative Data
Three Months Ended	Three Months Ended	Number of Subdivisions Impaired	Inventory Impairments		Fair Value of Inventory After Impairments		Discount Rate		Three Months Ended	Number of Subdivisions Impaired	Inventory Impairments		Fair Value of Inventory After Impairments		Discount Rate
		(Dollars in thousands)								(Dollars in thousands)
March 31, 2023									March 31, 2023	1	$	7,800	$	13,016	18%
Total									Total		$	7,800

March 31, 2022	March 31, 2022	1	$	660	$	1,728		N/A	March 31, 2022	1	$	660	$	1,728		N/A
Total	Total		$	660					Total		$	660

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7. Capitalization of Interest

We capitalize interest to inventories during the period of development in accordance with ASC Topic 835, Interest (“ASC 835”). Homebuilding interest capitalized as a cost of inventories is included in cost of sales during the period that related units or lots are delivered. To the extent our homebuilding debt exceeds our qualified assets as defined in ASC 835, we expense a portion of the interest incurred. Qualified homebuilding assets consist of all lots and homes, excluding finished unsold homes or finished models, within projects that are actively selling or under development. The table set forth below summarizes homebuilding interest activity. For all periods presented below, our qualified assets exceeded our homebuilding debt and as such, all interest incurred has been capitalized.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(Dollars in thousands)									(Dollars in thousands)
Homebuilding interest incurred	Homebuilding interest incurred	$	17,382	$	17,409	$	34,640	$	34,741	Homebuilding interest incurred	$	17,454	$	17,258
Less: Interest capitalized	Less: Interest capitalized	(17,382)		(17,409)		(34,640)		(34,741)		Less: Interest capitalized	(17,454)		(17,258)
Homebuilding interest expensed	Homebuilding interest expensed	$	—	$	—	$	—	$	—	Homebuilding interest expensed	$	—	$	—

Interest capitalized, beginning of period	Interest capitalized, beginning of period	$	60,468	$	55,268	$	58,054	$	52,777	Interest capitalized, beginning of period	$	59,921	$	58,054
Plus: Interest capitalized during period	Plus: Interest capitalized during period	17,382		17,409		34,640		34,741		Plus: Interest capitalized during period	17,454		17,258
Less: Previously capitalized interest included in home cost of sales	Less: Previously capitalized interest included in home cost of sales	(15,681)		(18,326)		(30,525)		(33,167)		Less: Previously capitalized interest included in home cost of sales	(16,065)		(14,844)
Interest capitalized, end of period	Interest capitalized, end of period	$	62,169	$	54,351	$	62,169	$	54,351	Interest capitalized, end of period	$	61,310	$	60,468

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8. Leases

We lease certain property, land and equipment, the majority of which comprise property related leases to provide office space where we operate our business. Leases with an initial term of 12 months or less are not recorded on the balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term.

Our property related leases typically have terms of between three and five years, with the exception of the lease governing the Company’s headquarters. All of our property related leases are classified as operating leases. These leases do not contain any residual value guarantees or restrictive covenants and do not include variable lease payments, except for the payment of common area maintenance and real estate taxes. Many of our property related leases give us the option to extend the lease term for a period of time, generally consistent with the initial lease term. These options are excluded from our calculation of the right-of-use asset and lease liability until such time as we determine it is reasonably certain that the option will be exercised.

The property related lease for the Company’s headquarters in Denver, Colorado is ten years in length with an expiration date of October 31, 2026 and contains a ten year option to extend the term of the lease through 2036. This option has been excluded from our calculation of the right-of-use asset and lease liability as it is not currently considered reasonably certain that the option will be exercised.

Operating lease expense is included as a component of selling, general and administrative expenses in the homebuilding section and expenses in the financial services ~~sections~~section of our consolidated statements of operations and comprehensive ~~income, respectively.~~income. Components of operating lease expense were as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(Dollars in thousands)									(Dollars in thousands)
Operating lease cost 1	Operating lease cost 1	$	2,107	$	1,995	$	4,238	$	3,972	Operating lease cost 1	$	2,156	$	2,131
Less: Sublease income (Note 19)		(142)		(39)		(225)		(78)
Less: Sublease income										Less: Sublease income	(144)		(83)
Net lease cost	Net lease cost	$	1,965	$	1,956	$	4,013	$	3,894	Net lease cost	$	2,012	$	2,048

1Includes variable lease costs, which are immaterial.

Supplemental cash flow information related to leases was as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(Dollars in thousands)									(Dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:									Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Operating cash flows from operating leases	$	1,999	$	1,887	$	4,021	$	3,745	Operating cash flows from operating leases	$	2,061	$	2,022
Right of use assets obtained in exchange for new operating lease liabilities		$	547	$	—	$	4,295	$	830
Leased assets obtained in exchange for new operating lease liabilities										Leased assets obtained in exchange for new operating lease liabilities	$	1,646	$	3,748

Weighted-average remaining lease term and discount rate for operating leases were as follows:


		June 30, 2022		June 30, 2021			March 31, 2023		March 31, 2022
Weighted-average remaining lease term (in years)	Weighted-average remaining lease term (in years)	4.4		4.9		Weighted-average remaining lease term (in years)	3.8		4.5
Weighted-average discount rate	Weighted-average discount rate	5.5	%	5.5	%	Weighted-average discount rate	5.5	%	5.5	%

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Maturities of operating lease liabilities were as follows:


		Year Ended December 31,			Year Ended December 31,
		(Dollars in thousands)			(Dollars in thousands)
2022 (excluding the six months ended June 30, 2022)		$	3,451
2023		7,150
2023 (excluding the three months ended March 31, 2023)				2023 (excluding the three months ended March 31, 2023)	$	5,148
2024	2024	6,498		2024	7,706
2025	2025	6,373		2025	7,621
2026	2026	5,573		2026	6,353
2027				2027	1,133
Thereafter	Thereafter	1,119		Thereafter	552
Total operating lease payments 1	Total operating lease payments 1	$	30,164	Total operating lease payments 1	$	28,513
Less: Interest		3,396
Less: Effects of discounting				Less: Effects of discounting	2,842
Present value of operating lease liabilities 2	Present value of operating lease liabilities 2	$	26,768	Present value of operating lease liabilities 2	$	25,671

1Operating lease payments exclude ~~$1.3~~$1.2 million of legally binding lease payments for leases signed but not yet commenced.

2Homebuilding and financial services operating lease liabilities of ~~$26.7~~$25.4 million and ~~$0.1~~$0.2 million, respectively, are included as a component of accrued and other liabilities and accounts payable and accrued liabilities, respectively, in the homebuilding and financial services sections of our consolidated balance sheet at ~~June 30, 2022.~~March 31, 2023.

9. Homebuilding Prepaids and Other Assets

The following table sets forth the components of homebuilding prepaids and other assets:


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

		(Dollars in thousands)					(Dollars in thousands)
Land option deposits						Land option deposits	$	20,058	$	19,539
Operating lease right-of-use asset (Note 8)	Operating lease right-of-use asset (Note 8)	$	25,689	$	25,514	Operating lease right-of-use asset (Note 8)	24,559		25,636
Land option deposits		43,564		41,617
Prepaids	Prepaids	14,302		26,058		Prepaids	11,073		13,333
Goodwill						Goodwill	6,008		6,008
Deferred debt issuance costs on revolving credit facility, net	Deferred debt issuance costs on revolving credit facility, net	6,192		7,166		Deferred debt issuance costs on revolving credit facility, net	4,766		5,241
Goodwill		6,008		6,008
Other	Other	201		199		Other	257		250
Total prepaids and other assets	Total prepaids and other assets	$	95,956	$	106,562	Total prepaids and other assets	$	66,721	$	70,007

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10. Homebuilding Accrued and Other Liabilities and Financial Services Accounts Payable and Accrued Liabilities

The following table sets forth information relating to homebuilding accrued and other liabilities:


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

		(Dollars in thousands)					(Dollars in thousands)
Accrued compensation and related expenses						Accrued compensation and related expenses	$	57,040	$	100,653
Customer and escrow deposits	Customer and escrow deposits	$	89,287	$	89,353	Customer and escrow deposits	47,191		42,296
Accrued compensation and related expenses		70,525		81,417
Warranty accrual (Note 11)	Warranty accrual (Note 11)	42,711		37,491		Warranty accrual (Note 11)	46,666		46,857
Accrued interest		30,934		30,934
Lease liability (Note 8)	Lease liability (Note 8)	26,705		26,440		Lease liability (Note 8)	25,426		26,574
Land development and home construction accruals	Land development and home construction accruals	25,670		22,012		Land development and home construction accruals	17,538		20,028
Accrued interest						Accrued interest	14,889		30,934
Income taxes payable	Income taxes payable	22,937		9,836		Income taxes payable	49,461		23,880
Construction defect claim reserves (Note 12)	Construction defect claim reserves (Note 12)	9,174		9,287		Construction defect claim reserves (Note 12)	10,322		10,466
Retentions payable						Retentions payable	19,417		21,519
Other accrued liabilities	Other accrued liabilities	79,406		64,140		Other accrued liabilities	54,217		60,199
Total accrued and other liabilities	Total accrued and other liabilities	$	397,349	$	370,910	Total accrued and other liabilities	$	342,167	$	383,406

A reclassification was made to our prior period financial information, where $21.5 million was reclassed from other accrued liabilities to retentions payable to conform to the current year presentation.

The following table sets forth information relating to financial services accounts payable and accrued liabilities:


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

		(Dollars in thousands)					(Dollars in thousands)
Insurance reserves (Note 12)	Insurance reserves (Note 12)	$	78,750	$	72,900	Insurance reserves (Note 12)	$	82,815	$	84,108
Accounts payable and other accrued liabilities	Accounts payable and other accrued liabilities	28,420		25,003		Accounts payable and other accrued liabilities	18,061		26,428
Total accounts payable and accrued liabilities	Total accounts payable and accrued liabilities	$	107,170	$	97,903	Total accounts payable and accrued liabilities	$	100,876	$	110,536

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11. Warranty Accrual

Our homes are sold with limited third-party warranties and, under our agreement with the issuer of the third-party warranties, we are responsible for performing all of the work for the first two years of the warranty coverage, and paying for certain work required to be performed subsequent to year two. We record accruals for general and structural warranty claims, as well as accruals for known, unusual warranty-related expenditures. Our warranty accrual is recorded based upon historical payment experience in an amount estimated to be adequate to cover expected costs of materials and outside labor during warranty periods. The determination of the warranty accrual rate for closed homes and the evaluation of our warranty accrual balance at period end are based on an internally developed analysis that includes known facts and interpretations of circumstances, including, among other things, our trends in historical warranty payment levels and warranty payments for claims not considered to be normal and recurring.

Our warranty accrual is included in accrued and other liabilities in the homebuilding section of our consolidated balance sheets and adjustments to our warranty accrual are recorded as an increase or reduction to home cost of sales in the homebuilding section of our consolidated statements of operations and comprehensive income.

The table set forth below summarizes accrual, adjustment and payment activity related to our warranty accrual for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022. The warranty accrual ~~for~~during the three months ended ~~June 30,~~March 31, 2023 decreased compared to an increase during the three months ended March 31, 2022 ~~increased~~ due to the increase in cash payments and a decrease in the number of home closings. ~~The warranty accrual for the six months ended June 30, 2022 increased also due to~~Further, there was a $2.4 million adjustment to increase our warranty accrual during the ~~period.~~three months ended March 31, 2022. This adjustment was due to higher general warranty related expenditures. ~~There were no warranty adjustments during the three and six months ended June 30, 2021.~~


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(Dollars in thousands)									(Dollars in thousands)
Balance at beginning of period	Balance at beginning of period	$	40,946	$	33,873	$	37,491	$	33,664	Balance at beginning of period	$	46,857	$	37,491
Expense provisions	Expense provisions	6,787		5,703		12,619		10,088		Expense provisions	5,635		5,832
Cash payments	Cash payments	(5,022)		(4,559)		(9,839)		(8,735)		Cash payments	(5,826)		(4,817)
Adjustments	Adjustments	—		—		2,440		—		Adjustments	—		2,440

Balance at end of period	Balance at end of period	$	42,711	$	35,017	$	42,711	$	35,017	Balance at end of period	$	46,666	$	40,946

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12. Insurance and Construction Defect Claim Reserves

The establishment of reserves for estimated losses associated with insurance policies issued by Allegiant and re-insurance agreements issued by StarAmerican are based on actuarial studies that include known facts and interpretations of circumstances, including our experience with similar cases and historical trends involving claim payment patterns, pending levels of unpaid claims, product mix or concentration, claim severity, frequency patterns, ~~depending on the business conducted,~~ and changing regulatory and legal environments. It is possible that changes in the insurance payment experience used in estimating our ultimate insurance losses could have a material impact on our insurance reserves.

The establishment of reserves for estimated losses to be incurred by our homebuilding subsidiaries associated with: (1) the self-insured retention (“SIR”) portion of construction defect claims that are expected to be covered under insurance policies with Allegiant and (2) the entire cost of any construction defect claims that are not expected to be covered by insurance policies with Allegiant, are based on third party actuarial studies that include known facts similar to those for our insurance reserves. It is possible that changes in the payment experience used in estimating our ultimate losses for construction defect claims could have a material impact on our reserves.

The table set forth below summarizes our insurance and construction defect claim reserves activity for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2021.~~2022. These reserves are included as a component of accounts payable and accrued liabilities and accrued and other liabilities in the financial services and homebuilding sections, respectively, of the consolidated balance sheets.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(Dollars in thousands)									(Dollars in thousands)
Balance at beginning of period	Balance at beginning of period	$	84,424	$	74,003	$	82,187	$	70,054	Balance at beginning of period	$	94,574	$	82,187
Expense provisions	Expense provisions	5,020		5,388		9,452		9,671		Expense provisions	3,789		4,432
Cash payments, net of recoveries	Cash payments, net of recoveries	(1,520)		(3,105)		(3,715)		(3,439)		Cash payments, net of recoveries	(5,226)		(2,195)
Balance at end of period	Balance at end of period	$	87,924	$	76,286	$	87,924	$	76,286	Balance at end of period	$	93,137	$	84,424

In the ordinary course of business, we make payments from our insurance and construction defect claim reserves to settle litigation claims arising from our homebuilding activities. These payments are irregular in both their timing and their magnitude. As a result, the cash payments, net of recoveries shown for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ are not necessarily indicative of what future cash payments will be for subsequent periods.

13. Income Taxes

Our overall effective income tax rates were ~~26.8%~~25.9% and ~~26.7%~~26.5% for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 24.9% and 24.2% for the three and six months ended June 30, 2021. The rates for the three and six months ended June 30, 2022 resulted~~respectively, resulting in income tax expense of ~~$69.4~~$28.3 million and ~~$122.9 million, respectively, compared to income tax expense of $51.2 million and $84.8~~$53.5 million for the ~~three and six months ended June 30, 2021,~~same periods, respectively. The year-over-year ~~increase~~decrease in ~~the~~our effective tax rate for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023 was primarily due to energy tax credits benefiting 2023, which had not ~~being~~been extended into 2022 ~~and a~~as of March 31, 2022. This decrease inwas partially offset by the ~~windfall on non-qualifying stock options exercised and lapsed restricted stock during the respective periods.~~tax impact of non-deductible executive compensation under Internal Revenue Code Section 162(m).

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14. Senior Notes

The carrying values of our senior notes as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, net of any unamortized debt issuance costs or discount, were as follows:


		June 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022

		(Dollars in thousands)					(Dollars in thousands)
3.850% Senior Notes due January 2030, net	3.850% Senior Notes due January 2030, net	$	297,821	$	297,699	3.850% Senior Notes due January 2030, net	$	298,012	$	297,949
2.500% Senior Notes due January 2031, net	2.500% Senior Notes due January 2031, net	347,269		347,126		2.500% Senior Notes due January 2031, net	347,486		347,413
6.000% Senior Notes due January 2043, net	6.000% Senior Notes due January 2043, net	491,010		490,903		6.000% Senior Notes due January 2043, net	491,176		491,120
3.966% Senior Notes due August 2061, net	3.966% Senior Notes due August 2061, net	346,074		346,053		3.966% Senior Notes due August 2061, net	346,105		346,094
Total	Total	$	1,482,174	$	1,481,781	Total	$	1,482,779	$	1,482,576

Our senior notes are not secured and, while the senior note indentures contain some restrictions on secured debt and other transactions, they do not contain financial covenants. Our senior notes are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by most of our homebuilding segment subsidiaries.

In January 2021, we completed an offering of $350.0 million of 2.500% senior notes due January 2031 at 100% of par. In August 2021, the Company issued $350.0 million of 3.966% senior notes due August 2061 at 100% of par. We used the net proceeds for general corporate purposes, which included the retirement of our 5.500% senior notes discussed further below, which were scheduled to mature in January 2024.

15. Stock-Based Compensation

The following table sets forth share-based award expense activity for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ which is included as a component of selling, general and administrative expenses and expenses in the homebuilding and financial services sections, respectively, of our consolidated statements of operations and comprehensive income:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2022		2021		2022		2021			2023		2022

		(Dollars in thousands)									(Dollars in thousands)
Stock option grants expense	Stock option grants expense	$	593	$	725	$	1,180	$	1,589	Stock option grants expense	$	157	$	587
Restricted stock awards expense	Restricted stock awards expense	2,041		1,452		4,628		3,921		Restricted stock awards expense	3,562		2,587
Performance share units expense	Performance share units expense	7,277		6,842		18,985		13,435		Performance share units expense	1,779		11,708
Total stock-based compensation	Total stock-based compensation	$	9,911	$	9,019	$	24,793	$	18,945	Total stock-based compensation	$	5,498	$	14,882

Additional detail on the performance share units ("PSUs") expense is included below:

~~2018~~2020 PSU Grants. The ~~2018~~2020 PSU awards vested on ~~April 29, 2021.~~February 3, 2023. For the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, the Company recorded share-based award expense of ~~$1.3~~$2.5 million related to these awards.

~~2019 PSU Grants. The 2019 PSU awards vested on February 3, 2022. For the three and six months ended June 30,~~ 2021 ~~the Company recorded share-based award expense of $1.8 million and $3.7 million, respectively, related to these awards.~~

~~2020~~ PSU Grants. As of ~~June 30, 2022,~~March 31, 2023, the Company recorded the required share-based award expense related to the awards of ~~$2.5 million and $4.9~~$1.8 million for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023, based on its assessment of the probability for achievement of the performance targets. For the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, the Company recorded share-based award expense of ~~$5.0~~$9.3 million ~~and $8.5 million, respectively,~~ related to these awards.

~~2021 PSU Grant~~s. As of June 30, 2022, the Company recorded the required share-based award expense related to the awards of $4.8 million and $14.1 million for the three and six months ended June 30, 2022, based on its assessment of the probability for achievement of the performance targets.

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16. Commitments and Contingencies

Surety Bonds and Letters of Credit. We are required to obtain surety bonds and letters of credit in support of our obligations for land development and subdivision improvements, homeowner association dues, warranty work, contractor license fees and earnest money deposits. At ~~June 30, 2022,~~March 31, 2023, we had outstanding surety bonds and letters of credit totaling ~~$379.6~~$359.1 million and ~~$211.0~~$116.0 million, respectively, including ~~$159.8~~$68.9 million in letters of credit issued by HomeAmerican. The estimated cost to complete obligations related to these bonds and letters of credit were approximately ~~$186.7~~$157.3 million and ~~$167.3~~$75.1 million, respectively. All letters of credit as of ~~June 30, 2022,~~March 31, 2023, excluding those issued by HomeAmerican, were issued under our unsecured revolving credit facility (see Note 18 for further discussion of the revolving credit facility). We expect that the obligations secured by these performance bonds and letters of credit generally will be performed in the ordinary course of

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business and in accordance with the applicable contractual terms. To the extent that the obligations are performed, the related performance bonds and letters of credit should be released and we should not have any continuing obligations. However, in the event any such performance bonds or letters of credit are called, our indemnity obligations could require us to reimburse the issuer of the performance bond or letter of credit.

We have made no material guarantees with respect to third-party obligations.

Litigation. Due to the nature of the homebuilding business, we have been named as defendants in various claims, complaints and other legal actions arising in the ordinary course of business, including product liability claims and claims associated with the sale and financing of homes. In the opinion of management, the outcome of these ordinary course matters will not have a material adverse effect upon our financial condition, results of operations or cash flows.

Lot Option Contracts. In the ordinary course of business, we enter into lot option purchase contracts (“Option Contracts”), generally through a deposit of cash or a letter of credit, for the right to purchase land or lots at a future point in time with predetermined terms. The use of such land option and other contracts generally allow us to reduce the risks associated with direct land ownership and development, reduces our capital and financial commitments, and minimizes the amount of land inventories on our consolidated balance sheets. In certain cases, these contracts will be settled shortly following the end of the period. Our obligation with respect to Option Contracts is generally limited to forfeiture of the related deposits. At ~~June 30, 2022,~~March 31, 2023, we had cash deposits, capitalized costs and letters of credit totaling ~~$40.9~~$19.2 million, $2.6 million and ~~$11.0~~$2.2 million, respectively, at risk associated with the option to purchase ~~7,296~~2,951 lots.

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17. Derivative and Financial Instruments

In the normal course of business, we enter into interest rate lock commitments ("IRLCs") with borrowers who have applied for loan funding and meet defined credit and underwriting criteria. Since we can terminate ~~a loan commitment~~IRLCs if the borrower does not comply with the terms of the contract, and some ~~loan commitments~~IRLCs may expire without being ~~drawn upon,~~utilized, these ~~commitments~~IRLCs do not necessarily represent future cash requirements.

Market risk arises if interest rates move adversely between the time ~~of the IRLCs~~we originate a mortgage loan or we enter into an IRLC and the date the loan is committed or sold to an investor. We mitigate our exposure to interest rate market risk relating to mortgage loans held-for-sale and IRLCs using: (1) forward sales of mortgage-backed securities, which are commitments to sell a specified financial instrument at a specified future date for a specified price, (2) mandatory delivery forward loan sale commitments, which are obligations of an investor to buy loans at a specified price within a specified time period, and (3) best-effort delivery forward loan sale commitments, which are obligations of an investor to buy loans at a specified price subject to the underlying mortgage loans being funded and closed. The best-effort delivery forward loan sale commitments do not meet the definition of a derivative financial ~~instruments~~instrument in accordance with ASC Topic 815, Derivatives and Hedging ("("ASC 815"). We have elected the fair value option for the ~~firm commitment financial instruments~~best-effort delivery forward loan sale commitments in accordance with ASC Topic 825, Financial Instruments ("ASC 825").

Forward sales of mortgage-backed securities are the predominant derivative and financial instruments we use to minimize market risk during the period from the time we extend an interest rate lock to a loan applicant until the time the loan is committed under a best-effort or mandatory delivery forward loan sale commitment.

The following table sets forth the notional amounts and fair value measurement of our derivative and financial instruments at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


							March 31, 2023								December 31, 2022
		June 30, 2022		December 31, 2021
							Notional Value		Derivative Assets		Derivative Liabilities		Derivatives, Net		Notional Value		Derivative Assets		Derivative Liabilities		Derivatives, Net
		(Dollars in thousands)					(Dollars in thousands)								(Dollars in thousands)
Interest rate lock commitments	Interest rate lock commitments	$	871,839	$	268,796	Interest rate lock commitments	$	391,487	$	3,504	$	822	$	2,682	$	394,004	$	1,566	$	3,244	$	(1,678)
Forward sales of mortgage-backed securities	Forward sales of mortgage-backed securities	553,000		275,600		Forward sales of mortgage-backed securities	362,500		1,258		3,607		(2,349)		323,000		580		5,849		(5,269)
Mandatory delivery forward loan sale commitments	Mandatory delivery forward loan sale commitments	99,117		128,391		Mandatory delivery forward loan sale commitments	106,607		102		183		(81)		105,060		794		3		791
Best-effort delivery forward loan sale commitments	Best-effort delivery forward loan sale commitments	351,237		51,993		Best-effort delivery forward loan sale commitments	11,237		77		74		3		139,972		2,161		185		1,976

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and March 31, 2022, we recorded net gains (loss) on these derivative and financial instruments measured on a recurring basis of ~~$19.7~~$(3.8) million and ~~$37.3~~$17.5 million, respectively, in revenues in the financial services section of our consolidated statements of operations and comprehensive ~~income, compared to net gain (loss) of $(8.5) million and $6.6 million for the same periods in 2021.~~income. There are no credit-risk-related contingent features within our derivative agreements, and counterparty risk is considered minimal.

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18. Lines of Credit

Revolving Credit Facility. We have an unsecured revolving credit agreement (“Revolving Credit Facility”) with a group of lenders which may be used for general corporate purposes. This agreement was amended on December 28, 2020 to (1) increase the aggregate commitment from $1.0 billion to $1.2 billion (the “Commitment”), (2) extend the Revolving Credit Facility maturity of $1.125 billion of the Commitments to December 18, 2025 with the remaining Commitment continuing to terminate on December 18, 2023 and (3) provide that the aggregate amount of the commitments may increase to an amount not to exceed $1.7 billion upon our request, subject to receipt of additional commitments from existing or additional lenders and, in the case of additional lenders, the consent of the co-administrative agents.

Effective April 11, 2023, the Revolving Credit Facility was amended to transition from a eurocurrency based interest rate to an interest rate based on the Secured Overnight Financing Rate ("SOFR"). As defined in the Revolving Credit Facility, interest rates on base rate borrowings are equal to the highest of (1) 0.0%, (2) a prime rate, (3) a federal funds effective rate plus ~~1.50%~~0.50%, and (4) ~~a specified eurocurrency~~the one month term SOFR screen rate plus the SOFR adjustment plus 1.00% and, in each case, plus a margin that is determined based on our credit ratings and leverage ratio. Interest rates on ~~eurocurrency~~SOFR borrowings are equal to ~~a specified eurocurrency~~the greater of (1) 0.0% and (2) the sum of the term SOFR screen rate for such interest period plus the SOFR adjustment, plus a margin that is determined based on our credit ratings and leverage ratio. At any time at which our leverage ratio, as of the last day of the most recent calendar quarter, exceeds 55%, the aggregate principal amount of all consolidated senior debt borrowings outstanding may not exceed the borrowing base. There is no borrowing base requirement if our leverage ratio, as of the last day of the most recent calendar quarter, is 55% or less.

~~The Revolving Credit Facility provides for a transition from the eurocurrency rate to a benchmark replacement upon the occurrence of certain events.~~

The Revolving Credit Facility is fully and unconditionally guaranteed, jointly and severally, by most of our homebuilding segment subsidiaries. The facility contains various representations, warranties and covenants that we believe are customary for agreements of this type. The financial covenants include a consolidated tangible net worth test and a leverage test, along with a consolidated tangible net worth covenant, all as defined in the Revolving Credit Facility. A failure to satisfy the foregoing tests does not constitute an event of default, but can trigger a “term-out” of the facility. A breach of the consolidated tangible net worth covenant (but not the consolidated tangible net worth test) or a violation of anti-corruption or sanctions laws would result in an event of default.

The Revolving Credit Facility is subject to acceleration upon certain specified events of default, including breach of the consolidated tangible net worth covenant, a violation of anti-corruption or sanctions laws, failure to make timely payments, breaches of certain representations or covenants, failure to pay other material indebtedness, or another person becoming beneficial owner of 50% or more of our outstanding common stock. We believe we were in compliance with the representations, warranties and covenants included in the Revolving Credit Facility as of ~~June 30, 2022.~~March 31, 2023.

We incur costs associated with unused commitment fees pursuant to the terms of the Revolving Credit Facility. At ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, there were ~~$51.1~~$47.1 million and ~~$40.1~~$48.3 million, respectively, in letters of credit outstanding, which reduced the amounts available to be borrowed under the Revolving Credit Facility. At ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, we had $10.0 million and $10.0 million, respectively, outstanding under the Revolving Credit Facility. As of ~~June 30, 2022,~~March 31, 2023, availability under the Revolving Credit Facility was approximately $1.14 billion.

Mortgage Repurchase Facility. HomeAmerican has a Master Repurchase Agreement (the “Mortgage Repurchase Facility”) with U.S. Bank National Association (“USBNA”). The Mortgage Repurchase Facility provides liquidity to HomeAmerican by providing for the sale of up to an aggregate of $75 million (subject to increase by up to $75 million under certain conditions) of eligible mortgage loans to USBNA with an agreement by HomeAmerican to repurchase the mortgage loans at a future date. Until such mortgage loans are transferred back to HomeAmerican, the documents relating to such loans are held by USBNA, as custodian, pursuant to the Custody Agreement (“Custody Agreement”), dated as of November 12, 2008, by and between HomeAmerican and USBNA. In the event that an eligible mortgage loan becomes ineligible, as defined under the Mortgage Repurchase Facility, HomeAmerican may be required to repurchase the ineligible mortgage loan immediately. The Mortgage Repurchase Facility was amended on September 24, 2020, March 25, 2021, May 20, 2021, December 21, 2021 and May 19, 2022 to adjust the commitments to purchase for specific time periods. The total capacity of the facility at ~~June 30, 2022~~March 31, 2023 was ~~$225~~$230 million. The May 19, 2022 amendment extended the termination date of the Repurchase Agreement to May 18, 2023. We are currently in negotiations to extend the Mortgage Repurchase Facility.

At ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, HomeAmerican had ~~$175.6~~$130.5 million and ~~$256.3~~$175.8 million, respectively, of mortgage loans that HomeAmerican was obligated to repurchase under the Mortgage Repurchase Facility. Mortgage loans that HomeAmerican is obligated to repurchase under the Mortgage Repurchase Facility are accounted for as a debt financing arrangement and are reported as mortgage repurchase facility in the consolidated balance sheets. ~~The December 21, 2021 amendment also provides for a transition from a pricing rate~~Pricing under the Mortgage Repurchase Facility is based on the ~~London Interbank Offered Rate (LIBOR) to one based on the Secured Overnight Financing Rate (SOFR).~~SOFR.

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The Mortgage Repurchase Facility contains various representations, warranties and affirmative and negative covenants that we believe are customary for agreements of this type. The negative covenants include, among others, (i) a minimum Adjusted Tangible Net Worth requirement, (ii) a maximum Adjusted Tangible Net Worth ratio, (iii) a minimum adjusted net income requirement, and (iv) a minimum Liquidity requirement. The foregoing capitalized terms are defined in the Mortgage Repurchase Facility. We believe HomeAmerican was in compliance with the representations, warranties and covenants included in the Mortgage Repurchase Facility as of ~~June 30, 2022.~~March 31, 2023.

19. Related Party Transactions

The Company has a sublease agreement with CVentures, Inc. Larry A. Mizel, the Executive Chairman of the Company, is the President of CVentures, Inc. The sublease is for office space that CVentures, Inc. has continuously leased from the Company as disclosed in the Form 8-K filed July 27, 2005 and the Form 8-K filed March 28, 2006. The current sublease term commenced November 1, 2016 and will continue through October 31, 2026. The sublease agreement is for approximately 5,437 rentable square feet at a base rent that increases over the term from $26.50 to $31.67 per rentable square foot per year. The sublease rent is an allocation of the rent under the master lease agreement based on the sublease square footage.

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20. Supplemental Guarantor Information

Our senior notes are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by the following subsidiaries (collectively, the "Guarantor Subsidiaries"), which are 100%-owned subsidiaries of the Company:

•M.D.C. Land Corporation

•RAH of Florida, Inc.

•Richmond American Construction, Inc.

•Richmond American Construction NM, Inc.

•Richmond American Homes of Arizona, Inc.

•Richmond American Homes of Colorado, Inc.

•Richmond American Homes of Florida, LP

•Richmond American Homes of Idaho, Inc.

•Richmond American Homes of Maryland, Inc.

•Richmond American Homes of Nevada, Inc.

•Richmond American Homes of New Mexico, Inc.

•Richmond American Homes of Oregon, Inc.

•Richmond American Homes of Pennsylvania, Inc.

•Richmond American Homes of Tennessee, Inc.

•Richmond American Homes of Texas, Inc.

•Richmond American Homes of Utah, Inc.

•Richmond American Homes of Virginia, Inc.

•Richmond American Homes of Washington, Inc.

The senior note indentures do not provide for a suspension of the guarantees. Other than for the senior notes due 2061, the senior note indentures, provide that any Guarantor may be released from its guarantee so long as (1) no default or event of default exists or would result from release of such guarantee, (2) the Guarantor being released has consolidated net worth of less than 5% of the Company’s consolidated net worth as of the end of the most recent fiscal quarter, (3) the Guarantors released from their guarantees in any year-end period comprise in the aggregate less than 10% (or 15% if and to the extent necessary to permit the cure of a default) of the Company’s consolidated net worth as of the end of the most recent fiscal quarter, (4) such release would not have a material adverse effect on the homebuilding business of the Company and its subsidiaries and (5) the Guarantor is released from its guarantee(s) under all Specified Indebtedness (other than by reason of payment under its guarantee of Specified Indebtedness). The indenture for the senior notes due 2061 provides that, if a Guarantor is released under its guarantees of our credit facilities or other publicly traded debt securities, the Guarantor will also be released under its guarantee of the senior notes due 2061. Upon delivery of an officers’ certificate and an opinion of counsel stating that all conditions precedent provided for in the indenture relating to such transactions have been complied with and the release is authorized, the guarantee will be automatically and unconditionally released. “Specified Indebtedness” means indebtedness under the senior notes, the Company’s Indenture dated as of December 3, 2002, the Revolving Credit Facility, and any refinancing, extension, renewal or replacement of any of the foregoing.

As the combined assets, liabilities and results of operations of M.D.C. Holdings, Inc. and the Guarantor Subsidiaries (the “Obligor Group”) are not materially different from those in the homebuilding section of our consolidated balance sheets and consolidated statements of operations and comprehensive income, separate summarized financial information of the Obligor Group has not been included. As of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, amounts due to non-guarantor subsidiaries from the Obligor Group totaled ~~$59.4~~$46.7 million and ~~$60.2~~$29.7 million, respectively.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with, and is qualified in its entirety by, the Unaudited Consolidated Financial Statements and Notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This item contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are based upon management’s experiences, observations, and analyses. Actual results may differ materially from those indicated in such forward-looking statements. Factors that may cause such a difference include, but are not limited to, those discussed in "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 and this Quarterly Report on Form 10-Q.


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2022			2021			2022			2021				2023			2022

		(Dollars in thousands, except per share amounts)													(Dollars in thousands, except per share amounts)
Homebuilding:	Homebuilding:													Homebuilding:
Home sale revenues	Home sale revenues	$	1,450,823		$	1,367,773		$	2,691,343		$	2,409,631		Home sale revenues	$	1,020,016		$	1,240,520
Home cost of sales	Home cost of sales	(1,062,016)			(1,051,181)			(1,983,394)			(1,865,069)			Home cost of sales	(840,747)			(921,378)
Inventory impairments	Inventory impairments	—			—			(660)			—			Inventory impairments	(7,800)			(660)
Total cost of sales	Total cost of sales	(1,062,016)			(1,051,181)			(1,984,054)			(1,865,069)			Total cost of sales	(848,547)			(922,038)
Gross profit	Gross profit	388,807			316,592			707,289			544,562			Gross profit	171,469			318,482
Gross margin	Gross margin	26.8		%	23.1		%	26.3		%	22.6		%	Gross margin	16.8		%	25.7		%
Selling, general and administrative expenses	Selling, general and administrative expenses	(133,849)			(128,861)			(263,163)			(243,854)			Selling, general and administrative expenses	(94,988)			(129,314)

Interest and other income	Interest and other income	822			868			1,577			1,835			Interest and other income	13,459			755
Other expense	Other expense	(15,509)			(1,090)			(16,933)			(1,527)			Other expense	1,059			(1,424)
Homebuilding pretax income	Homebuilding pretax income	240,271			187,509			428,770			301,016			Homebuilding pretax income	90,999			188,499

Financial Services:	Financial Services:													Financial Services:
Revenues	Revenues	36,229			33,318			65,360			78,341			Revenues	29,486			29,131
Expenses	Expenses	(18,801)			(16,440)			(35,736)			(31,545)			Expenses	(15,250)			(16,935)
Other income, net	Other income, net	1,264			1,155			2,451			2,042			Other income, net	3,734			1,187
Financial services pretax income	Financial services pretax income	18,692			18,033			32,075			48,838			Financial services pretax income	17,970			13,383

Income before income taxes	Income before income taxes	258,963			205,542			460,845			349,854			Income before income taxes	108,969			201,882
Provision for income taxes	Provision for income taxes	(69,421)			(51,190)			(122,882)			(84,812)			Provision for income taxes	(28,269)			(53,461)
Net income	Net income	$	189,542		$	154,352		$	337,963		$	265,042		Net income	$	80,700		$	148,421

Earnings per share:	Earnings per share:													Earnings per share:
Basic	Basic	$	2.66		$	2.19		$	4.75		$	3.76		Basic	$	1.10		$	2.09
Diluted	Diluted	$	2.59		$	2.11		$	4.61		$	3.62		Diluted	$	1.08		$	2.02

Weighted average common shares outstanding:	Weighted average common shares outstanding:													Weighted average common shares outstanding:
Basic	Basic	70,841,476			70,291,057			70,804,019			70,044,326			Basic	72,647,659			70,766,146
Diluted	Diluted	72,881,012			72,715,273			72,945,748			72,754,141			Diluted	74,021,989			72,938,414

Dividends declared per share	Dividends declared per share	$	0.50		$	0.40		$	1.00		$	0.77		Dividends declared per share	$	0.50		$	0.50

Cash provided by (used in):	Cash provided by (used in):													Cash provided by (used in):
Operating Activities	Operating Activities	$	53,005		$	70,041		$	171,060		$	12,084		Operating Activities	$	426,164		$	118,055
Investing Activities	Investing Activities	$	(6,814)		$	(7,698)		$	(13,698)		$	(13,447)		Investing Activities	$	(244,760)		$	(6,884)
Financing Activities	Financing Activities	$	(38,304)		$	(97,592)		$	(164,584)		$	238,750		Financing Activities	$	(93,508)		$	(126,280)

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Overview

Industry Conditions and Outlook for MDC*

The housing market in the first quarter of 2023 presented more challenging conditions compared to the same period in the prior year, as the historically strong demand experienced in the ~~housing market over~~prior year quarter began to weaken beginning in mid-2022 due to the ~~last two years slowed during~~sharp increases in interest rates, inflation concerns, and various other economic uncertainties. As a result, our net orders and net order value decreased 44% and 48%, respectively, in the ~~second~~first quarter of ~~2022~~2023 as the average 30-year fixed mortgage rate approached 6.0% in June, representing its largest year-over-year basis point increase in over 40 years. The magnitude and speed of these recent rate increases has caused many buyers to pause and reconsider a home purchase, resulting in lower gross demand and higher cancellations during the second quarter. Longer-term, after buyers acclimate to higher interest rates, we believe that a more normalized level of housing activity should continue to be supported by low levels of existing home inventory, a continued focus on suburban home ownership and interest rates that remain low by historical standards. However, we also believe that there is increasing risk that housing activity could be negatively impacted by broader economic factors such as declining consumer confidence or higher inflation.

Throughout the homebuilding industry we have continued to see production challenges due to supply chain disruptions, labor market tightness, and shortages of certain building materials. These disruptions have caused our cycle times to extend year-over-year compared to the ~~three~~first quarter of 2022. While our 2023 first quarter monthly absorption rate of 2.6 homes per community per month remained below our pre-pandemic levels, we experienced sequential increases in our monthly absorption rate as the quarter progressed. On a gross basis (excluding cancellations) our monthly absorption rate was 3.7 homes per community per month for the first quarter of 2023. We were pleased with our ability to sell and ~~six months ended June 30, 2021. However,~~close our quick move-in inventory during the ~~second~~ quarter, which allowed us to turn our inventories quicker than expected. We remain focused on balancing our pace of sales and pricing and incentive levels to maximize profitability while continuing to turn our inventory. As a result, we ~~began to see signs~~delivered strong top and bottom line results and generated positive cash flow from operations in the first quarter of 2023 despite the volatile market conditions that ~~the pressure on our cycle times may be abating. We~~ continue to ~~work with our suppliers and trade partners to address ongoing issues, but it remains uncertain whether or not conditions will improve in~~impact the ~~near term. Continued supply chain disruptions and labor and material shortages could further extend delivery times and increase cost pressures.~~homebuilding industry.

We believe we are well-positioned to navigate the ever evolving market conditions given our strong financial position. We ended the quarter with total cash and cash equivalents of $590.2 million, total liquidity of $1.74 billion and no senior note maturities until 2030. We remain focused on cash flow as we continue to build through our homes in backlog, and as a result have slowed our pace of land acquisition and approval activity during the second quarter of 2022. We ended the quarter with 33,130 lots controlled, which represents a decrease of 4% from the prior year.

~~While we~~ remain confident in the long-term growth prospects for the industry given the underproduction of new homes over the past decade and the softening supply of re-sale home inventory due to homeowners holding on to extremely low mortgage rates. With that said, the current demand for new homes is subject to continued ~~and increasing~~ uncertainty due to many ~~factors. These include~~factors, including ongoing inflation concerns, the Federal Reserve's quantitative tightening and the resulting impact on mortgage interest rates, consumer confidence, the current geopolitical environment ~~the Federal Reserve's continued quantitative tightening, the sharp rise in mortgage interest rates, ongoing inflation concerns, the impact of the COVID-19 pandemic~~ and other factors. The potential effect of these factors is highly uncertain and could adversely and materially impact our operations and financial results in future periods.

We believe that we are uniquely equipped to navigate these uncertainties and any continued market volatility given our seasoned leadership team, strong financial position and distinct operating strategy. We remain focused on maximizing risk-adjusted returns while minimizing the risks of excess leverage and land ownership. We ended the quarter with total cash and cash equivalents and marketable securities of $1.61 billion, total liquidity of $2.79 billion, a debt-to-capital ratio of 32.3% and no senior note maturities until 2030.

Three Months Ended ~~June 30, 2022~~March 31, 2023

For the three months ended ~~June 30, 2022,~~March 31, 2023, our net income was ~~$189.5~~$80.7 million, or ~~$2.59~~$1.08 per diluted share, a ~~23% increase~~46% decrease compared to net income of ~~$154.4~~$148.4 million, or $2.11 per diluted share, for the same period in the prior year. Both our homebuilding and financial services businesses contributed to the increase, as pretax income from our homebuilding operations increased $52.8 million, or 28%, and our financial services pretax income increased $0.7 million, or 4%, compared to the same period in the prior year. The increase in homebuilding pretax income was the result of a 6% increase in home sale revenues and an increase in gross margin from home sales of 370 basis points. This was partially offset by project abandonment expense of $15.5 million, as we intentionally slowed land approval and acquisition activity during the quarter as noted above. The increase in financial services pretax income was primarily due to our insurance operations, which benefited from increased premium revenue within our captive insurance companies. This was partly offset by our mortgage operations business, as we have seen profitability per loan locked, sold and closed return to more historical levels during the period ended June 30, 2022 as competition in the primary mortgage market has increased. The decrease in mortgage operations was partly offset by an increase in interest rate lock volume as well as an increase in mortgage servicing revenue, as additions to our mortgage servicing portfolio increased year-over-year.

The dollar value of our net new home orders decreased 40% from the prior year period, due to a 48% decrease in the number of net new orders, which was slightly offset by a 16% increase in the average selling price of net new orders. The decrease in the number of net new orders was due to a decrease in the monthly sales absorption rate, which was partially offset by an increase in average active communities year-over-year from 188 to 203 communities. The increase in the average selling price was the result of price increases implemented in the second half of 2021 and the first quarter of 2022.

~~Six Months Ended June 30, 2022~~

~~For the six months ended June 30, 2022, our net income was $338.0 million, or $4.61 per diluted share, a 28% increase compared to net income of $265.0 million, or $3.62~~$2.02 per diluted share, for the same period in the prior year. Our homebuilding business was the primary driver of the ~~increase,~~decrease, as pretax income ~~from our homebuilding operations increased $127.8~~decreased $97.5 million, or ~~42%.~~52% year-over-year. This decrease was ~~slightly~~partially offset by our financial services business, as pretax income ~~which decreased $16.8~~increased $4.6 million, or 34%., compared to the same period in the prior year. The ~~main drivers of the~~

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~~increase~~decrease in homebuilding pretax income ~~are consistent with~~was primarily due to an 18% decrease in home sale revenues and an 890 basis point decrease in gross margin from home sales. The decrease in gross margin from home sales was driven largely by an increase in both incentives and construction costs year-over-year, and to a lesser extent by $7.8 million of inventory impairments recognized during the ~~second quarter commentary discussed above.~~current year period. These items were partially offset by a 110 basis point decrease in our selling, general and administrative expenses as a percentage of revenue. The ~~decrease~~increase in financial services pretax income was ~~primarily~~ due to both our mortgage and other financial services operations. The increase in pretax income for our mortgage operations ~~which~~ was ~~slightly offset by our insurance operations. The main drivers of the~~due to a decrease in ~~mortgage~~salary related expenses driven by lower headcount, an increase in capture rate and the allocation of revenue from our homebuilding business associated with our financing incentives. Our other financial services operations and homebuilding business each saw an increase in ~~insurance operations are consistent with the second quarter commentary discussed above.~~interest income due to increases in both interest rates and our cash and short-term investments year-over-year.

* See "Forward-Looking Statements" below.

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Homebuilding

Pretax Income (Loss):


		Three Months Ended								Six Months Ended									Three Months Ended
		June 30,				Change				June 30,				Change					March 31,				Change
		2022		2021		Amount		%		2022		2021		Amount		%			2023		2022		Amount		%

		(Dollars in thousands)																	(Dollars in thousands)
West	West	$	148,508	$	132,919	$	15,589	12	%	$	279,034	$	210,106	$	68,928	33	%	West	$	43,200	$	130,526	$	(87,326)	(67)	%
Mountain	Mountain	79,135		64,052		15,083		24	%	129,641		109,910		19,731		18	%	Mountain	25,036		50,506		(25,470)		(50)	%
East	East	34,407		10,846		23,561		217	%	65,801		18,681		47,120		252	%	East	15,309		31,394		(16,085)		(51)	%
Corporate	Corporate	(21,779)		(20,308)		(1,471)		(7)	%	(45,706)		(37,681)		(8,025)		(21)	%	Corporate	7,454		(23,927)		31,381		131	%
Total Homebuilding pretax income	Total Homebuilding pretax income	$	240,271	$	187,509	$	52,762	28	%	$	428,770	$	301,016	$	127,754	42	%	Total Homebuilding pretax income	$	90,999	$	188,499	$	(97,500)	(52)	%

For the three months ended ~~June 30, 2022,~~March 31, 2023, we recorded homebuilding pretax income of ~~$240.3~~$91.0 million, ~~an increase~~a decrease of ~~28%~~52% from ~~$187.5~~$188.5 million for the same period in the prior year. The ~~increase~~decrease was due to ~~a 6% increase~~an 18% decrease in home sale revenues ~~a 370~~and an 890 basis point ~~increase~~decrease in ~~our~~ gross margin from home ~~sales and~~sales. This was partially offset by a 20110 basis point decrease in our selling, general and administrative expenses as a percentage of ~~revenue.~~home sale revenues.

Our West segment experienced ~~a $15.6~~an $87.3 million year-over-year ~~increase~~decrease in pretax income, due to ~~an improved~~a decrease in gross margin ~~slightly offset by~~from home sales, an 18% decrease in home sale revenues and an increase in selling, general and administrative expenses as a ~~7% decrease in~~percentage of home sale revenues. Our Mountain segment experienced a ~~$15.1~~$25.5 million ~~increase~~decrease in pretax income from the prior year, as a result of a ~~9% increase~~10% decrease in home sale revenues and ~~an improved gross margin. Our East segment experienced~~ a $23.6 million increase in pretax income from the prior year, due primarily to a 89% increase in home sale revenues as well as an improved gross margin. Our Mountain and East homebuilding segments also benefited from decreased selling, general and administrative expenses as a percentage of revenue driven by improved operating leverage. Our Corporate segment experienced a $1.5 million decrease in pretax income, due primarily to increased stock-based and deferred compensation expense. This was partially offset by an increase in the amount of corporate cost allocated to our homebuilding and financial services segments.

For the six months ended June 30, 2022, we recorded homebuilding pretax income of $428.8 million, an increase of 42% from $301.0 million for the same period in the prior year. The increase was due to a 12% increase in home sale revenues, a 370 basis point increase in our gross margin from home sales, and a 30 basis point decrease in our selling, general and administrative expenses as a percentage of revenue. Our West segment experienced a $68.9 million increase in pretax income, due to an improved gross margin, a 2% increase in home sale revenue, andpartially offset by a decrease in selling, general and administrative expenses as a percentage of ~~revenue. Commentary on~~home sale revenues. Our East segment experienced a $16.1 million decrease in pretax income from the ~~drivers~~prior year, due primarily to a 29% decrease in home sale revenues, a decrease in gross margin from home sales, and an increase in selling, general and administrative expenses as a percentage of ~~the~~home sale revenues. Our Corporate segment experienced a $31.4 million increase in pretax income, due to decreased compensation related costs associated with a decrease in ~~our Mountain~~headcount, decreased stock-based and ~~East homebuilding segments is consistent with the 2022 second quarter discussion above.~~deferred compensation expenses and an increase in interest income.

Assets:


		June 30, 2022			December 31, 2021			Change						March 31, 2023					December 31, 2022			Change
							Amount			%							Amount					%

				(Dollars in thousands)														(Dollars in thousands)
West	West	$	2,653,052		$	2,472,378		$	180,674		7	%	West		$	2,098,329				$	2,275,144		$	(176,815)		(8)		%
Mountain	Mountain	1,169,938			1,072,717			97,221			9	%	Mountain	898,227					1,005,622			(107,395)			(11)		%
East	East	508,690			450,675			58,015			13	%	East	407,046					427,926			(20,880)			(5)		%
Corporate	Corporate	547,620			547,364			256			0	%	Corporate	1,574,847					1,249,370			325,477			26		%
Total homebuilding assets	Total homebuilding assets	$	4,879,300		$	4,543,134		$	336,166		7	%	Total homebuilding assets	$	4,978,449				$	4,958,062		$	20,387		0		%

Total homebuilding assets ~~increased 7%~~remained relatively flat from December 31, ~~2021~~2022 to ~~June 30, 2022. Homebuilding~~March 31, 2023. The increase in the Corporate segment assets ~~increased~~was driven by an increase to cash and cash equivalents as well as marketable securities. The decrease in ~~each of our operating~~the West and Mountain segments ~~largely due to~~assets was driven by a ~~greater number of homes~~decrease in home sale receivables, land and land under development and housing completed or under ~~construction as of period-end.~~

construction.

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New Home Deliveries & Home Sale Revenues:

Changes in home sale revenues are impacted by changes in the number of new homes delivered and the average selling price of those delivered homes. Commentary for each of our segments on significant changes in these two metrics is provided below.


		Three Months Ended June 30,																	Three Months Ended March 31,
		2022					2021					% Change							2023					2022					% Change
		Homes	Home Sale Revenues		Average Price		Homes	Home Sale Revenues		Average Price		Homes		Home Sale Revenues		Average Price			Homes	Home Sale Revenues		Average Price		Homes	Home Sale Revenues		Average Price		Homes		Home Sale Revenues		Average Price

		(Dollars in thousands)																	(Dollars in thousands)
West	West	1,371	$	788,279	$	575.0	1,672	$	847,683	$	507.0	(18)	%	(7)	%	13	%	West	1,064	$	577,933	$	543.2	1,243	$	707,311	$	569.0	(14)	%	(18)	%	(5)	%
Mountain	Mountain	665	437,001		657.1		711	400,633		563.5		(6)	%	9	%	17	%	Mountain	487	301,155		618.4		548	335,128		611.5		(11)	%	(10)	%	1	%
East	East	500	225,543		451.1		339	119,457		352.4		47	%	89	%	28	%	East	300	140,928		469.8		442	198,081		448.1		(32)	%	(29)	%	5	%
Total	Total	2,536	$	1,450,823	$	572.1	2,722	$	1,367,773	$	502.5	(7)	%	6	%	14	%	Total	1,851	$	1,020,016	$	551.1	2,233	$	1,240,520	$	555.5	(17)	%	(18)	%	(1)	%

Six Months Ended June 30,
2022 2021 % Change
Homes Home Sale
Revenues Average
Price Homes Home Sale
Revenues Average
Price Homes Home
Sale
Revenues Average Price
(Dollars in thousands)
West 2,614 $ 1,495,590 $ 572.1 2,948 $ 1,464,294 $ 496.7 (11) % 2 % 15 %
Mountain 1,213 772,129 636.5 1,323 725,350 548.3 (8) % 6 % 16 %
East 942 423,624 449.7 629 219,987 349.7 50 % 93 % 29 %
Total 4,769 $ 2,691,343 $ 564.3 4,900 $ 2,409,631 $ 491.8 (3) % 12 % 15 %

For the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023, the decrease in the number of new homes delivered in each of our segments was negatively impacted by an increase in construction cycle times year-over-year. This increase was primarily the result of extended permitting times, supply chain disruptions and labor shortages as a result of the pandemic as well as the strong demand for new homes experienced in recent periods.

~~West Segment Commentary~~

~~For the three and six months ended June 30, 2022, the decrease in new home deliveries was~~ the result of a decrease in backlog conversion rates in most of our markets within this segment as a result of the increased construction cycle times discussed above. This decrease was partially offset by an increase in the number of homes in backlog to begin the respective periods. The average selling price of homes delivered increased as a result of price increases implemented over the past two years. These increases were slightly offset by a shift in mix to lower priced communities.

~~Mountain Segment Commentary~~

For the three and six months ended June 30, 2022, the decrease in new home deliveries was the result of a decrease in backlog conversion rates in most of our markets within this segment as a result of the increased construction cycle times discussed above. This decrease was partially offset by an increase in the number of homes in backlog to begin the period. ~~The average selling price of homes delivered increased as a result of price increases implemented over the past two years.~~

~~East Segment Commentary~~

~~For the three and six months ended June 30, 2022, the~~This decrease was partially offset within each segment by an increase in ~~new home deliveries was~~backlog conversion rates due to an increase in the number of homes both sold and closed during the quarter. This increase was a result of the year-over-year increase in ~~backlog~~the number of unsold started homes to begin the period as ~~well as an increase in backlog conversion rates as~~ a result of the above average cancellation rates experienced in the second half of 2022 and our recent pivot to focus more on speculative construction ~~status of those homes~~starts.

West Segment Commentary

For the three months ended March 31, 2023, the decrease in ~~beginning backlog.~~new home deliveries, as discussed above, was further impacted by an increase in construction cycle times year-over-year in our Phoenix division. The average selling price of homes delivered ~~increased~~decreased as a result of ~~price increases implemented over the past two years as well as~~ a shift in mix ~~within several~~from our California divisions to our Arizona divisions.

Mountain Segment Commentary

For the three months ended March 31, 2023, the decrease in new home deliveries was driven by the factors discussed above.

East Segment Commentary

For the three months ended March 31, 2023, the decrease in new home deliveries, as discussed above, was partially offset by a decrease in cycle times. For the three months ended March 31, 2023, the average selling price of homes delivered increased driven by our Florida markets, due to a shift in mix to higher priced communities.

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Gross Margin from Home Sales:

Our gross margin from home sales for the three months ended ~~June 30, 2022, increased 370~~March 31, 2023, decreased 890 basis points year-over-year from ~~23.1%~~25.7% to ~~26.8%~~16.8%. ~~Gross~~The decrease in gross margin from home sales ~~increased across each~~was driven largely by increases in both incentives and construction costs year-over-year, and to a lesser extent by $7.8 million of ~~our segments on both build-to-order and speculative home deliveries driven~~inventory impairments recognized during the current year period compared to $0.6 million in the prior year period. These decreases were partially offset by price increases implemented ~~in the second half of~~during 2021 and the first quarter of 2022. ~~This increase was partially offset~~

Inventory Impairments:

Inventory impairments recognized by ~~an increase in building costs year-over-year.~~

~~Our gross margin from home sales~~segment for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022 ~~increased 370 basis points year-over-year from 22.6% to 26.3%. The increase~~are shown in ~~gross margin from home sales are consistent with~~ the second quarter discussed above. This increase was partially offset by an increase in building costs year-over-year, a $0.7 million inventory impairment and a $2.4 million warranty accrual adjustment recognized during the six months ended June 30, 2022.table below.


	Three Months Ended March 31,
	2023		2022
	(Dollars in thousands)
Housing Completed or Under Construction:
West	$	—	$	660
Mountain	664		—
East	—		—
Subtotal	664		660
Land and Land Under Development:
West	—		—
Mountain	7,136		—
East	—		—
Subtotal	7,136		—
Total Inventory Impairments	$	7,800	$	660

The table below provides quantitative data, for the periods presented, where applicable, used in determining the fair value of the impaired inventory.


	Impairment Data					Quantitative Data
Three Months Ended	Number of Subdivisions Impaired	Inventory Impairments		Fair Value of Inventory After Impairments		Discount Rate
	(Dollars in thousands)
March 31, 2023	1	$	7,800	$	13,016	18%
Total		$	7,800

March 31, 2022	1	$	660	$	1,728		N/A
Total		$	660

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Selling, General and Administrative Expenses:


		Three Months Ended June 30,								Six Months Ended June 30,									Three Months Ended March 31,
		2022			2021			Change		2022			2021			Change			2023			2022			Change

		(Dollars in thousands)																	(Dollars in thousands)
General and administrative expenses	General and administrative expenses	$	72,894		$	61,958		$	10,936	$	144,877		$	119,121		$	25,756	General and administrative expenses	$	42,776		$	71,983		$	(29,207)
General and administrative expenses as a percentage of home sale revenues	General and administrative expenses as a percentage of home sale revenues	5.0		%	4.5		%	50 bps		5.4		%	4.9		%	50 bps		General and administrative expenses as a percentage of home sale revenues	4.2		%	5.8		%	-160 bps
Marketing expenses	Marketing expenses	$	26,035		$	26,832		$	(797)	$	51,667		$	52,535		$	(868)	Marketing expenses	$	23,096		$	25,632		$	(2,536)
Marketing expenses as a percentage of home sale revenues	Marketing expenses as a percentage of home sale revenues	1.8		%	2.0		%	-20 bps		1.9		%	2.2		%	-30 bps		Marketing expenses as a percentage of home sale revenues	2.3		%	2.1		%	20 bps
Commissions expenses	Commissions expenses	$	34,920		$	40,071		$	(5,151)	$	66,619		$	72,198		$	(5,579)	Commissions expenses	$	29,116		$	31,699		$	(2,583)
Commissions expenses as a percentage of home sale revenues	Commissions expenses as a percentage of home sale revenues	2.4		%	2.9		%	-50 bps		2.5		%	3.0		%	-50 bps		Commissions expenses as a percentage of home sale revenues	2.9		%	2.6		%	30 bps
Total selling, general and administrative expenses	Total selling, general and administrative expenses	$	133,849		$	128,861		$	4,988	$	263,163		$	243,854		$	19,309	Total selling, general and administrative expenses	$	94,988		$	129,314		$	(34,326)
Total selling, general and administrative expenses as a percentage of home sale revenues	Total selling, general and administrative expenses as a percentage of home sale revenues	9.2		%	9.4		%	-20 bps		9.8		%	10.1		%	-30 bps		Total selling, general and administrative expenses as a percentage of home sale revenues	9.3		%	10.4		%	-110 bps

General and administrative expenses ~~increased~~decreased for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 due to ~~increased~~decreased compensation related costs associated with a decrease in headcount as well as decreased stock-based and deferred compensation ~~expenses as well as increased salary related expenses due to higher average headcount. For the six months ended June 30, 2022, the increase was also due to increased bonus~~ expenses.

Marketing expenses ~~were consistent~~decreased for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 compared to the previous period, as ~~increased salary~~decreased compensation related expenses, ~~were offset by decreased~~ amortization of deferred selling ~~cost.~~cost, and model home expenses were partially offset by increased product advertising expenses.

Commissions expenses decreased for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 due to decreases in home sale revenues, partially offset by changes in our commission ~~structure, which were partially offset by increases in home sale revenues.~~structure.

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Other Homebuilding Operating Data

Net New Orders and Active Subdivisions:

Changes in the dollar value of net new orders are impacted by changes in the number of net new orders and the average selling price of those homes. Commentary for each of our segments on significant changes in these two metrics is provided below.
Three Months Ended June 30,
2022 2021 % Change
Homes Dollar
Value Average
Price Monthly
Absorption
Rate * Homes Dollar Value Average Price Monthly
Absorption Rate * Homes Dollar Value Average Price Monthly
Absorption
Rate
(Dollars in thousands)
West 857 $ 543,584 $ 634.3 2.45 1,602 $ 850,742 $ 531.0 5.67 (47) % (36) % 19 % (57) %
Mountain 277 196,340 708.8 1.79 706 433,793 614.4 4.18 (61) % (55) % 15 % (57) %
East 270 142,221 526.7 2.63 406 180,205 443.9 3.56 (33) % (21) % 19 % (26) %
Total 1,404 $ 882,145 $ 628.3 2.31 2,714 $ 1,464,740 $ 539.7 4.80 (48) % (40) % 16 % (52) %


		Six Months Ended June 30,																		Three Months Ended March 31,
		2022						2021						% Change									2023						2022						% Change
		Homes	Dollar Value		Average Price		Monthly Absorption Rate *	Homes	Dollar Value		Average Price		Monthly Absorption Rate *	Homes		Dollar Value		Average Price		Monthly Absorption Rate			Homes	Dollar Value		Average Price		Monthly Absorption Rate *	Homes	Dollar Value		Average Price		Monthly Absorption Rate *	Homes		Dollar Value		Average Price		Monthly Absorption Rate

		(Dollars in thousands)																		(Dollars in thousands)
West	West	2,561	$	1,574,372	$	614.7	3.91	3,377	$	1,791,809	$	530.6	5.73	(24)	%	(12)	%	16	%	(32)	%	West	1,012	$	566,909	$	560.2	2.47	1,704	$	1,000,954	$	587.4	5.54	(41)	%	(43)	%	(5)	%	(55)	%
Mountain	Mountain	1,197	799,482		667.9		3.76	1,717	1,017,585		592.7		5.03	(30)	%	(21)	%	13	%	(25)	%	Mountain	410	237,546		579.4		2.47	920	581,971		632.6		5.63	(55)	%	(59)	%	(8)	%	(56)	%
East	East	797	399,780		501.6		3.73	829	354,950		428.2		4.03	(4)	%	13	%	17	%	(7)	%	East	345	152,809		442.9		3.03	527	253,850		481.7		4.78	(35)	%	(40)	%	(8)	%	(37)	%
Total	Total	4,555	$	2,773,634	$	608.9	3.83	5,923	$	3,164,344	$	534.2	5.21	(23)	%	(12)	%	14	%	(26)	%	Total	1,767	$	957,264	$	541.7	2.56	3,151	$	1,836,775	$	582.9	5.42	(44)	%	(48)	%	(7)	%	(53)	%

*Calculated as total net new orders (gross orders less cancellations) in period ÷ average active communities during period ÷ number of months in period.


						Average Active Subdivisions				Average Active Subdivisions									Average Active Subdivisions
		Active Subdivisions				Three Months Ended				Six Months Ended					Active Subdivisions				Three Months Ended
		June 30,		%		June 30,		%		June 30,		%			March 31,		%		March 31,		%
		2022	2021	Change		2022	2021	Change		2022	2021	Change			2023	2022	Change		2023	2022	Change
West	West	122	91	34	%	117	94	24	%	109	98	11	%	West	141	112	26	%	137	103	33	%
Mountain	Mountain	51	55	(7)	%	52	56	(7)	%	53	57	(7)	%	Mountain	56	53	6	%	55	55	—	%
East	East	34	41	(17)	%	34	38	(11)	%	36	34	6	%	East	39	35	11	%	38	37	3	%
Total	Total	207	187	11	%	203	188	8	%	198	189	5	%	Total	236	200	18	%	230	195	18	%

For the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023, the decrease in the number of net new orders in each of our segments was ~~negatively impacted by~~the result of a decrease in the monthly sales absorption pace. This was driven by a lower pace of gross ~~sales~~orders (before cancellations) as well as an increase in cancellations as both a percentage of homes in beginning backlog to start the quarter ~~(“cancellation rate”). The lower pace~~and a percentage of gross sales ~~experienced~~ during the ~~respective periods was~~quarter (“cancellation rates”). Gross orders in the ~~result of~~prior year quarter benefited from historically strong demand, which began to weaken beginning in mid-2022 due to the sharp ~~rise~~increases in ~~mortgage~~ interest rates, ~~during the first half of 2022~~inflation concerns, and ~~to a lesser extent the return of more seasonal sale patterns during the second quarter of 2022.~~various other economic uncertainties. See the "Cancellation Rate" section below for commentary on the increase in our cancellation ~~rate.~~rates. The ~~increase in average selling price for the three and six months ended June 30, 2022 was due to price increases implemented in the second half of 2021 and the first quarter of 2022.~~

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~~West Segment Commentary~~

~~For the three and six months ended June 30, 2022, the decrease in net new orders was due to a~~ decrease in the monthly sales absorption ~~rate as discussed above. This was partially offset by an increase~~pace in ~~average active subdivisions year-over-year. The increase in average selling price was partially offset by a shift in mix to~~ our ~~more affordable communities.~~

~~Mountain Segment Commentary~~

~~For the three~~West and six months ended June 30, 2022, the decrease in net new orders was due to a decrease in the monthly sales absorption rates as discussed above, as well as a decrease in average active subdivisions within our Utah market.

East ~~Segment Commentary~~

For the three and six months ended June 30, 2022, the decrease in net new orders was due to a decrease in the monthly sales absorption rate as discussed above. For the three months ended June 30, 2022, the decrease in net new orders was also due to a decrease in average active subdivisions year-over-year. For the six months ended June 30, 2022, the decrease in net new orderssegments was partially offset by an increase in average active subdivisions year-over-year.

For the three months ended March 31, 2023, the decrease in the average selling price in each of our segments was due to decreases in base pricing during the second half of 2022 in most communities and to a lesser extent increased incentives.

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Cancellation Rate:


		Cancellations as a Percentage of Homes in Beginning Backlog								Cancellations as a Percentage of Homes in Beginning Backlog
		2022				2021						2023		2022
		Three Months Ended								Three Months Ended
		March 31,		June 30,		March 31,		June 30,				March 31,			March 31,
West	West	8	%	10	%	7	%	5	%		West	26	%		8	%
Mountain	Mountain	8	%	9	%	8	%	5	%		Mountain	25	%		8	%
East	East	9	%	11	%	13	%	9	%		East	24	%		9	%
Total	Total	8	%	10	%	8	%	6	%		Total	25	%		8	%

~~Our~~


	Cancellations as a Percentage of Gross Sales
	2023		2022
	Three Months Ended
	March 31,			March 31,
West	32	%		17	%
Mountain	31	%		16	%
East	21	%		18	%
Total	30	%		17	%

In light of our recent pivot to focus more on speculative construction starts, we believe it is appropriate to view our cancellations as a product of both our beginning backlog as well as our gross sales during the period. While our cancellation rate as a percentage of homes in beginning backlog increased year-over-year in each of our segments, ~~during the three months ended June 30, 2022. The~~this increase ~~in cancellation rates~~ was less significant when viewed as a percentage of gross sales. These increases were a result of the ~~sharp increase~~recent softening in ~~mortgage interest rates during~~housing market demand, homebuyer sentiment, as well as the strong demand levels we experienced in the first ~~half~~quarter of ~~2022 and its impact on our homebuyers in backlog who where unable to lock their interest rate~~the prior ~~to these increases.~~year.

Backlog:


		June 30,																	March 31,
		2022					2021					% Change							2023					2022					% Change
		Homes	Dollar Value		Average Price		Homes	Dollar Value		Average Price		Homes		Dollar Value		Average Price			Homes	Dollar Value		Average Price		Homes	Dollar Value		Average Price		Homes		Dollar Value		Average Price

		(Dollars in thousands)																	(Dollars in thousands)
West	West	4,163	$	2,438,184	$	585.7	4,139	$	2,204,500	$	532.6	1	%	11	%	10	%	West	1,839	$	1,020,206	$	554.8	4,677	$	2,651,123	$	566.8	(61)	%	(62)	%	(2)	%
Mountain	Mountain	2,158	1,450,194		672.0		2,412	1,426,496		591.4		(11)	%	2	%	14	%	Mountain	638	444,681		697.0		2,546	1,668,048		655.2		(75)	%	(73)	%	6	%
East	East	1,105	549,721		497.5		1,127	482,736		428.3		(2)	%	14	%	16	%	East	413	197,034		477.1		1,335	628,631		470.9		(69)	%	(69)	%	1	%
Total	Total	7,426	$	4,438,099	$	597.6	7,678	$	4,113,732	$	535.8	(3)	%	8	%	12	%	Total	2,890	$	1,661,921	$	575.1	8,558	$	4,947,802	$	578.1	(66)	%	(66)	%	(1)	%

At ~~June 30, 2022,~~March 31, 2023, we had ~~7,426~~2,890 homes in backlog with a total value of ~~$4.44~~$1.66 billion. This represented a 3%66% decrease in both the number of homes in backlog and ~~an 8% increase in~~ the dollar value of those homes in backlog from ~~June 30, 2021.~~March 31, 2022. The decrease in the number of homes in backlog iswas primarily a result of ~~increased cancellations and~~ a decrease in the ~~pace~~level of ~~gross sales~~net new orders during the second half of 2022, which continued to a lesser degree into the first quarter of ~~2022.~~2023, as well as a shift in consumer preference to quick move-in homes and our associated pivot to focus on more speculative construction starts to supplement build-to-order construction activity. This was partially offset by an increase in cycle times ~~year-over-year within nearly all of our markets.~~year-over-year. The increase in ~~the~~ average selling price ~~of homes~~ in ~~backlog~~our Mountain segment was ~~due to price increases implemented in the second half of 2021 and the first quarter of 2022. These increases were slightly offset~~driven by a ~~shift~~change in mix to ~~lower~~higher priced ~~communities, most notably in our West segment, consistent with our ongoing strategy of offering more affordable home plans.~~communities. Our ability to convert backlog into closings could be negatively impacted in future periods by ongoing inflation concerns, the ~~pandemic, rising~~Federal Reserve's quantitative tightening and the resulting impact on mortgage interest rates, consumer confidence, the current geopolitical environment and other factors, the extent to which is highly uncertain and depends on future developments.

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Homes Completed or Under Construction (WIP lots):


		June 30,		%			March 31,		%
		2022	2021	Change			2023	2022	Change
Unsold:	Unsold:					Unsold:
Completed	Completed	46	19	142	%	Completed	255	19	1,242	%
Under construction	Under construction	607	214	184	%	Under construction	1,277	313	308	%
Total unsold started homes	Total unsold started homes	653	233	180	%	Total unsold started homes	1,532	332	361	%
Sold homes under construction or completed	Sold homes under construction or completed	7,007	6,655	5	%	Sold homes under construction or completed	2,493	7,445	(67)	%
Model homes under construction or completed	Model homes under construction or completed	524	502	4	%	Model homes under construction or completed	560	513	9	%
Total homes completed or under construction	Total homes completed or under construction	8,184	7,390	11	%	Total homes completed or under construction	4,585	8,290	(45)	%

The increase in total unsold started homes is due to an increase in ~~the~~our cancellation ~~rate~~rates during the ~~three months ended June 30, 2022.~~second half of 2022, which continued to a lesser extent into the first quarter of 2023, as well as our recent pivot to focus more on speculative construction starts.

Lots Owned and Optioned (including homes completed or under construction):


		June 30, 2022			June 30, 2021						March 31, 2023			March 31, 2022
		Lots Owned	Lots Optioned	Total	Lots Owned	Lots Optioned	Total	Total % Change			Lots Owned	Lots Optioned	Total	Lots Owned	Lots Optioned	Total	Total % Change
West	West	15,027	1,963	16,990	13,265	4,729	17,994	(6)	%	West	11,766	422	12,188	15,548	4,237	19,785	(38)	%
Mountain	Mountain	6,696	2,961	9,657	6,599	4,174	10,773	(10)	%	Mountain	4,944	1,034	5,978	6,741	4,240	10,981	(46)	%
East	East	4,111	2,372	6,483	3,636	1,997	5,633	15	%	East	3,281	1,495	4,776	4,318	2,728	7,046	(32)	%
Total	Total	25,834	7,296	33,130	23,500	10,900	34,400	(4)	%	Total	19,991	2,951	22,942	26,607	11,205	37,812	(39)	%

Our total owned and optioned lots at ~~June 30, 2022~~March 31, 2023 were ~~33,130,~~22,942, which represented a 4%39% decrease year-over-year. This decrease is a result of our intentional slowdown in land acquisition and approval activity due to current market uncertainty. We believe that our total lot supply is sufficient to meet our operating needs, ~~for several years,~~ consistent with our philosophy of maintaining a two to three year supply of land. See "Forward-Looking Statements" below.

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Financial Services


		Three Months Ended								Six Months Ended									Three Months Ended
		June 30,				Change				June 30,				Change					March 31,				Change
		2022		2021		Amount		%		2022		2021		Amount		%			2023		2022		Amount		%

		(Dollars in thousands)																	(Dollars in thousands)
Financial services revenues	Financial services revenues																	Financial services revenues
Mortgage operations	Mortgage operations	$	22,077	$	23,321	$	(1,244)	(5)	%	$	39,678	$	58,486	$	(18,808)	(32)	%	Mortgage operations	$	18,419	$	17,601	$	818	5	%
Other	Other	14,152		9,997		4,155		42	%	25,682		19,855		5,827		29	%	Other	11,067		11,530		(463)		(4)	%
Total financial services revenues	Total financial services revenues	$	36,229	$	33,318	$	2,911	9	%	$	65,360	$	78,341	$	(12,981)	(17)	%	Total financial services revenues	$	29,486	$	29,131	$	355	1	%
Financial services pretax income	Financial services pretax income																	Financial services pretax income
Mortgage operations	Mortgage operations	$	10,673	$	14,088	$	(3,415)	(24)	%	$	18,106	$	40,127	$	(22,022)	(55)	%	Mortgage operations	$	9,726	$	7,433	$	2,293	31	%
Other	Other	8,019		3,945		4,074		103	%	13,969		8,711		$	5,258	60	%	Other	8,244		5,950		2,294		39	%
Total financial services pretax income	Total financial services pretax income	$	18,692	$	18,033	$	659	4	%	$	32,075	$	48,838	$	(16,763)	(34)	%	Total financial services pretax income	$	17,970	$	13,383	$	4,587	34	%

For the three months ended ~~June 30, 2022,~~March 31, 2023, our financial services pretax income increased to ~~$18.7~~$18.0 million compared to ~~$18.0~~$13.4 million in the ~~second~~first quarter of ~~2021.~~2022. The increase in financial services pretax income was ~~primarily~~ due to both our mortgage and our other financial services operations. The increase in pretax income for our mortgage operations was due to a decrease in salary related expenses driven by lower headcount, an increase in capture rate and the allocation of revenue from our homebuilding business associated with our financing incentives. The increase in other financial services was driven by our insurance operations which benefited from increased premium revenue within our captive insurance companies. This was mostly offset by our mortgage operations business, due to decreased profitability per loan locked and sold during the period ended June 30, 2022 driven by increased competition in the primary mortgage market, as well as an increase to compensation expense due to higher headcount. The decrease in mortgage operations was partly offset by an increase in mortgage servicing revenue due to an increase in additions to the servicing portfolio year-over-year, as well assaw an increase in interest rate lock commitments as many homebuyers elected to take advantage of long-term lock opportunities during the quarter. The accounting treatment for these rate lock commitments had a favorable pull-forward effect on pre-tax income ~~in the second quarter of 2022.~~

For the six months ended June 30, 2022, our financial services pretax income decreased to $32.1 million compared to $48.8 million in the prior year period. The decrease in financial services pretax income was primarily due to increases in both interest rates and our ~~mortgage operations, as a result of decreased profitability per loan locked~~cash and sold as well as compensation expense, partially offset by an increase in mortgage servicing revenue and interest rate lock commitments. The decrease was also partly offset by an increase in premium revenue within our captive insurance companies. The main drivers of the decrease in mortgage operations and increase related to our captive insurance companies are consistent with the second quarter commentary discussed above.short-term investments year-over-year.

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The following table sets forth information for our mortgage operations segment relating to mortgage loans originated and capture rate.


		Three Months Ended						% or Percentage			Six Months Ended									% or Percentage Change			Three Months Ended								% or Percentage
		June 30,								June 30,									March 31,
		2022			2021					Change				2022				2021								2023				2022					Change

		(Dollars in thousands)																					(Dollars in thousands)
Total Originations (including transfer loans):	Total Originations (including transfer loans):																					Total Originations (including transfer loans):
Loans	Loans	1,517			1,564			(3)	%		2,831				3,132							(10)	%	Loans		1,221				1,314			(7)	%
Principal	Principal	$	703,325		$	643,129		9	%		$	1,309,125			$	1,259,134				4	%	Principal	$	555,608			$	605,800			(8)	%
Capture Rate Data:	Capture Rate Data:																					Capture Rate Data:
Capture rate as % of all homes delivered	Capture rate as % of all homes delivered	60		%	57		%	3	%		59		%		64		%			(5)	%	Capture rate as % of all homes delivered	66		%		59		%		7	%
Capture rate as % of all homes delivered (excludes cash sales)	Capture rate as % of all homes delivered (excludes cash sales)	63		%	60		%	3	%		63		%		66		%			(3)	%	Capture rate as % of all homes delivered (excludes cash sales)	72		%		62		%		10	%
Mortgage Loan Origination Product Mix:	Mortgage Loan Origination Product Mix:																					Mortgage Loan Origination Product Mix:
FHA loans	FHA loans	14		%	18		%	(4)	%		13		%		19		%			(6)	%	FHA loans	17		%		12		%		5	%
Other government loans (VA & USDA)	Other government loans (VA & USDA)	22		%	18		%	4	%		21		%		18		%			3	%	Other government loans (VA & USDA)	19		%		20		%		(1)	%
Total government loans	Total government loans	36		%	36		%	—	%		34		%		37		%			(3)	%	Total government loans	36		%		32		%		4	%
Conventional loans	Conventional loans	64		%	64		%	—	%		66		%		63		%			3	%	Conventional loans	64		%		68		%		(4)	%
		100		%	100		%	—	%		100		%		100		%			—	%		100		%		100		%		—	%
Loan Type:	Loan Type:																					Loan Type:
Fixed rate	Fixed rate	97		%	100		%	(3)	%		98		%		100		%			(2)	%	Fixed rate	99		%		99		%		—	%
ARM	ARM	3		%	—		%	3	%		2		%		—		%			2	%	ARM	1		%		1		%		—	%
Credit Quality:	Credit Quality:																					Credit Quality:
Average FICO Score	Average FICO Score	744			740			1	%		743				739					1	%	Average FICO Score	740				742				—	%
Other Data:	Other Data:	`			`																	Other Data:	`
Average Combined LTV ratio	Average Combined LTV ratio	81		%	84		%	(3)	%		82		%		85		%			(3)	%	Average Combined LTV ratio	82		%		82		%		—	%
Full documentation loans	Full documentation loans	100		%	100		%	—	%		100		%		100		%			—	%	Full documentation loans	100		%		100		%		—	%
Loans Sold to Third Parties:	Loans Sold to Third Parties:																					Loans Sold to Third Parties:
Loans	Loans	1,502			1,701			(12)	%		3,029				3,287					(8)	%	Loans	1,354				1,527				(11)	%
Principal	Principal	$	700,058		$	689,530		2	%		$	1,391,416			$	1,300,428				7	%	Principal	$	620,329			$	691,358			(10)	%

Income Taxes

Our overall effective income tax rates were ~~26.8%~~25.9% and ~~26.7%~~26.5% for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 24.9% and 24.2% for the three and six months ended June 30, 2021.~~respectively. The rates for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022 resulted in income tax expense of ~~$69.4~~$28.3 million and ~~$122.9~~$53.5 million, ~~respectively, compared to income tax expense of $51.2 million and $84.8 million for the three and six months ended June 30, 2021,~~ respectively. The year-over-year ~~increase~~decrease in ~~the~~our effective tax rate for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023 was primarily due to energy tax credits benefiting 2023, which had not ~~being~~been extended into 2022 ~~and a~~as of March 31, 2022. This decrease inwas partially offset by the ~~windfall on non-qualifying stock options exercised and lapsed restricted stock during the respective periods.~~tax impact of non-deductible executive compensation under Internal Revenue Code Section 162(m).

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CRITICAL ACCOUNTING ESTIMATES AND POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of 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 judgments on historical experience and on various other factors that are believed to be 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. Management evaluates such estimates and judgments on an on-going basis and makes adjustments as deemed necessary. Actual results could differ from these estimates if conditions are significantly different in the future. See "Forward-Looking Statements" below.

Our critical accounting estimates and policies have not changed from those reported in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

LIQUIDITY AND CAPITAL RESOURCES

We use our liquidity and capital resources to (1) support our operations, including the purchase of land, land development and construction of homes; (2) provide working capital; and (3) provide mortgage loans for our homebuyers. Our liquidity includes our cash and cash equivalents, marketable securities, Revolving Credit Facility (as defined below) and Mortgage Repurchase Facility (as defined below). Additionally, we have an existing effective shelf registration statement that allows us to issue equity, debt or hybrid securities up to $5.0 billion, of which $5.0 billion remains.

Material Cash Requirements

We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the Consolidated Balance Sheet as of ~~June 30, 2022,~~March 31, 2023, while others are considered future commitments. Our contractual obligations primarily consist of long-term debt and related interest payments, payments due on our Mortgage Repurchase Facility, purchase obligations related to expected acquisition of land under purchase agreements and land development agreements (many of which are secured by letters of credit or surety bonds) and operating leases. Other material cash requirements include land acquisition and development costs not yet contracted for, home construction costs, operating expenses, including our selling, general and administrative expenses, investments and funding of capital improvements and dividend payments.

At ~~June 30, 2022,~~March 31, 2023, we had outstanding senior notes with varying maturities totaling an aggregate principal amount of $1.5 billion, with none payable within 12 months. Future interest payments associated with the notes total $1.3 billion, with $64.2 million payable within 12 months. As of ~~June 30, 2022,~~March 31, 2023, we had ~~$30.2~~$28.5 million of required operating lease future minimum payments.

At ~~June 30, 2022,~~March 31, 2023, we had deposits of ~~$43.6~~$20.1 million in the form of cash and ~~$11.6~~$2.7 million in the form of letters of credit that secured option contracts to purchase ~~7,296~~2,951 lots for a total estimated purchase price of ~~$743.1~~$332.8 million.

At ~~June 30, 2022,~~March 31, 2023, we had outstanding surety bonds and letters of credit totaling ~~$379.6~~$359.1 million and ~~$211.0~~$116.0 million, respectively, including ~~$159.8~~$68.9 million in letters of credit issued by HomeAmerican. The estimated cost to complete obligations related to these bonds and letters of credit was approximately ~~$186.7~~$157.3 million and ~~$167.3~~$75.1 million, respectively. We expect that the obligations secured by these performance bonds and letters of credit generally will be performed in the ordinary course of business and in accordance with the applicable contractual terms. To the extent that the obligations are performed, the related performance bonds and letters of credit should be released and we should not have any continuing obligations. However, in the event any such performance bonds or letters of credit are called, our indemnity obligations could require us to reimburse the issuer of the performance bond or letter of credit. We have made no material guarantees with respect to third-party obligations.

Capital Resources

Our capital structure is primarily a combination of (1) permanent financing, represented by stockholders’ equity; (2) long-term financing, represented by our 3.850% senior notes due 2030, 2.500% senior notes due 2031, 6.000% senior notes due 2043, and 3.966% senior notes due 2061; (3) our Revolving Credit Facility and (4) our Mortgage Repurchase Facility. Because of our current balance of cash, cash equivalents, marketable securities, ability to access the capital markets, and available capacity under both our Revolving Credit Facility and Mortgage Repurchase Facility, we believe that our capital resources are ~~adequate to satisfy our~~

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adequate to satisfy our short and long-term capital requirements, including meeting future payments on our senior notes as they become due. See “Forward-Looking Statements” ~~above.~~below.

We may from time to time seek to retire or purchase our outstanding senior notes through cash purchases, whether through open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Senior Notes, Revolving Credit Facility and Mortgage Repurchase Facility

Senior Notes. Our senior notes are not secured and, while the senior note indentures contain some restrictions on secured debt and other transactions, they do not contain financial covenants. Our senior notes are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by most of our homebuilding segment subsidiaries. We believe that we are in compliance with the representations, warranties and covenants in the senior note indentures.

Revolving Credit Facility. We have an unsecured revolving credit agreement (“Revolving Credit Facility”) with a group of lenders, which may be used for general corporate purposes. This agreement was amended on December 28, 2020 to (1) increase the aggregate commitment from $1.0 billion to $1.2 billion (the "Commitment"), (2) extend the Revolving Credit Facility maturity of $1.125 billion of the Commitments to December 18, 2025 with the remaining Commitment continuing to terminate on December 18, 2023 and (3) provide that the aggregate amount of the commitments may increase to an amount not to exceed $1.7 billion upon our request, subject to receipt of additional commitments from existing or additional lenders and, in the case of additional lenders, the consent of the co-administrative agents.

~~The Revolving Credit Facility provides for a transition from the eurocurrency rate to a benchmark replacement upon the occurrence of certain events.~~

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Dividends

During the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ we paid cash dividends of $0.50 per share and $0.40 per share, respectively. During the six months ended June 30, 2022 and 2021, we paid cash dividends of $1.00 per share and $0.77 per share, respectively. Additionally, during the six months ended June 30, 2021, we distributed an 8% stock dividend.share.

MDC Common Stock Repurchase Program

At ~~June 30, 2022,~~March 31, 2023, we were authorized to repurchase up to 4.0 million shares of our common stock. We did not repurchase any shares of our common stock during the three ~~and six~~ months ended ~~June 30, 2022.~~March 31, 2023.

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Consolidated Cash Flow

During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, net cash provided by operating activities was ~~$171.1~~$426.2 million compared with ~~$12.1~~net cash provided by operating activities of $118.1 million in the prior year period. ~~Cash used to increase housing completed or under construction for~~During the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021 was $468.3 million and $385.7 million, respectively, as homes in inventory increased during both periods. During the six months ended June 30, 2022 and 2021,~~one of the most significant ~~source~~sources of cash provided by operating activities was net income of ~~$338.0~~$80.7 million and ~~$265.0~~$148.4 million, respectively. ~~Cash~~Another significant source of cash provided by operating activities during the ~~decrease in mortgage loans held-for-sale was $92.5 million and $46.5 million in the six~~three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021, respectively, as a result of the above average level of originations that occur during the fourth quarter. Cash~~was cash provided by the decrease in land and land under development ~~for the six months ended June 30, 2022 and 2021 was $126.3~~of $115.9 million and ~~$36.4~~$107.3 million, ~~respectively, as~~respectively. This decrease was the result of home starts ~~outnumbered~~outnumbering lot acquisitions during the respective periods. During the three months ended March 31, 2023, cash provided by housing completed or under construction was $135.6 million compared to the three months ended March 31, 2022, where cash used by housing completed or under construction was $277.2 million. This increase in cash provided in the first quarter of 2023 was due to homes in inventory decreasing during the three months ended March 31, 2023 compared to homes in inventory increasing during the prior year quarter. Cash provided to decrease trade and other receivables for the three months ended March 31, 2023 was $55.9 million compared to cash used to increase trade and other receivables for the ~~six~~three months ended ~~June 30,~~March 31, 2022 ~~and 2021~~of $16.7 million. This change was ~~$22.3 million and $57.1 million, respectively,~~ due to ~~the~~a year-over-year ~~increases~~decrease in home deliveries in the ~~dollar amount~~first quarter of ~~home deliveries during both periods.~~2023. Cash provided to decrease prepaids and other assets for the three months ended March 31, 2023 was $3.5 million compared to cash used to increase prepaids and other assets for the three months ended March 31, 2022 of $20.5 million. Cash used by the change in accounts payable and accrued liabilities for the three months ended ~~June 30, 2022~~March 31, 2023 was $40.5 million compared to cash provided of $57.6 million for the three months ended March 31, 2022. The changes in both prepaids and ~~2021 was $70.2 million~~other assets and ~~$70.6 million, respectively,~~accounts payable and accrued liabilities were due to ~~the increased~~decreased construction spend during ~~both periods~~the first quarter of 2023 as a result of the ~~increase~~year-over-year decrease in home deliveries and homes in ~~inventory at both period ends.~~inventory.

During the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ net cash used in investing activities was ~~$13.7~~$244.8 million and ~~$13.4~~$6.9 million, respectively. ~~This primarily relates to~~The increase in net cash used toin investing activities was driven by $434.4 million of cash used in the purchase ~~property and equipment, which~~of marketable securities during the three months ended March 31, 2023. This was ~~consistent year-over-year.~~partially offset by cash provided by the maturities of marketable securities of $195.0 million during the three months ended March 31, 2023.

During the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, net cash used in financing activities was ~~$164.6~~$93.5 million ~~compared with net cash provided by financing activities of $238.8~~and $126.3 million ~~in the prior year period.~~respectively. The primary driver of this decrease in net cash ~~provided~~used by financing activities was the ~~proceeds from~~decrease in cash used on the ~~issuance of senior notes of $347.7 million during the six months ended June 30, 2021. Cash used to decrease~~net payments made on the mortgage repurchase ~~facility was $80.7~~facility. The three months ended March 31, 2023 and 2022 saw cash used of $45.2 million and ~~$37.7~~$78.1 million, ~~for~~respectively on the ~~six months ended June 30, 2022 and 2021, respectively,~~mortgage repurchase facility. This was driven by the ~~increased~~decreased proceeds from the sale of mortgage loans.

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OTHER

Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q, as well as statements made by us in periodic press releases, oral statements made by our officials in the course of presentations about the Company and conference calls in connection with quarterly earnings releases, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our business, financial condition, results of operations, cash flows, strategies and prospects. These forward-looking statements may be identified by terminology such as “likely,” “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained in this Report are reasonable, we cannot guarantee future results. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by the forward-looking statements. 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 subsequent reports on Forms 10-K, 10-Q and 8-K should be considered. Additionally, information about issues that could lead to material changes in performance and risk factors that have the potential to affect us is contained under the caption “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 and Item 1A of Part II of this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have a cash and investment policy that enables us to achieve an appropriate investment return while preserving principal and managing risk. Under this policy, cash and cash equivalents may include U.S. government securities, commercial bank deposits, commercial paper, certificates of deposit, money market funds, and time deposits, with maturities of three months or less. Marketable securities under this policy may include holdings in U.S. government securities with a maturity of more than three months, equity securities and corporate debt securities.

As of ~~June 30, 2022,~~March 31, 2023, our cash and cash equivalents included commercial bank deposits and money market ~~funds.~~funds and our marketable securities included U.S. government treasury securities with original maturities upon acquisition of less than six months.

We are exposed to market risks related to fluctuations in interest rates on mortgage loans held-for-sale, mortgage interest rate lock commitments, marketable securities and debt. Financial instruments utilized in the normal course of business by HomeAmerican include forward sales of mortgage-backed securities, which are commitments to sell a specified financial instrument at a specified future date for a specified price, mandatory delivery forward loan sale commitments, which are obligations of an investor to buy loans at a specified price within a specified time period, and best-effort delivery forward loan sale commitments, which are obligations of an investor to buy loans at a specified price subject to the underlying mortgage loans being funded and closed. Such contracts are the only significant financial and derivative instruments utilized by MDC. HomeAmerican’s mortgage loans in process for which an interest rate lock commitment had been made to a borrower that had not closed at ~~June 30, 2022~~March 31, 2023 had an aggregate principal balance of ~~$871.8~~$391.5 million, of which ~~$556.6~~$385.7 million had not yet been committed to a mortgage purchaser. In addition, HomeAmerican had mortgage loans held-for-sale with an aggregate principal balance of ~~$190.3~~$165.9 million at ~~June 30, 2022,~~March 31, 2023, of which ~~$55.1~~$53.8 million had not yet been committed to a mortgage purchaser. In order to hedge the changes in fair value of interest rate lock commitments and mortgage loans held-for-sale that had not yet been committed to a mortgage purchaser, HomeAmerican had forward sales of securities totaling ~~$553.0~~$362.5 million and ~~$275.6~~$323.0 million at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

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HomeAmerican provides mortgage loans that generally are sold forward on a best-efforts or mandatory commitment basis and subsequently delivered to a third-party purchaser between 5 and 35 days after closing. Forward sale commitments and forward sales of mortgage-backed securities are used for non-trading purposes to sell mortgage loans and economically hedge price risk due to fluctuations in interest rates on rate-locked mortgage loans in process that have not closed and mortgage loans held-for-sale. Due to this economic hedging philosophy, the market risk associated with these mortgages is limited. For forward sales commitments, forward sales of mortgage-backed securities and commitments to originate mortgage loans that are still outstanding at the end of a reporting period, we record the changes in fair value of these financial instruments in revenues in the financial services section of the consolidated statements of operations and comprehensive income with an offset to either other assets or accounts payable and accrued liabilities in the financial services section of our consolidated balance sheets, depending on the nature of the change.

We utilize our Revolving Credit Facility, our Mortgage Repurchase Facility and senior notes in our financing strategy. For fixed rate debt, changes in interest rates generally affect the fair value of the debt instrument, but do not affect our earnings or

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cash flows. We do not have an obligation to prepay our senior notes prior to maturity and, as a result, interest rate risk and changes in fair value do not have an impact on our financial position, results of operations or cash flows. For variable rate debt such as our Revolving Credit Facility and Mortgage Repurchase Facility, changes in interest rates generally do not affect the fair value of the outstanding borrowing on the debt facilities, but do affect our earnings and cash flows. See “Forward-Looking Statements” above.

Item 4. Controls and Procedures

(a)Conclusion regarding the effectiveness of disclosure controls and procedures - An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures was performed under the supervision, and with the participation, of our management, including the Executive Chairman (principal executive officer) and the Chief Financial Officer (principal financial officer). Based on that evaluation, our management, including the Executive Chairman and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

(b)Changes in internal control over financial reporting - There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~June 30, 2022~~March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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M.D.C. HOLDINGS, INC.

FORM 10-Q

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Because of the nature of the homebuilding business, we and certain of our subsidiaries and affiliates have been named as defendants in various claims, complaints and other legal actions arising in the ordinary course of business, including product liability claims and claims associated with the sale and financing of our homes. In the opinion of management, the outcome of these ordinary course matters will not have a material adverse effect upon our financial condition, results of operations or cash flows.

Item 1A. Risk Factors

In addition to the other information set forth in this Form 10-Q, you should carefully consider the risk factors that appeared under Item 1A. Risk Factors in the Company’s ~~2021~~2022 Annual Report on Form 10-K. There are no material changes from the risk factors included within the Company’s ~~2021~~2022 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information about our repurchase of common stock during the three months ended ~~June 30, 2022:~~March 31, 2023:
Period
Total Number of Shares Purchased (1)
Average Price Paid Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plan or Program (2)
Maximum Number of Shares that may yet be Purchased under the Plan or Program (2)
April 1 to April 30, 2022 — N/A — 4,000,000
May 1 to May 31, 2022 1,573 $ 36.95 — 4,000,000
June 1 to June 30, 2022 — N/A — 4,000,000


Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan or Program (2)	Maximum Number of Shares that may yet be Purchased under the Plan or Program (2)
January 1 to January 31, 2023	—	N/A		—	4,000,000
February 1 to February 28, 2023	47,131	$	40.33	—	4,000,000
March 1 to March 31, 2023	—	N/A		—	4,000,000

(1) Represents shares of common stock withheld by us to cover withholding taxes due upon the vesting of restricted stock award shares, at the election of certain holders of nonvested shares, with market value approximating the amount of withholding taxes due.

(2) We are authorized to repurchase up to 4,000,000 shares of our common stock. There were no shares of MDC common stock repurchased under this repurchase program during the three month period ended ~~June 30, 2022.~~March 31, 2023.

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Item 6. Exhibits


~~2.1~~10.1			~~Asset Purchase~~Credit Agreement ~~dated~~by and among M.D.C. Holding, Inc., U.S. Bank National Association, as designated agent and co-administrative agent, Citibank, N.A., as co-administrative agent, and the other Lenders identified therein, as amended as of April ~~21, 2022, between Richmond American Homes of Tennessee, Inc. and The Jones Company of Tennessee, L.L.C.~~11, 2023 (incorporated by reference to Exhibit ~~2.1 of~~10.1 to the Company's ~~Current Report on~~ Form 8-K filed April ~~22, 2022)~~13, 2023).*
~~10.8~~10.2			~~Ninth~~First Amendment to ~~Amended and Restated Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of May 19, 2022~~the M.D.C. Holdings, Inc. 2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 of the ~~Company's~~Company’s Current Report on Form 8-K filed ~~May 20, 2022)~~April 19, 2023).*
10.3			M.D.C. Holdings, Inc. 2021 Equity Incentive Plan, as amended as of April 17, 2021 (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed April 19, 2023). *
22			Subsidiary Guarantors (incorporated by reference to Exhibit 22 to the Company's Form 10-Q for the quarter ended June 30, 2021). *
31.1			Certification of principal executive officer required by 17 CFR 240.13a-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certification of principal financial officer required by 17 CFR 240.13a-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1			Certification of principal executive officer required by 17 CFR 240.13a-14(b), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2			Certification of principal financial officer required by 17 CFR 240.13a-14(b), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101			The following financial statements, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Consolidated Balance Sheets as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, (ii) Consolidated Statements of Operations and Comprehensive Income for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ (iii) Consolidated Statements of Changes in Stockholders’ Equity for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ (iv) Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2021;~~2022; and (v) Notes to the Unaudited Consolidated Financial Statements, tagged as blocks of text.
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

____________________

*Incorporated by reference.

~~SIGNATURE~~SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


~~Date: July 28, 2022~~			M.D.C. HOLDINGS, INC.
			(Registrant)

Date: May 2, 2023			By: /s/ Robert N. Martin
			Robert N. Martin Senior Vice President and Chief Financial Officer (principal financial officer and duly authorized officer)


Date: May 2, 2023			By: /s/ Derek R. Kimmerle
			Derek R. Kimmerle
			Vice President, Controller and Chief Accounting Officer (principal accounting officer and duly authorized officer)

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