UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the Quarterly Period Ended September 30, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _____________________

Commission File Number 1-12434

M/I HOMES, INC.

(Exact name of registrant as specified in it charter)

Ohio

31-1210837

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

4131 Worth Avenue, Suite 500, Columbus, Ohio 43219

(Address of principal executive offices) (Zip Code)

(614) 418-8000

(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 Shares, par value $.01	MHO	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

☒

☐

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

☒

☐

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 the definitions 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 not 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. q

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common shares, par value $.01 per share: ~~29,099,630~~27,428,983 shares outstanding as of October ~~27, 2021.~~26, 2022.


M/I HOMES, INC.
FORM 10-Q

TABLE OF CONTENTS

PART 1.	FINANCIAL INFORMATION

	Item 1.	M/I Homes, Inc. and Subsidiaries Unaudited Condensed Consolidated Financial Statements

		Unaudited Condensed Consolidated Balance Sheets at September 30, ~~2021~~2022 and December 31, ~~2020~~2021	3

		Unaudited Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021	4

		Unaudited Condensed Consolidated Statement of Shareholders’ Equity for the Three and Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021	5

		Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021	6

		Notes to Unaudited Condensed Consolidated Financial Statements	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4442

	Item 4.	Controls and Procedures	4644

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	4644

	Item 1A.	Risk Factors	4644

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4645

	Item 3.	Defaults Upon Senior Securities	4745

	Item 4.	Mine Safety Disclosures	4745

	Item 5.	Other Information	4745

	Item 6.	Exhibits	4746

Signatures			4847

M/I HOMES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


(Dollars in thousands, except par values)	(Dollars in thousands, except par values)	September 30, 2021		December 31, 2020		(Dollars in thousands, except par values)	September 30, 2022		December 31, 2021
		(unaudited)					(unaudited)

ASSETS:	ASSETS:					ASSETS:
Cash, cash equivalents and restricted cash	Cash, cash equivalents and restricted cash	$	221,157	$	260,810	Cash, cash equivalents and restricted cash	$	67,761	$	236,368
Mortgage loans held for sale	Mortgage loans held for sale	215,857		234,293		Mortgage loans held for sale	183,327		275,655
Inventory	Inventory	2,353,143		1,916,608		Inventory	3,016,735		2,452,434
Property and equipment - net	Property and equipment - net	23,644		26,612		Property and equipment - net	35,217		37,648
Investment in joint venture arrangements	Investment in joint venture arrangements	42,466		34,673		Investment in joint venture arrangements	51,700		57,121
Operating lease right-of-use assets	Operating lease right-of-use assets	51,181		52,291		Operating lease right-of-use assets	55,388		50,950
Deferred income tax asset	Deferred income tax asset	6,183		6,183		Deferred income tax asset	10,251		10,251
Goodwill	Goodwill	16,400		16,400		Goodwill	16,400		16,400

Other assets	Other assets	116,569		95,175		Other assets	151,134		103,026
TOTAL ASSETS	TOTAL ASSETS	$	3,046,600	$	2,643,045	TOTAL ASSETS	$	3,587,913	$	3,239,853

LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES:	LIABILITIES:					LIABILITIES:
Accounts payable	Accounts payable	$	227,311	$	185,669	Accounts payable	$	296,326	$	244,505
Customer deposits	Customer deposits	115,288		72,635		Customer deposits	126,368		107,864
Operating lease liabilities	Operating lease liabilities	51,637		52,474		Operating lease liabilities	56,199		51,497
Other liabilities	Other liabilities	179,562		183,583		Other liabilities	252,532		226,969

Community development district obligations	Community development district obligations	15,975		8,196		Community development district obligations	31,991		20,089
Obligation for consolidated inventory not owned	Obligation for consolidated inventory not owned	4,403		9,914		Obligation for consolidated inventory not owned	4,778		2,768

Notes payable bank - financial services operations	Notes payable bank - financial services operations	211,281		225,634		Notes payable bank - financial services operations	189,371		266,160
Notes payable - other	Notes payable - other	5,537		4,072		Notes payable - other	429		4,549

Senior notes due 2025 - net		—		247,613

Senior notes due 2028 - net	Senior notes due 2028 - net	395,137		394,557		Senior notes due 2028 - net	395,911		395,331
Senior notes due 2030 - net	Senior notes due 2030 - net	296,002		—		Senior notes due 2030 - net	296,235		295,937
TOTAL LIABILITIES	TOTAL LIABILITIES	$	1,502,133	$	1,384,347	TOTAL LIABILITIES	$	1,650,140	$	1,615,669

Commitments and contingencies (Note 6)	Commitments and contingencies (Note 6)	—		—		Commitments and contingencies (Note 6)	—		—

SHAREHOLDERS’ EQUITY:	SHAREHOLDERS’ EQUITY:					SHAREHOLDERS’ EQUITY:

Common shares - $0.01 par value; authorized 58,000,000 shares at both September 30, 2021 and December 31, 2020; issued 30,137,141 shares at both September 30, 2021 and December 31, 2020		301		301
Common shares - $0.01 par value; authorized 58,000,000 shares at both September 30, 2022 and December 31, 2021; issued 30,137,141 shares at both September 30, 2022 and December 31, 2021						Common shares - $0.01 par value; authorized 58,000,000 shares at both September 30, 2022 and December 31, 2021; issued 30,137,141 shares at both September 30, 2022 and December 31, 2021	$	301	$	301
Additional paid-in capital	Additional paid-in capital	345,092		339,001		Additional paid-in capital	350,569		347,452
Retained earnings	Retained earnings	1,231,938		948,453		Retained earnings	1,705,588		1,345,321
Treasury shares - at cost - 1,037,511 and 1,323,292 shares at September 30, 2021 and December 31, 2020, respectively		(32,864)		(29,057)
Treasury shares - at cost - 2,708,158 and 1,637,511 shares at September 30, 2022 and December 31, 2021, respectively						Treasury shares - at cost - 2,708,158 and 1,637,511 shares at September 30, 2022 and December 31, 2021, respectively	(118,685)		(68,890)
TOTAL SHAREHOLDERS’ EQUITY	TOTAL SHAREHOLDERS’ EQUITY	$	1,544,467	$	1,258,698	TOTAL SHAREHOLDERS’ EQUITY	$	1,937,773	$	1,624,184
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	3,046,600	$	2,643,045	TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	3,587,913	$	3,239,853

See Notes to Unaudited Condensed Consolidated Financial Statements.

M/I HOMES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except per share amounts)	(In thousands, except per share amounts)	2021		2020		2021		2020		(In thousands, except per share amounts)	2022		2021		2022		2021

Revenue	Revenue	$	904,319	$	847,921	$	2,694,135	$	2,139,718	Revenue	$	1,012,928	$	904,319	$	2,914,393	$	2,694,135
Costs and expenses:	Costs and expenses:									Costs and expenses:
Land and housing	Land and housing	682,565		653,407		2,028,822		1,672,122		Land and housing	741,013		682,565		2,145,082		2,028,822

General and administrative	General and administrative	49,420		48,879		143,703		123,763		General and administrative	58,247		49,420		162,246		143,703
Selling	Selling	47,114		49,539		143,379		127,494		Selling	46,373		47,114		134,000		143,379

Equity in loss (income) from joint venture arrangements		50		(252)		(145)		(307)
Interest (income) expense		(74)		1,239		1,554		8,454
Other loss (income)										Other loss (income)	—		50		(17)		(145)
Interest expense (income)										Interest expense (income)	701		(74)		2,065		1,554
Loss on early extinguishment of debt	Loss on early extinguishment of debt	9,072		—		9,072		—		Loss on early extinguishment of debt	—		9,072		—		9,072

Total costs and expenses	Total costs and expenses	$	788,147	$	752,812	$	2,326,385	$	1,931,526	Total costs and expenses	$	846,334	$	788,147	$	2,443,376	$	2,326,385

Income before income taxes	Income before income taxes	116,172		95,109		367,750		208,192		Income before income taxes	166,594		116,172		471,017		367,750

Provision for income taxes	Provision for income taxes	25,160		21,572		84,265		48,401		Provision for income taxes	35,004		25,160		110,750		84,265

Net income	Net income	$	91,012	$	73,537	$	283,485	$	159,791	Net income	$	131,590	$	91,012	$	360,267	$	283,485

Earnings per common share:	Earnings per common share:									Earnings per common share:
Basic	Basic	$	3.11	$	2.57	$	9.72	$	5.60	Basic	$	4.76	$	3.11	$	12.86	$	9.72
Diluted	Diluted	$	3.03	$	2.51	$	9.46	$	5.50	Diluted	$	4.67	$	3.03	$	12.59	$	9.46

Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	29,250		28,653		29,179		28,554		Basic	27,618		29,250		28,025		29,179
Diluted	Diluted	30,028		29,286		29,966		29,030		Diluted	28,185		30,028		28,610		29,966

See Notes to Unaudited Condensed Consolidated Financial Statements.

M/I HOMES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY


		Three Months Ended September 30, 2021																		Three Months Ended September 30, 2022

		Common Shares																		Common Shares
		Shares Outstanding			Additional Paid-in Capital				Retained Earnings			Treasury Shares				Total Shareholders’ Equity				Shares Outstanding			Additional Paid-in Capital		Retained Earnings		Treasury Shares		Total Shareholders’ Equity
(Dollars in thousands)	(Dollars in thousands)		Amount								(Dollars in thousands)				Amount

Balance at June 30, 2021		29,318,130	$	301			$	343,301						$	1,140,926			$	(17,984)		$	1,466,544
Balance at June 30, 2022																			Balance at June 30, 2022	27,760,583	$	301	$	347,923	$	1,573,998	$	(103,955)	$	1,818,267
Net income	Net income	—	—		—				91,012			—				91,012			Net income	—	—		—		131,590		—		131,590

Stock options exercised	Stock options exercised	24,000	—		(3)				—			614				611			Stock options exercised	8,400	—		(137)		—		369		232
Stock-based compensation expense	Stock-based compensation expense	—	—		1,794				—			—				1,794			Stock-based compensation expense	—	—		2,764		—		—		2,764
Repurchase of common shares	Repurchase of common shares	(242,500)	—		—				—			(15,494)				(15,494)			Repurchase of common shares	(340,000)	—		—		—		(15,099)		(15,099)
Deferral of executive and director compensation																			Deferral of executive and director compensation	—	—		19		—		—		19

Balance at September 30, 2021		29,099,630	$	301	$	345,092			$	1,231,938		$	(32,864)			$	1,544,467
Balance at September 30, 2022																			Balance at September 30, 2022	27,428,983	$	301	$	350,569	$	1,705,588	$	(118,685)	$	1,937,773


		Nine Months Ended September 30, 2021																		Nine Months Ended September 30, 2022

		Common Shares																		Common Shares
		Shares Outstanding			Additional Paid-in Capital				Retained Earnings			Treasury Shares				Total Shareholders’ Equity				Shares Outstanding			Additional Paid-in Capital		Retained Earnings		Treasury Shares		Total Shareholders’ Equity
(Dollars in thousands)	(Dollars in thousands)		Amount								(Dollars in thousands)				Amount
Balance at December 31, 2020		28,813,849	$	301			$	339,001						$	948,453			$	(29,057)		$	1,258,698
Balance at December 31, 2021																			Balance at December 31, 2021	28,499,630	$	301	$	347,452	$	1,345,321	$	(68,890)	$	1,624,184
Net income	Net income	—	—		—				283,485			—				283,485			Net income	—	—		—		360,267		—		360,267

Stock options exercised	Stock options exercised	452,100	—		1,227				—			10,014				11,241			Stock options exercised	38,800	—		(687)		—		1,689		1,002
Stock-based compensation expense	Stock-based compensation expense	—	—		6,199				—			—				6,199			Stock-based compensation expense	—	—		6,613		—		—		6,613
Repurchase of common shares	Repurchase of common shares	(242,500)	—		—				—			(15,494)				(15,494)			Repurchase of common shares	(1,200,000)	—		—		—		(55,334)		(55,334)
Deferral of executive and director compensation	Deferral of executive and director compensation	—	—		338				—			—				338			Deferral of executive and director compensation	—	—		1,041		—		—		1,041
Executive and director deferred compensation distributions	Executive and director deferred compensation distributions	76,181	—		(1,673)				—			1,673				—			Executive and director deferred compensation distributions	90,553	—		(3,850)		—		3,850		—
Balance at September 30, 2021		29,099,630	$	301	$	345,092			$	1,231,938		$	(32,864)			$	1,544,467
Balance at September 30, 2022																			Balance at September 30, 2022	27,428,983	$	301	$	350,569	$	1,705,588	$	(118,685)	$	1,937,773


		Three Months Ended September 30, 2020																		Three Months Ended September 30, 2021

		Common Shares																		Common Shares
		Shares Outstanding			Additional Paid-in Capital				Retained Earnings			Treasury Shares				Total Shareholders’ Equity				Shares Outstanding			Additional Paid-in Capital		Retained Earnings		Treasury Shares		Total Shareholders’ Equity
(Dollars in thousands)	(Dollars in thousands)		Amount								(Dollars in thousands)				Amount

Balance at June 30, 2020		28,543,629	$	301			$	334,261						$	794,833			$	(34,990)		$	1,094,405
Balance at June 30, 2021																			Balance at June 30, 2021	29,318,130	$	301	$	343,301	$	1,140,926	$	(17,984)	$	1,466,544
Net income	Net income	—	—		—				73,537			—				73,537			Net income	—	—		—		91,012		—		91,012

Stock options exercised	Stock options exercised	202,020	—		173				—			4,436				4,609			Stock options exercised	24,000	—		(3)		—		614		611
Stock-based compensation expense	Stock-based compensation expense	—	—		2,189				—			—				2,189			Stock-based compensation expense	—	—		1,794		—		—		1,794
Repurchase of common shares																			Repurchase of common shares	(242,500)	—		—		—		(15,494)		(15,494)

Balance at September 30, 2020		28,745,649	$	301	$	336,623			$	868,370		$	(30,554)			$	1,174,740
Balance at September 30, 2021																			Balance at September 30, 2021	29,099,630	$	301	$	345,092	$	1,231,938	$	(32,864)	$	1,544,467


		Nine Months Ended September 30, 2020																		Nine Months Ended September 30, 2021

		Common Shares																		Common Shares
		Shares Outstanding			Additional Paid-in Capital				Retained Earnings			Treasury Shares				Total Shareholders’ Equity				Shares Outstanding			Additional Paid-in Capital		Retained Earnings		Treasury Shares		Total Shareholders’ Equity
(Dollars in thousands)	(Dollars in thousands)		Amount								(Dollars in thousands)				Amount
Balance at December 31, 2019		28,386,456	$	301			$	332,861						$	708,579			$	(38,264)		$	1,003,477
Balance at December 31, 2020																			Balance at December 31, 2020	28,813,849	$	301	$	339,001	$	948,453	$	(29,057)	$	1,258,698
Net income	Net income	—	—		—				159,791			—				159,791			Net income	—	—		—		283,485		—		283,485

Stock options exercised	Stock options exercised	354,620	—		481				—			7,773				8,254			Stock options exercised	452,100	—		1,227		—		10,014		11,241
Stock-based compensation expense	Stock-based compensation expense	—	—		4,915				—			—				4,915			Stock-based compensation expense	—	—		6,199		—		—		6,199
Repurchase of common shares	Repurchase of common shares	(80,000)	—		—				—			(1,912)				(1,912)			Repurchase of common shares	(242,500)	—		—		—		(15,494)		(15,494)
Deferral of executive and director compensation	Deferral of executive and director compensation	—	—		215				—			—				215			Deferral of executive and director compensation	—	—		338		—		—		338
Executive and director deferred compensation distributions	Executive and director deferred compensation distributions	84,573	—		(1,849)				—			1,849				—			Executive and director deferred compensation distributions	76,181	—		(1,673)		—		1,673		—
Balance at September 30, 2020		28,745,649	$	301	$	336,623			$	868,370		$	(30,554)			$	1,174,740
Balance at September 30, 2021																			Balance at September 30, 2021	29,099,630	$	301	$	345,092	$	1,231,938	$	(32,864)	$	1,544,467

See Notes to Unaudited Condensed Consolidated Financial Statements.

M/I HOMES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


		Nine Months Ended September 30,					Nine Months Ended September 30,
(Dollars in thousands)	(Dollars in thousands)	2021		2020		(Dollars in thousands)	2022		2021
OPERATING ACTIVITIES:	OPERATING ACTIVITIES:					OPERATING ACTIVITIES:
Net income	Net income	$	283,485	$	159,791	Net income	$	360,267	$	283,485
Adjustments to reconcile net income to net cash (used in) provided by operating activities:	Adjustments to reconcile net income to net cash (used in) provided by operating activities:					Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Equity in income from joint venture arrangements	Equity in income from joint venture arrangements	(145)		(307)		Equity in income from joint venture arrangements	(17)		(145)

Mortgage loan originations	Mortgage loan originations	(1,630,588)		(1,287,426)		Mortgage loan originations	(1,482,628)		(1,630,588)
Proceeds from the sale of mortgage loans	Proceeds from the sale of mortgage loans	1,647,062		1,301,713		Proceeds from the sale of mortgage loans	1,567,685		1,647,062
Fair value adjustment of mortgage loans held for sale	Fair value adjustment of mortgage loans held for sale	1,962		911		Fair value adjustment of mortgage loans held for sale	7,271		1,962
Fair value adjustment of mortgage servicing rights	Fair value adjustment of mortgage servicing rights	(162)		507		Fair value adjustment of mortgage servicing rights	—		(162)
Capitalization of originated mortgage servicing rights	Capitalization of originated mortgage servicing rights	(13,596)		(4,119)		Capitalization of originated mortgage servicing rights	(7,090)		(13,596)
Amortization of mortgage servicing rights	Amortization of mortgage servicing rights	1,106		1,847		Amortization of mortgage servicing rights	1,137		1,106
Depreciation	Depreciation	9,494		9,298		Depreciation	9,754		9,494
Amortization of debt issue costs	Amortization of debt issue costs	1,937		1,869		Amortization of debt issue costs	1,933		1,937
Loss on sale of mortgage servicing rights	Loss on sale of mortgage servicing rights	177		—		Loss on sale of mortgage servicing rights	418		177
Loss on early extinguishment of debt	Loss on early extinguishment of debt	2,040		950		Loss on early extinguishment of debt	—		2,040
Stock-based compensation expense	Stock-based compensation expense	6,199		4,915		Stock-based compensation expense	6,613		6,199
Deferred income tax expense		—		426

Change in assets and liabilities:	Change in assets and liabilities:					Change in assets and liabilities:

Inventory	Inventory	(412,179)		(62,524)		Inventory	(533,036)		(412,179)
Other assets	Other assets	(5,787)		(18,493)		Other assets	(37,400)		(5,787)
Accounts payable	Accounts payable	41,642		51,555		Accounts payable	51,821		41,642
Customer deposits	Customer deposits	42,653		32,170		Customer deposits	18,504		42,653
Accrued compensation	Accrued compensation	(3,413)		(4,990)		Accrued compensation	(807)		(3,413)
Other liabilities	Other liabilities	(6,228)		9,133		Other liabilities	21,426		(6,228)
Net cash (used in) provided by operating activities		(34,341)		197,226
Net cash used in operating activities						Net cash used in operating activities	(14,149)		(34,341)

INVESTING ACTIVITIES:	INVESTING ACTIVITIES:					INVESTING ACTIVITIES:

Purchase of property and equipment	Purchase of property and equipment	(2,559)		(8,465)		Purchase of property and equipment	(3,878)		(2,559)
Return of capital from joint venture arrangements	Return of capital from joint venture arrangements	1,050		1,213		Return of capital from joint venture arrangements	2,046		1,050

Investment in joint venture arrangements	Investment in joint venture arrangements	(34,738)		(24,075)		Investment in joint venture arrangements	(17,366)		(34,738)
Proceeds from sale of mortgage servicing rights	Proceeds from sale of mortgage servicing rights	4,324		—		Proceeds from sale of mortgage servicing rights	100		4,324

Net cash used in investing activities	Net cash used in investing activities	(31,923)		(31,327)		Net cash used in investing activities	(19,098)		(31,923)

FINANCING ACTIVITIES:	FINANCING ACTIVITIES:					FINANCING ACTIVITIES:
Repayment of senior notes	Repayment of senior notes	(250,000)		(300,000)		Repayment of senior notes	—		(250,000)
Proceeds from issuance of senior notes	Proceeds from issuance of senior notes	300,000		400,000		Proceeds from issuance of senior notes	—		300,000

Proceeds from bank borrowings - homebuilding operations	Proceeds from bank borrowings - homebuilding operations	—		306,800		Proceeds from bank borrowings - homebuilding operations	238,900		—
Repayment of bank borrowings - homebuilding operations	Repayment of bank borrowings - homebuilding operations	—		(372,800)		Repayment of bank borrowings - homebuilding operations	(238,900)		—
Net repayments of bank borrowings - financial services operations	Net repayments of bank borrowings - financial services operations	(14,353)		(785)		Net repayments of bank borrowings - financial services operations	(76,789)		(14,353)
Proceeds from (principal repayments of) notes payable - other and community development district bond obligations		1,466		(503)
(Principal repayments of) proceeds from notes payable - other and community development district bond obligations						(Principal repayments of) proceeds from notes payable - other and community development district bond obligations	(4,119)		1,466

Repurchase of common shares	Repurchase of common shares	(15,494)		(1,912)		Repurchase of common shares	(55,334)		(15,494)
Debt issue costs	Debt issue costs	(6,249)		(8,524)		Debt issue costs	(120)		(6,249)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	11,241		8,254		Proceeds from exercise of stock options	1,002		11,241

Net cash provided by financing activities		26,611		30,530
Net increase in cash, cash equivalents and restricted cash		(39,653)		196,429
Net cash (used in) provided by financing activities						Net cash (used in) provided by financing activities	(135,360)		26,611
Net decrease in cash, cash equivalents and restricted cash						Net decrease in cash, cash equivalents and restricted cash	(168,607)		(39,653)
Cash, cash equivalents and restricted cash balance at beginning of period	Cash, cash equivalents and restricted cash balance at beginning of period	260,810		6,083		Cash, cash equivalents and restricted cash balance at beginning of period	236,368		260,810
Cash, cash equivalents and restricted cash balance at end of period	Cash, cash equivalents and restricted cash balance at end of period	$	221,157	$	202,512	Cash, cash equivalents and restricted cash balance at end of period	$	67,761	$	221,157

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:	SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:					SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:	Cash paid during the year for:					Cash paid during the year for:
Interest — net of amount capitalized	Interest — net of amount capitalized	$	9,167	$	15,644	Interest — net of amount capitalized	$	7,683	$	9,167
Income taxes	Income taxes	$	91,546	$	39,510	Income taxes	$	123,118	$	91,546

NON-CASH TRANSACTIONS DURING THE PERIOD:	NON-CASH TRANSACTIONS DURING THE PERIOD:					NON-CASH TRANSACTIONS DURING THE PERIOD:
Community development district infrastructure	Community development district infrastructure	$	7,779	$	(3,639)	Community development district infrastructure	$	11,902	$	7,779
Consolidated inventory not owned	Consolidated inventory not owned	$	(5,511)	$	(7,570)	Consolidated inventory not owned	$	2,010	$	(5,511)
Distribution of single-family lots from joint venture arrangements	Distribution of single-family lots from joint venture arrangements	$	26,040	$	27,016	Distribution of single-family lots from joint venture arrangements	$	20,758	$	26,040

See Notes to Unaudited Condensed Consolidated Financial Statements.

M/I HOMES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. Basis of Presentation

The accompanying Unaudited Condensed Consolidated Financial Statements (the “financial statements”) of M/I Homes, Inc. and its subsidiaries (the “Company”) and notes thereto have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. The financial statements include the accounts of the Company. All intercompany transactions have been eliminated. Results for the interim period are not necessarily indicative of results for a full year. In the opinion of management, the accompanying financial statements reflect all adjustments (all of which are normal and recurring in nature) necessary for a fair presentation of financial results for the interim periods presented. These financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (the ~~“2020~~“2021 Form 10-K”).

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 and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during that period. Actual results could differ from these estimates and have a significant impact on the financial condition and results of operations and cash flows. With regard to the Company, estimates and assumptions are inherent in calculations relating to valuation of inventory and investment in unconsolidated joint ventures, property and equipment depreciation, valuation of derivative financial instruments, accounts payable on inventory, accruals for costs to complete inventory, accruals for warranty claims, accruals for self-insured general liability claims, litigation, accruals for health care and workers’ compensation, accruals for guaranteed or indemnified loans, stock-based compensation expense, income taxes, and contingencies. Items that could have a significant impact on these estimates and assumptions include the risks and uncertainties listed in “Item 1A. Risk Factors” in Part I of our ~~2020~~2021 Form 10-K, as the same may be updated from time to time in our subsequent filings with the SEC.

Recently Adopted Accounting Standards

In ~~December 2019,~~March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. ~~2019-12,~~2020-04, ~~Income Taxes (Topic 740): Simplifying~~Facilitation of the ~~Accounting for Income Taxes~~Effects of Reference Rate Reform on Financial Reporting ("(“ASU ~~2019-12"~~2020-04”)~~, which~~. ASU 2020-04 is intended to ~~simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain~~provide temporary optional expedients and exceptions to the ~~general principles~~US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This guidance became effective on March 12, 2020 and can be applied prospectively through December 31, 2022. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”), which clarified the scope and application of the original guidance. We fully adopted ASU 2020-04 and ASU 2021-01 in ~~Topic 740~~October 2022 after we amended our $90 million mortgage repurchase agreement, dated October 30, 2017, as amended (the “MIF Mortgage Repurchase Facility”), which discontinued the use of LIBOR and ~~also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for~~replaced it with the ~~Company beginning January 1, 2021.~~One-Month Term SOFR (“SOFR”) rate. The adoption of this ~~ASU~~guidance did not have a material impact on our ~~Consolidated Financial Statements~~consolidated financial statements and disclosures.

Significant Accounting Policies

There have been no significant changes to our significant accounting policies during the quarter ended September 30, ~~2021~~2022 as compared to those disclosed in our ~~2020~~2021 Form 10-K.

NOTE 2. Inventory and Capitalized Interest

Inventory

Inventory is recorded at cost, unless events and circumstances indicate that the carrying value of the inventory is impaired, at which point the inventory is written down to fair value (see Note 4 to our financial statements for additional details relating to our procedures for evaluating our inventories for impairment). Inventory includes the costs of land acquisition, land development and home construction, capitalized interest, real estate taxes, direct overhead costs incurred during development and home construction, and common costs that benefit the entire community, less impairments, if any.

A summary of the Company’s inventory as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 is as follows:


(In thousands)	(In thousands)	September 30, 2021		December 31, 2020		(In thousands)	September 30, 2022		December 31, 2021
Single-family lots, land and land development costs	Single-family lots, land and land development costs	$	1,022,434	$	868,288	Single-family lots, land and land development costs	$	1,230,139	$	1,125,738
Land held for sale	Land held for sale	3,620		4,623		Land held for sale	9,174		4,312
Homes under construction	Homes under construction	1,190,921		898,966		Homes under construction	1,624,831		1,187,341
Model homes and furnishings - at cost (less accumulated depreciation: September 30, 2021 - $12,593; December 31, 2020 - $12,909)		67,190		81,264
Model homes and furnishings - at cost (less accumulated depreciation: September 30, 2022 - $12,130; December 31, 2021 - $12,023)						Model homes and furnishings - at cost (less accumulated depreciation: September 30, 2022 - $12,130; December 31, 2021 - $12,023)	59,145		59,268
Community development district infrastructure	Community development district infrastructure	15,975		8,196		Community development district infrastructure	31,991		20,089
Land purchase deposits	Land purchase deposits	48,600		45,357		Land purchase deposits	56,677		52,918
Consolidated inventory not owned	Consolidated inventory not owned	4,403		9,914		Consolidated inventory not owned	4,778		2,768
Total inventory	Total inventory	$	2,353,143	$	1,916,608	Total inventory	$	3,016,735	$	2,452,434

Single-family lots, land and land development costs include raw land that the Company has purchased to develop into lots, costs incurred to develop the raw land into lots, and lots for which development has been completed, but which have not yet been used to start construction of a home.

Homes under construction include homes that are in various stages of construction. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had ~~1,042~~1,855 homes (with a carrying value of ~~$146.7~~$369.0 million) and ~~1,131~~1,266 homes (with a carrying value of ~~$186.9~~$193.2 million), respectively, included in homes under construction that were not subject to a sales contract.

Model homes and furnishings include homes that are under construction or have been completed and are being used as sales models. The amount also includes the net book value of furnishings included in our model homes. Depreciation on model home furnishings is recorded using an accelerated method over the estimated useful life of the assets, which is typically three years.

We own lots in certain communities in Florida that have Community Development Districts (“CDDs”). The Company records a liability for the estimated developer obligations that are probable and estimable and user fees that are required to be paid or transferred at the time the parcel or unit is sold to an end user. The Company reduces this liability at the time of closing and the transfer of the property. The Company recorded a ~~$16.0~~$32.0 million liability and a ~~$8.2~~$20.1 million liability related to these CDD bond obligations as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, along with the related inventory infrastructure.

Land purchase deposits include both refundable and non-refundable amounts paid to third party sellers relating to the purchase of land. On an ongoing basis, the Company evaluates the land option agreements relating to the land purchase deposits. The Company expenses any deposits and accumulated pre-acquisition costs relating to such agreements in the period when the Company makes the decision not to proceed with the purchase of land under an agreement.

Capitalized Interest

The Company capitalizes interest during land development and home construction. Capitalized interest is charged to land and housing costs and expensed as the related inventory is delivered to a third party. ~~The~~A summary of capitalized interest for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 is as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	(In thousands)	2021		2020		2021		2020		(In thousands)	2022		2021		2022		2021
Capitalized interest, beginning of period	Capitalized interest, beginning of period	$	22,304	$	22,203	$	21,329	$	21,607	Capitalized interest, beginning of period	$	27,049	$	22,304	$	24,343	$	21,329
Interest capitalized to inventory	Interest capitalized to inventory	9,402		8,758		28,020		23,678		Interest capitalized to inventory	8,926		9,402		26,495		28,020
Capitalized interest charged to land and housing costs and expenses	Capitalized interest charged to land and housing costs and expenses	(8,212)		(8,803)		(25,855)		(23,127)		Capitalized interest charged to land and housing costs and expenses	(6,683)		(8,212)		(21,546)		(25,855)
Capitalized interest, end of period	Capitalized interest, end of period	$	23,494	$	22,158	$	23,494	$	22,158	Capitalized interest, end of period	$	29,292	$	23,494	$	29,292	$	23,494

Interest incurred	Interest incurred	$	9,328	$	9,997	$	29,574	$	32,132	Interest incurred	$	9,627	$	9,328	$	28,560	$	29,574

NOTE 3. Investment in Joint Venture Arrangements

Investment in Joint Venture Arrangements

In order to minimize our investment and risk of land exposure in a single location, we have periodically partnered with other land developers or homebuilders to share in the land investment and development of a property through joint ownership and development agreements, joint ventures, and other similar arrangements. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, our investment in such joint venture arrangements totaled ~~$42.5~~$51.7 million and ~~$34.7~~$57.1 million, respectively, and was reported as Investment in Joint Venture Arrangements on our Unaudited Condensed Consolidated Balance Sheets. The ~~$7.8~~$5.4 million ~~increase~~decrease during the nine-month period ended September 30, ~~2021~~2022 was driven primarily by lot distributions from our joint venture arrangements of $20.8 million and return of capital from joint venture arrangements of $2.0 million, offset, in part, by our cash contributions to our joint venture arrangements during the first nine months of ~~2021~~2022 of ~~$34.7 million, offset, in part, by lot distributions from our joint venture arrangements of $26.0 million and return of capital from joint venture arrangements of $1.1~~$17.4 million.

The majority of our investment in joint venture arrangements for both September 30, ~~2021~~2022 and December 31, ~~2020~~2021 consisted of joint ownership and development agreements for which a special purpose entity was not established (“JODAs”). In these JODAs, we own the property jointly with partners which are typically other builders, and land development activities are funded jointly until the developed lots are subdivided for separate ownership by the partners in accordance with the JODA and the approved site plan. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had ~~$42.3~~$46.2 million and ~~$33.9~~$50.6 million, respectively, invested in JODAs.

The remainder of our investment in joint venture arrangements was comprised of joint venture arrangements where a special purpose entity was established to own and develop the property. For these joint venture arrangements, we generally enter into limited liability company or similar arrangements (“LLCs”) with the other partners. These entities typically engage in land development activities for the purpose of distributing or selling developed lots to the Company and its partners in the LLC. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had ~~$0.2~~$5.5 million and ~~$0.8~~$6.5 million, respectively, of equity invested in LLCs. The Company’s percentage of ownership in these LLCs as of both September 30, 2022 and December 31, 2021 ranged from 25% to 50% ~~and as of December 31, 2020 ranged from 25% to 74%~~.

We use the equity method of accounting for investments in LLCs and other joint venture arrangements, including JODAs, over which we exercise significant influence but do not have a controlling interest. Under the equity method, our share of the LLCs’ earnings or loss, if any, is included in our Unaudited Condensed Consolidated Statements of Income. The ~~Company’s~~Company did not have any share of losses from its LLCs for the three months ended September 30, ~~2021 was less than $0.1 million. The~~2022; however, the Company’s ~~equity in income relating to earnings~~share of losses from its LLCs was ~~$0.3~~$0.1 million for the three months ended September 30, ~~2020.~~2021. For the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the Company’s equity in income relating to earnings from its LLCs was less than $0.1 million and ~~$0.3~~$0.1 million, respectively. Our share of the profit relating to lots we purchase from our LLCs is deferred until homes are delivered by us and title passes to a homebuyer.

We believe that the Company’s maximum exposure related to its investment in these joint venture arrangements as of September 30, ~~2021~~2022 was the amount invested of ~~$42.5~~$51.7 million, which is reported as Investment in Joint Venture Arrangements on our Unaudited Condensed Consolidated Balance Sheets. We expect to invest further amounts in these joint venture arrangements as development of the properties progresses.

The Company assesses its investments in unconsolidated LLCs for recoverability on a quarterly basis. See Note 4 to our financial statements for additional details relating to our procedures for evaluating our investments for impairment.

Variable Interest Entities

With respect to our investments in these LLCs, we are required, under ASC 810-10, Consolidation (“ASC 810”), to evaluate whether or not such entities should be consolidated into our consolidated financial statements. We initially perform these evaluations when each new entity is created and upon any events that require reconsideration of the entity. See Note 1, “Summary of Significant Accounting Policies - Variable Interest Entities” in the Company’s ~~2020~~2021 Form 10-K for additional information regarding the Company’s methodology for evaluating entities for consolidation.

Land Option Agreements

In the ordinary course of business, the Company enters into land option or purchase agreements for which we generally pay non-refundable deposits. Pursuant to these land option agreements, the Company provides a deposit to the seller as consideration for the right to purchase land at different times in the future, usually at predetermined prices. In accordance with ASC 810, we analyze our land option or purchase agreements to determine whether the corresponding land sellers are variable interest entities (“VIEs”) and, if so, whether we are the primary beneficiary, as further described in Note 1, “Summary of

Significant Accounting Policies - Land Option Agreements” in the ~~2020~~2021 Form 10-K. If we are deemed to be the primary beneficiary of the VIE, we will consolidate the VIE in our consolidated financial statements and reflect such assets and liabilities in our Consolidated Inventory Not Owned in our Unaudited Condensed Consolidated Balance Sheets. At both September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we concluded that we were not the primary beneficiary of any VIEs from which we are purchasing land under option or purchase agreements.

NOTE 4. Fair Value Measurements

There are three measurement input levels for determining fair value: Level 1, Level 2, and Level 3. Fair values determined by Level 1 inputs utilize quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.

Assets Measured on a Recurring Basis

The Company measures both mortgage loans held for sale and interest rate lock commitments (“IRLCs”) at fair value. Fair value measurement results in a better presentation of the changes in fair values of the loans and the derivative instruments used to economically hedge them.

In the normal course of business, our financial services segment enters into contractual commitments to extend credit to buyers of single-family homes with fixed expiration dates. The commitments become effective when the borrowers “lock-in” a specified interest rate within established time frames. Market risk arises if interest rates move adversely between the time of the “lock-in” of rates by the borrower and the sale date of the loan to an investor. To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, the Company enters into optional or mandatory delivery forward sale contracts to sell whole loans and mortgage-backed securities to broker/dealers. The forward sale contracts lock in an interest rate and price for the sale of loans similar to the specific rate lock commitments. The Company does not engage in speculative trading or derivative activities. Both the rate lock commitments to borrowers and the forward sale contracts to broker/dealers or investors are undesignated derivatives, and accordingly, are marked to fair value through earnings. Changes in fair value measurements are included in earnings in the accompanying statements of income.

The fair value of mortgage loans held for sale is estimated based primarily on published prices for mortgage-backed securities with similar characteristics. To calculate the effects of interest rate movements, the Company utilizes applicable published mortgage-backed security prices, and multiplies the price movement between the rate lock date and the balance sheet date by the notional loan commitment amount. The Company applies a fallout rate to IRLCs when measuring the fair value of rate lock commitments. Fallout is defined as locked loan commitments for which the Company does not close a mortgage loan and is based on management’s judgment and company experience.

The Company sells loans on a servicing released or servicing retained basis and receives servicing compensation. Thus, the value of the servicing rights included in the fair value measurement is based upon contractual terms with investors and depends on the loan type. Mortgage servicing rights (Level 3 financial instruments as they are measured using significant unobservable inputs such as mortgage prepayment rates, discount rates and delinquency rates) are periodically evaluated for impairment. The amount of impairment is the amount by which the mortgage servicing rights, net of accumulated amortization, exceed their fair value, which is calculated using third-party valuations. Impairment, if any, is recognized through a valuation allowance and a reduction of revenue. ~~The carrying value and fair value of mortgage servicing rights was $17.0 million at September 30, 2021. At December 31, 2020,~~Both the carrying value and fair value of our mortgage servicing rights were ~~$9.4~~$14.5 million at September 30, 2022. At December 31, 2021, both the carrying value and ~~$9.2 million, respectively. This $0.2 million decrease in the~~fair value of our mortgage servicing rights was caused by the disruption in the mortgage industry as a result of the COVID-19 pandemic, and was recorded as a decrease in revenue to bring the carrying value down to the fair value, for a net valuation allowance and impairment of $0.2 million for the year ended December 31, 2020.were $8.4 million.

The fair value of the Company’s forward sales contracts to broker/dealers solely considers the market price movement of the same type of security between the trade date and the balance sheet date. The market price changes are multiplied by the notional amount of the forward sales contracts to measure the fair value.

Interest Rate Lock Commitments. IRLCs are extended to certain homebuying customers who have applied for a mortgage loan and meet certain defined credit and underwriting criteria. Typically, the IRLCs will have a term of less than six months; however, in certain markets, the term could extend to nine months.

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

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

Mortgage Loans Held for Sale. Mortgage loans held for sale consists primarily of single-family residential loans collateralized by the underlying property. Generally, all of the mortgage loans and related servicing rights are sold to third-party investors shortly after origination. During the period between when a loan is closed and when it is sold to an investor, the interest rate risk is covered through the use of a whole loan contract or by FMBSs.

The table below shows the notional amounts of our financial instruments at September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


Description of Financial Instrument (in thousands)	Description of Financial Instrument (in thousands)	September 30, 2021		December 31, 2020		Description of Financial Instrument (in thousands)	September 30, 2022		December 31, 2021
Whole loan contracts and related committed IRLCs	Whole loan contracts and related committed IRLCs	$	5,294	$	2,354	Whole loan contracts and related committed IRLCs	$	4,169	$	782
Uncommitted IRLCs	Uncommitted IRLCs	273,470		208,500		Uncommitted IRLCs	477,065		228,831
FMBSs related to uncommitted IRLCs	FMBSs related to uncommitted IRLCs	258,000		183,000		FMBSs related to uncommitted IRLCs	476,000		223,000
Whole loan contracts and related mortgage loans held for sale	Whole loan contracts and related mortgage loans held for sale	6,813		78,142		Whole loan contracts and related mortgage loans held for sale	18,648		3,785
FMBSs related to mortgage loans held for sale	FMBSs related to mortgage loans held for sale	192,000		131,000		FMBSs related to mortgage loans held for sale	174,000		251,000
Mortgage loans held for sale covered by FMBSs	Mortgage loans held for sale covered by FMBSs	192,672		148,331		Mortgage loans held for sale covered by FMBSs	172,151		263,088

The following table sets forth the amount of gain (loss) recognized, within our revenue in the Unaudited Condensed Consolidated Statements of Income, on assets and liabilities measured on a recurring basis for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
Description (in thousands)	Description (in thousands)	2021		2020		2021		2020		Description (in thousands)	2022		2021		2022		2021
Mortgage loans held for sale	Mortgage loans held for sale	$	(1,704)	$	(1,338)	$	(1,962)	$	(911)	Mortgage loans held for sale	$	(4,396)	$	(1,704)	$	(7,271)	$	(1,962)
Forward sales of mortgage-backed securities	Forward sales of mortgage-backed securities	3,877		1,670		4,893		507		Forward sales of mortgage-backed securities	24,952		3,877		22,199		4,893
Interest rate lock commitments	Interest rate lock commitments	(1,440)		(853)		(940)		704		Interest rate lock commitments	(13,015)		(1,440)		(15,708)		(940)
Whole loan contracts	Whole loan contracts	49		(20)		413		(68)		Whole loan contracts	(209)		49		(97)		413
Total gain (loss) recognized	Total gain (loss) recognized	$	782	$	(541)	$	2,404	$	232	Total gain (loss) recognized	$	7,332	$	782	$	(877)	$	2,404

The following tables set forth the fair value of the Company’s derivative instruments and their location within the Unaudited Condensed Consolidated Balance Sheets for the periods indicated (except for mortgage loans held for sale which are disclosed as a separate line item):

Asset Derivatives

Liability Derivatives

Asset Derivatives

Liability Derivatives

September 30, 2021

September 30, 2022

Description of Derivatives

Balance Sheet
Location

Fair Value
(in thousands)

Balance Sheet Location

Fair Value
(in thousands)

Description of Derivatives

Balance Sheet
Location

Fair Value
(in thousands)

Balance Sheet Location

Fair Value
(in thousands)

Forward sales of mortgage-backed securities

Other assets

3,253

Other liabilities

—

Forward sales of mortgage-backed securities

Other assets

26,676

Other liabilities

—

Interest rate lock commitments

Other assets

745

Other liabilities

—

Interest rate lock commitments

Other assets

—

Other liabilities

16,173

Whole loan contracts

Other assets

—

Other liabilities

Whole loan contracts

Other assets

—

Other liabilities

181

Total fair value measurements

3,998

Total fair value measurements

26,676

16,354

Asset Derivatives

Liability Derivatives

Asset Derivatives

Liability Derivatives

December 31, 2020

December 31, 2021

Description of Derivatives

Balance Sheet
Location

Fair Value
(in thousands)

Balance Sheet Location

Fair Value
(in thousands)

Description of Derivatives

Balance Sheet
Location

Fair Value
(in thousands)

Balance Sheet Location

Fair Value
(in thousands)

Forward sales of mortgage-backed securities

Other assets

—

Other liabilities

1,640

Forward sales of mortgage-backed securities

Other assets

4,477

Other liabilities

—

Interest rate lock commitments

Other assets

1,664

Other liabilities

—

Interest rate lock commitments

Other assets

—

Other liabilities

487

Whole loan contracts

Other assets

—

Other liabilities

422

Whole loan contracts

Other assets

—

Other liabilities

Total fair value measurements

1,664

2,062

Total fair value measurements

4,477

549

Assets Measured on a Non-Recurring Basis

Inventory. The Company assesses inventory for recoverability on a quarterly basis based on the difference in the carrying value of the inventory and its fair value at the time of the evaluation. Determining the fair value of a community’s inventory involves a number of variables, estimates and projections, which are Level 3 measurement inputs. See Note 1, “Summary of Significant Accounting Policies - Inventory” in the ~~2020~~2021 Form 10-K for additional information regarding the Company’s methodology for determining fair value.

The Company uses significant assumptions to evaluate the recoverability of its inventory, such as estimated average selling price, construction and development costs, absorption rate (reflecting any product mix change strategies implemented or to be implemented), selling strategies, alternative land uses (including disposition of all or a portion of the land owned), or discount rates. Changes in these assumptions could materially impact future cash flow and fair value estimates and may lead the Company to incur additional impairment charges in the future. Our analysis is conducted only if indicators of a decline in value of our inventory exist, which include, among other things, declines in gross margin on sales contracts in backlog or homes that have been delivered, slower than anticipated absorption pace, declines in average sales price or high incentive offers by management to improve absorptions, declines in margins regarding future land sales, or declines in the value of the land itself as a result of third party appraisals. If communities are not recoverable based on the estimated future undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. During the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the Company did not record any impairment charges on its inventory.

Investment in Unconsolidated Joint Ventures. We evaluate our investments in unconsolidated joint ventures for impairment on a quarterly basis based on the difference in the investment’s carrying value and its fair value at the time of the evaluation. If the Company has determined that the decline in value is other than temporary, the Company would write down the value of the investment to its estimated fair value. Determining the fair value of investments in unconsolidated joint ventures involves a number of variables, estimates and assumptions, which are Level 3 measurement inputs. See Note 1, “Summary of Significant Accounting Policies - Investment in Unconsolidated Joint Ventures,” in the ~~2020~~2021 Form 10-K for additional information regarding the Company’s methodology for determining fair value. Because of the high degree of judgment involved in developing these assumptions, it is possible that changes in these assumptions could materially impact future cash flow and fair value estimates of the investments which may lead the Company to incur additional impairment charges in the future. During the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the Company did not record any impairment charges on its investments in unconsolidated joint ventures.

Financial Instruments

Counterparty Credit Risk. To reduce the risk associated with losses that would be recognized if counterparties failed to perform as contracted, the Company limits the entities with whom management can enter into commitments. This risk of

accounting loss is the difference between the market rate at the time of non-performance by the counterparty and the rate to which the Company committed.

The following table presents the carrying amounts and fair values of the Company’s financial instruments at September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The objective of the fair value measurement is to estimate the price at which an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions.


			September 30, 2021				December 31, 2020						September 30, 2022				December 31, 2021
(In thousands)	(In thousands)	Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value		(In thousands)	Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:	Assets:										Assets:
Cash, cash equivalents and restricted cash	Cash, cash equivalents and restricted cash	Level 1	$	221,157	$	221,157	$	260,810	$	260,810	Cash, cash equivalents and restricted cash	Level 1	$	67,761	$	67,761	$	236,368	$	236,368
Mortgage loans held for sale	Mortgage loans held for sale	Level 2	215,857		215,857		234,293		234,293		Mortgage loans held for sale	Level 2	183,327		183,327		275,655		275,655

Interest rate lock commitments		Level 2	745		745		1,664		1,664

Forward sales of mortgage-backed securities	Forward sales of mortgage-backed securities	Level 2	3,253		3,253		—		—		Forward sales of mortgage-backed securities	Level 2	26,676		26,676		4,477		4,477
Liabilities:	Liabilities:										Liabilities:

Notes payable - homebuilding operations											Notes payable - homebuilding operations	Level 2	—		—		—		—
Notes payable - financial services operations	Notes payable - financial services operations	Level 2	211,281		211,281		225,634		225,634		Notes payable - financial services operations	Level 2	189,371		189,371		266,160		266,160
Notes payable - other	Notes payable - other	Level 2	5,537		5,458		4,072		3,647		Notes payable - other	Level 2	429		423		4,549		5,015

Senior notes due 2025 (a)		Level 2	—		—		250,000		259,375

Senior notes due 2028 (a)	Senior notes due 2028 (a)	Level 2	400,000		417,500		400,000		421,000		Senior notes due 2028 (a)	Level 2	400,000		330,500		400,000		414,000
Senior notes due 2030 (a)	Senior notes due 2030 (a)	Level 2	300,000		301,500		—		—		Senior notes due 2030 (a)	Level 2	300,000		217,875		300,000		294,375

Interest rate lock commitments											Interest rate lock commitments	Level 2	16,173		16,173		487		487
Whole loan contracts for committed IRLCs and mortgage loans held for sale	Whole loan contracts for committed IRLCs and mortgage loans held for sale	Level 2	30		30		422		422		Whole loan contracts for committed IRLCs and mortgage loans held for sale	Level 2	181		181		62		62
Forward sales of mortgage-backed securities		Level 2	—		—		1,640		1,640

(a)Our senior notes are stated at the principal amount outstanding which does not include the impact of premiums, discounts, and debt issuance costs that are amortized to interest cost over the respective terms of the notes.

The following methods and assumptions were used by the Company in estimating its fair value disclosures of financial instruments at September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:

Cash, Cash Equivalents and Restricted Cash. The carrying amounts of these items approximate fair value because they are short-term by nature.

Mortgage Loans Held for Sale, Forward Sales of Mortgage-Backed Securities, Interest Rate Lock Commitments, Whole ~~loan~~Loan Contracts for Committed IRLCs and Mortgage Loans Held for Sale, ~~Senior Notes due 2025,~~ Senior Notes due 2028 and Senior Notes due 2030. The fair value of these financial instruments was determined based upon market quotes at September 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The market quotes used were quoted prices for similar assets or liabilities along with inputs taken from observable market data by correlation. The inputs were adjusted to account for the condition of the asset or liability.

Notes Payable - Homebuilding Operations. The interest rate available to the Company during the quarter ended September 30, ~~2021~~2022 under the Company’s $550 million unsecured revolving credit facility, dated July 18, 2013, as amended ~~most recently on June 10, 2021~~ (the “Credit Facility”), fluctuated daily with the one-month LIBOR rate plus a margin of 175 basis points, and thus the carrying value is a reasonable estimate of fair value. See Note 8 to our financial statements for additional information regarding the Credit Facility.

Notes Payable - Financial Services Operations. M/I Financial, LLC, a 100%-owned subsidiary of M/I Homes, Inc. (“M/I Financial”), is a party to two credit agreements: (1) a ~~$175~~$200 million secured mortgage warehousing agreement, dated ~~June 24, 2016, as amended~~May 27, 2022 (the “MIF Mortgage Warehousing Agreement”); and (2) ~~a $90 million mortgage repurchase agreement, dated October 30, 2017, as amended (the “MIF~~the MIF Mortgage Repurchase ~~Facility”).~~Facility. For each of these credit facilities, the interest rate is based on a variable rate index, and thus their carrying value is a reasonable estimate of fair value. The interest rate available to M/I Financial during the third quarter of ~~2021~~2022 fluctuated with ~~LIBOR.~~LIBOR or BSBY, as applicable. See Note 8 to our financial statements for additional information regarding the MIF Mortgage Warehousing Agreement and the MIF Mortgage Repurchase Facility.

Notes Payable - Other. The estimated fair value was determined by calculating the present value of the future cash flows using the Company’s current incremental borrowing rate.

NOTE 5. Guarantees and Indemnifications

In the ordinary course of business, M/I Financial enters into agreements that provide a limited-life guarantee on loans sold to certain third-party purchasers of its mortgage loans that M/I Financial will repurchase a loan if certain conditions occur,

primarily if the mortgagor does not meet the terms of the loan within the first six months after the sale of the loan. Loans totaling approximately ~~$113.0~~$435.9 million and ~~$21.1~~$305.0 million were covered under these guarantees as of September 30, ~~2021~~2022 and

December 31, ~~2020,~~2021, respectively. ~~The increase in loans covered by these guarantees from December 31, 2020 is a result of a change in the mix of investors and their related purchase terms.~~ A portion of the revenue paid to M/I Financial for providing the guarantees on these loans was deferred at September 30, ~~2021,~~2022, and will be recognized in income as M/I Financial is released from its obligation under the guarantees. The risk associated with the guarantees above is offset by the value of the underlying assets.

M/I Financial has received inquiries concerning underwriting matters from purchasers of its loans regarding certain loans totaling approximately ~~$0.9~~$2.0 million and ~~$0.6~~$0.7 million at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

M/I Financial has also guaranteed the collectability of certain loans to third party insurers (U.S. Department of Housing and Urban Development and U.S. Veterans Administration) of those loans for periods ranging from five to thirty years. The maximum potential amount of future payments is equal to the outstanding loan value less the value of the underlying asset plus administrative costs incurred related to foreclosure on the loans, should this event occur.

The Company recorded a liability relating to the guarantees described above totaling ~~$0.3~~$0.6 million and ~~$0.4~~$0.3 million at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, which is management’s best estimate of the Company’s liability with respect to such guarantees.

NOTE 6. Commitments and Contingencies

Warranty

We use subcontractors for nearly all aspects of home construction. Although our subcontractors are generally required to repair and replace any product or labor defects, we are, during applicable warranty periods, ultimately responsible to the homeowner for making such repairs. As such, we record warranty reserves to cover our exposure to the costs for materials and labor not expected to be covered by our subcontractors to the extent they relate to warranty-type claims. Warranty reserves are established by charging cost of sales and crediting a warranty reserve for each home delivered. The amounts charged are estimated by management to be adequate to cover expected warranty-related costs under the Company’s warranty programs. Warranty reserves are recorded for warranties under our Home Builder’s Limited Warranty (“HBLW”) and our transferable structural warranty in Other Liabilities on the Company’s Unaudited Condensed Consolidated Balance Sheets.

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

Our warranty reserves for our transferable structural warranty programs are established on a per-unit basis. While the structural warranty reserve is recorded as each house is delivered, the sufficiency of the structural warranty per unit charge and total reserve is reevaluated on an annual basis, with the assistance of an actuary, using our own historical data and trends, industry-wide historical data and trends, and other project specific factors. The reserves are also evaluated quarterly and adjusted if we encounter activity that is inconsistent with the historical experience used in the annual analysis. These reserves are subject to variability due to uncertainties regarding structural defect claims for products we build, the markets in which we build, claim settlement history, insurance and legal interpretations, among other factors.

Our warranty reserve amounts are based upon historical experience and geographic location. While we believe that our warranty reserves are sufficient to cover our projected costs, there can be no assurances that historical data and trends will accurately predict our actual warranty costs.

A summary of warranty activity for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 is as follows:

Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) 2021 2020 2021 2020
Warranty reserves, beginning of period $ 29,880 $ 26,175 $ 29,012 $ 26,420
Warranty expense on homes delivered during the period 4,834 4,961 15,246 12,624
Changes in estimates for pre-existing warranties 1,745 416 2,356 (228)
Charges related to stucco-related claims — — — — (a)
Settlements made during the period (6,078) (4,578) (16,233) (11,842)
Warranty reserves, end of period $ 30,381 $ 26,974 $ 30,381 $ 26,974

~~(a) Represents charges for stucco-related repair costs, net of recoveries during the period.~~


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2022		2021		2022		2021
Warranty reserves, beginning of period	$	29,970	$	29,880	$	29,728	$	29,012
Warranty expense on homes delivered during the period	5,373		4,834		15,479		15,246
Changes in estimates for pre-existing warranties	2,342		1,745		3,520		2,356

Settlements made during the period	(6,807)		(6,078)		(17,849)		(16,233)
Warranty reserves, end of period	$	30,878	$	30,381	$	30,878	$	30,381

We have received claims related to stucco installation from homeowners in certain of our communities in our Tampa and Orlando, Florida markets and have been named as a defendant in legal proceedings initiated by certain of such homeowners. These claims primarily relate to homes built prior to 2014 which have second story elevations with frame construction.

During the three and nine month ~~periods~~period ended September 30, ~~2021,~~2022, we did not record any additional warranty charges or receive any additional recoveries for stucco-related repair costs. AtThe remaining reserve at September 30, ~~2021, the remaining reserve~~2022 for (1) homes in our Florida communities that we ~~have~~had identified as needing repair but ~~have~~had not yet completed the repair and (2) estimated repair costs for homes in our Florida communities that we ~~have~~had not yet identified as needing repair but that may require repair in the future included within our warranty reserve was ~~$3.2~~$2.1 million. We believe that this amount is sufficient to cover both known and estimated future repair costs as of September 30, ~~2021.~~2022. Our remaining stucco-related reserve is gross of any recoveries. ~~Stucco-related recoveries are recorded in the period the reimbursement is received.~~

~~Our review of the stucco-related issues in our Florida communities is ongoing.~~ Our estimate of future costs of stucco-related repairs is based on our judgment, various assumptions and internal data. Due to the degree of judgment and the potential for variability in our underlying assumptions and data, ~~as we obtain additional information,~~ we may revise our estimate, including to reflect additional estimated future stucco-related repairs costs, which revision could be material.

We continue to investigate the extent to which we may be able to further recover a portion of our stucco repair and claims handling costs from other sources, including our direct insurers, the subcontractors involved with the construction of the homes and their insurers. As of September 30, 2021, we are unable to estimate any additional amount that we believe is probable of recovery from these sources and, as noted above, we have not recorded a receivable for recoveries nor included an estimated amount of recoveries in determining our stucco-related warranty reserve.

Performance Bonds and Letters of Credit

At September 30, ~~2021,~~2022, the Company had outstanding approximately ~~$363.6~~$446.4 million of completion bonds and standby letters of credit, some of which were issued to various local governmental entities that expire at various times through November 2027. Included in this total are: (1) ~~$263.6~~$344.8 million of performance and maintenance bonds and ~~$81.4~~$88.3 million of performance letters of credit that serve as completion bonds for land development work in progress; (2) ~~$13.0~~$8.4 million of financial letters of credit, of which ~~$12.6~~$8.0 million represent deposits on land and lot purchase agreements; and (3) ~~$5.6~~$4.9 million of financial bonds.

Land Option Contracts and Other Similar Contracts

At September 30, ~~2021,~~2022, the Company also had options and contingent purchase agreements to acquire land and developed lots with an aggregate purchase price of approximately ~~$866.7~~$982.4 million. Purchase of properties under these agreements is contingent upon satisfaction of certain requirements by the Company and the sellers.

Legal Matters

In addition to the legal proceedings related to stucco, the Company and certain of its subsidiaries have been named as defendants in certain other legal proceedings which are incidental to our business. While management currently believes that the ultimate resolution of these other legal proceedings, individually and in the aggregate, will not have a material effect on the Company’s financial position, results of operations and cash flows, such legal proceedings are subject to inherent uncertainties. The Company has recorded a liability to provide for the anticipated costs, including legal defense costs, associated with the resolution of these other legal proceedings. However, the possibility exists that the costs to resolve these legal proceedings could differ from the recorded estimates and, therefore, have a material effect on the Company’s net income for the periods in which they are resolved. At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had ~~$1.7~~$0.6 million and ~~$0.8~~$1.2 million reserved for legal expenses, respectively.

NOTE 7. Goodwill

Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired and liabilities assumed in business combinations. In connection with the Company’s acquisition of the homebuilding assets and operations of Pinnacle Homes in Detroit, Michigan in March of 2018, the Company recorded goodwill of $16.4 million, which is included as Goodwill in our Consolidated Balance Sheets. This amount was based on the estimated fair values of the acquired assets and liabilities at the date of the acquisition in accordance with ASC 350.

In accordance with ASC 350, the Company analyzes goodwill for impairment on an annual basis (or more often if indicators of impairment exist). The Company performs a qualitative assessment to determine whether the existence of events or circumstances leads to a determination that it is ~~more-likely-than-not~~more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment indicates that it is ~~more-likely-than-not~~more likely than not that the fair value of the reporting unit is less than its carrying amount, ~~then~~ a quantitative assessment is performed to determine the reporting unit’s fair value. If the reporting unit’s carrying value exceeds its fair value, then an impairment loss is recognized for the amount of the excess of the carrying amount over the reporting unit’s fair value. The Company performed its annual goodwill impairment analysis during the fourth quarter of ~~2020,~~2021, and as no indicators for impairment existed at December 31, 2021, no impairment was ~~recorded at December 31, 2020.~~recorded. At September 30, ~~2021,~~2022, no indicators for impairment existed and therefore no impairment was recorded. However, we will continue to monitor the fair value of the reporting unit in future periods if conditions worsen or other events occur that could impact the fair value of the reporting unit.

NOTE 8. Debt

Notes Payable - Homebuilding

The Credit Facility provides for an aggregate commitment amount of $550 million and also includes an accordion feature pursuant to which the maximum borrowing availability may be increased to an aggregate of $700 million, subject to obtaining additional commitments from lenders. The Credit Facility matures on July 18, 2025. Interest on amounts borrowed under the Credit Facility is payable at a rate which is adjusted daily and is equal to the sum of the one-month LIBOR (subject to a floor of 0.25%) plus a margin of 175 basis points (subject to adjustment in subsequent quarterly periods based on the Company’s leverage ratio). The Credit Facility includes a provision for the replacement of LIBOR under certain circumstances where one-month LIBOR is no longer available. The Credit Facility also contains certain financial covenants. At September 30, ~~2021,~~2022, the Company was in compliance with all financial covenants of the Credit Facility.

The available amount under the Credit Facility is computed in accordance with a borrowing base, which is calculated by applying various advance rates for different categories of inventory, and totaled ~~$1.13~~$1.53 billion of availability for additional senior debt at September 30, ~~2021.~~2022. As a result, the full $550 million commitment amount of the Credit Facility was available, less any borrowings and letters of credit outstanding. At September 30, ~~2021,~~2022, there were no borrowings outstanding and ~~$94.4~~$96.6 million of letters of credit outstanding, leaving a net remaining borrowing availability of ~~$455.6~~$453.4 million. The Credit Facility includes a $150 million sub-facility for letters of credit.

The Company’s obligations under the Credit Facility are guaranteed by all of the Company’s subsidiaries, with the exception of subsidiaries that are primarily engaged in the business of mortgage financing, title insurance or similar financial businesses relating to the homebuilding and home sales business, certain subsidiaries that are not 100%-owned by the Company or another subsidiary, and other subsidiaries designated by the Company as Unrestricted Subsidiaries (as defined in the Credit Facility), subject to limitations on the aggregate amount invested in such Unrestricted Subsidiaries in accordance with the terms of the Credit Facility and the indentures governing the Company’s $300.0 million aggregate principal amount of 3.95% Senior Notes due 2030 (the “2030 Senior Notes”) and the Company’s $400.0 million aggregate principal amount of 4.95% Senior Notes due

2028 (the “2028 Senior Notes”). The guarantors for the Credit Facility (the “Subsidiary Guarantors”) are the same subsidiaries that guarantee the 2030 Senior Notes and the 2028 Senior Notes.

The Company’s obligations under the Credit Facility are general, unsecured senior obligations of the Company and the Subsidiary Guarantors and rank equally in right of payment with all our and the Subsidiary Guarantors’ existing and future unsecured senior indebtedness. Our obligations under the Credit Facility are effectively subordinated to our and the Subsidiary Guarantors’ existing and future secured indebtedness with respect to any assets comprising security or collateral for such indebtedness.

Notes Payable - Financial Services

The MIF Mortgage Warehousing Agreement is used to finance eligible residential mortgage loans originated by M/I Financial. The MIF Mortgage Warehousing Agreement provides for a maximum borrowing availability of ~~$175~~$200 million, which increased to ~~$210~~$275 million from September ~~25, 2021~~19, 2022 to ~~October 15, 2021~~November 13, 2022 and increases to ~~$235~~$300 million from November ~~15, 2021 to~~14, 2022 through February ~~4, 2022,~~6, 2023, which are periods of expected increases in the volume of mortgage originations. The MIF Mortgage Warehousing Agreement expires on May ~~27, 2022.~~26, 2023. Interest on amounts borrowed under the MIF Mortgage Warehousing Agreement is payable at a per annum rate equal to the one-month ~~LIBOR~~BSBY rate (subject to a floor of ~~0.5%~~0.25%) plus a spread of 190

basis ~~points~~. ~~The MIF Mortgage Warehousing Agreement includes a provision for the replacement of LIBOR under certain circumstances where one-month LIBOR is no longer available.~~points. The MIF Mortgage Warehousing Agreement also contains certain financial covenants. At September 30, ~~2021,~~2022, M/I Financial was in compliance with all financial covenants of the MIF Mortgage Warehousing Agreement.

The MIF Mortgage Repurchase Facility is used to finance eligible residential mortgage loans originated by M/I Financial. The MIF Mortgage Repurchase Facility provides for a mortgage repurchase facility with a maximum borrowing availability of $90 million. ~~The~~Before entering into the amendment to the MIF Mortgage Repurchase Facility ~~was scheduled to expire on October 25, 2021.~~discussed below, M/I Financial ~~pays~~paid interest on each advance under the MIF Mortgage Repurchase Facility at a per annum rate equal to the one-month LIBOR rate (subject to a ~~floor)~~floor of 0.75% or 0.625% based on the type of loan) plus ~~a spread of~~ 175 or 200 basis points depending on the loan type. The MIF Mortgage Repurchase Facility ~~includes a provision for the replacement of LIBOR under certain circumstances where one-month LIBOR is no longer available. The MIF Mortgage Repurchase Facility~~ also contains certain financial covenants. At September 30, ~~2021,~~2022, M/I Financial was in compliance with all financial covenants of the MIF Mortgage Repurchase Facility. Effective October ~~25, 2021,~~24, 2022, M/I Financial entered into an amendment to the MIF Mortgage Repurchase Facility which, among other things, extends the term of the MIF Mortgage Repurchase Facility for an additional year to October ~~24, 2022, reduces~~23, 2023, replaces the LIBOR rate with the One-Month Term SOFR (“SOFR”) rate (subject to an all-in floor ~~on one-month LIBOR from 1.0% to 0.75% (or 0.625%~~of 2.375% or 2.75% based on the type of loan), and adjusts certain financial covenant ~~limits.At~~limits.

At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, M/I Financial’s total combined maximum borrowing availability under the two credit facilities was ~~$300.0~~$365.0 million and ~~$275.0~~$325.0 million, respectively. At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, M/I Financial had ~~$211.3~~$189.4 million and ~~$225.6~~$266.2 million, respectively, in borrowings outstanding on a combined basis under its credit ~~facilities, respectively.~~facilities.

Senior Notes

~~On August 23,~~As of both September 30, 2022 and December 31, 2021, ~~the Company issued~~we had $300.0 million ~~aggregate principal amount~~ of ~~the~~our 2030 Senior ~~Notes.~~Notes outstanding. The 2030 Senior Notes bear interest at a rate of 3.95% per year, payable semiannually in arrears on February 15 and August 15 of each year, ~~(commencing on February 15, 2022),~~ and mature on February 15, 2030. The Company may redeem some or all of the 2030 Senior Notes at any time prior to August 15, 2029 (the date that is six months prior to the maturity of the 2030 Senior Notes), at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the redemption date, plus a “make-whole” amount set forth in the indenture governing the 2030 Senior Notes. In addition, on or after August 15, 2029 (the date that is six months prior to the maturity of the 2030 Senior Notes), the Company may redeem some or all of the 2030 Senior Notes at a redemption price equal to 100.000% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the redemption date.

The Company used a portion of the net proceeds from the issuance of the 2030 Senior Notes to redeem all $250.0 million aggregate principal amount of its then outstanding 5.625% Senior Notes due 2025 (the “2025 Senior Notes”) at a redemption price of 102.813% of the principal amount, plus accrued and unpaid interest thereon, on August 24, 2021.

As of both September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had $400.0 million of our 2028 Senior Notes outstanding. The 2028 Senior Notes bear interest at a rate of 4.95% per year, payable semiannually in arrears on February 1 and August 1 of each year and mature on February 1, 2028. We may redeem all or any portion of the 2028 Senior Notes on or after February 1, 2023 at a stated redemption price, together with accrued and unpaid interest thereon. The redemption price will initially be 103.713% of the principal amount outstanding, but will decline to 102.475% of the principal amount outstanding if redeemed during the 12-month period beginning on February 1, 2024, will further decline to 101.238% of the principal amount outstanding if

redeemed during the 12-month period beginning on February 1, 2025 and will further decline to 100.000% of the principal amount outstanding if redeemed on or after February 1, 2026, but prior to maturity.

The 2030 Senior Notes contain certain covenants, as more fully described and defined in the indenture governing the 2030 Senior Notes, which limit the ability of the Company and the restricted subsidiaries to, among other things: incur certain liens securing indebtedness without equally and ratably securing the 2030 Senior Notes and the guarantees thereof; enter into certain sale and leaseback transactions; and consolidate or merge with or into other companies, liquidate or sell or otherwise dispose of all or substantially all of the Company’s assets. These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2030 Senior Notes. As of September 30, ~~2021,~~2022, the Company was in compliance with all terms, conditions, and covenants under the indenture.

The 2028 Senior Notes contain certain covenants, as more fully described and defined in the indenture governing the 2028 Senior Notes, which limit the ability of the Company and the restricted subsidiaries to, among other things: incur additional indebtedness; make certain payments, including dividends, or repurchase any shares, in an aggregate amount exceeding our “restricted payments basket”; make certain investments; and create or incur certain liens, consolidate or merge with or into other companies, or liquidate or sell or transfer all or substantially all of our assets. These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2028 Senior Notes. As of September 30, ~~2021,~~2022, the Company was in compliance with all terms, conditions, and covenants under the indenture.

The 2030 Senior Notes and the 2028 Senior Notes are fully and unconditionally guaranteed jointly and severally on a senior unsecured basis by the Subsidiary Guarantors. The 2030 Senior Notes and the 2028 Senior Notes are general, unsecured senior obligations of the Company and the Subsidiary Guarantors and rank equally in right of payment with all our and the Subsidiary

Guarantors’ existing and future unsecured senior indebtedness. The 2030 Senior Notes and the 2028 Senior Notes are effectively subordinated to our and the Subsidiary Guarantors’ existing and future secured indebtedness with respect to any assets comprising security or collateral for such indebtedness.

The indenture governing the 2028 Senior Notes limits our ability to pay dividends on, and repurchase, our common shares and any of our preferred shares then outstanding to the amount of the positive balance in our “restricted payments basket,” as defined in the indenture. The “restricted payments basket” is equal to $125.0 million plus (1) 50% of our aggregate consolidated net income (or minus 100% of our aggregate consolidated net loss) from October 1, 2015, excluding income or loss from Unrestricted Subsidiaries (as defined in the indenture), plus (2) 100% of the net cash proceeds from either contributions to the common equity of the Company after December 1, 2015 or the sale of qualified equity interests after December 1, 2015, plus other items and subject to other exceptions. The positive balance in our restricted payments basket was ~~$470.9~~$600.8 million at September 30, ~~2021~~2022 and ~~$363.0~~$487.5 million at December 31, ~~2020.~~2021. The determination to pay future dividends on, or make future repurchases of, our common shares will be at the discretion of our board of directors and will depend upon our results of operations, financial condition, capital requirements and compliance with debt covenants, and other factors deemed relevant by our board of directors (see Note 12 to our financial statements for more information).

Notes Payable - Other

The Company had other borrowings, which are reported in Notes Payable - Other in our Unaudited Condensed Consolidated Balance Sheets, totaling ~~$5.5~~$0.4 million and ~~$4.1~~$4.5 million as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, which are comprised of notes payable acquired in the normal course of business.

NOTE 9. Earnings Per Share

The table below presents a reconciliation between basic and diluted weighted average shares outstanding, net income, and basic and diluted income per share for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
(In thousands, except per share amounts)	(In thousands, except per share amounts)	2021		2020		2021		2020		(In thousands, except per share amounts)	2022		2021		2022		2021
NUMERATOR	NUMERATOR									NUMERATOR

Net income	Net income	$	91,012	$	73,537	$	283,485	$	159,791	Net income	$	131,590	$	91,012	$	360,267	$	283,485
DENOMINATOR	DENOMINATOR									DENOMINATOR
Basic weighted average shares outstanding	Basic weighted average shares outstanding	29,250		28,653		29,179		28,554		Basic weighted average shares outstanding	27,618		29,250		28,025		29,179
Effect of dilutive securities:	Effect of dilutive securities:									Effect of dilutive securities:
Stock option awards	Stock option awards	447		376		474		253		Stock option awards	248		447		274		474
Deferred compensation awards	Deferred compensation awards	331		257		313		223		Deferred compensation awards	319		331		311		313

Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	$	30,028	$	29,286	$	29,966	$	29,030	Diluted weighted average shares outstanding	28,185		30,028		28,610		29,966
Earnings per common share:	Earnings per common share:									Earnings per common share:
Basic	Basic	$	3.11	$	2.57	$	9.72	$	5.60	Basic	$	4.76	$	3.11	$	12.86	$	9.72
Diluted	Diluted	$	3.03	$	2.51	$	9.46	$	5.50	Diluted	$	4.67	$	3.03	$	12.59	$	9.46

Anti-dilutive equity awards not included in the calculation of diluted earnings per common share	Anti-dilutive equity awards not included in the calculation of diluted earnings per common share	16		435		7		360		Anti-dilutive equity awards not included in the calculation of diluted earnings per common share	908		16		826		7

NOTE 10. Income Taxes

The Inflation Reduction Act (IRA) was enacted on August 16, 2022 to address the high cost of prescription drugs, healthcare availability, climate change and inflation. The IRA extended the energy efficient homes credit through 2032 and, as a result, the Company recognized an $8.4 million year-to-date tax benefit during the third quarter of 2022.

During the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the Company recorded a tax provision of ~~$25.2~~$35.0 million and ~~$21.6~~$25.2 million, respectively, which reflects income tax expense related to ~~the periods’~~ income before income ~~taxes.~~taxes for the periods. The effective tax rate for the three months ended September 30, 2022 and 2021 was 21.0% and ~~2020 was~~ 21.7% ~~and 22.7%~~, respectively. The decrease in the effective rate from the three months ended September 30, ~~2020~~2021 was primarily attributable to a ~~$2.1~~$3.7 million increase in tax ~~benefit~~benefits from energy efficient home ~~credits.~~ credits for 2022.

During the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the Company recorded a tax provision of ~~$84.3~~$110.8 million and ~~$48.4~~$84.3 million, respectively. The effective tax rate for the nine months ended September 30, 2022 and 2021 ~~and 2020~~ was 23.5% and

22.9% ~~and 23.2%~~, respectively. The increase in the effective rate from the nine months ended September 30, 2021 was primarily attributable to a $2.2 million decrease in tax benefit from equity compensation taken during the first nine months of 2022 compared to the same period in 2021.

NOTE 11. Business Segments

The Company’s chief operating decision makers evaluate the Company’s performance in various ways, including: (1) the results of our individual homebuilding operating segments and the results of our financial services operations; (2) the results of our homebuilding reportable segments; and (3) our consolidated financial results.

In accordance with ASC 280, Segment Reporting (“ASC 280”), we have identified each homebuilding division as an operating segment and have elected to aggregate our operating segments into separate reportable segments as they share similar aggregation characteristics prescribed in ASC 280 in the following regards: (1) long-term economic characteristics; (2) historical and expected future long-term gross margin percentages; (3) housing products, production processes and methods of distribution; and (4) geographical proximity.

The homebuilding operating segments that comprise each of our reportable segments are as follows:


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

~~In October 2021, we announced our entry into the Nashville, Tennessee market.~~

The following table shows, by segment, revenue, operating income (loss) and interest expense (income) ~~expense~~ for the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, as well as the Company’s income before income taxes for such periods:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	(In thousands)	2021		2020		2021		2020		(In thousands)	2022		2021		2022		2021
Revenue:	Revenue:									Revenue:
Northern homebuilding	Northern homebuilding	$	400,564	$	350,591	$	1,151,349	$	890,201	Northern homebuilding	$	415,741	$	400,564	$	1,242,341	$	1,151,349
Southern homebuilding	Southern homebuilding	482,960		468,384		1,463,707		1,188,056		Southern homebuilding	577,088		482,960		1,608,468		1,463,707
Financial services (a)	Financial services (a)	20,795		28,946		79,079		61,461		Financial services (a)	20,099		20,795		63,584		79,079
Total revenue	Total revenue	$	904,319	$	847,921	$	2,694,135	$	2,139,718	Total revenue	$	1,012,928	$	904,319	$	2,914,393	$	2,694,135

Operating income:
Operating income (loss):										Operating income (loss):
Northern homebuilding	Northern homebuilding	$	59,009	$	38,365	$	159,975	$	91,487	Northern homebuilding	$	59,623	$	59,009	$	173,917	$	159,975
Southern homebuilding	Southern homebuilding	72,957		55,861		218,236		129,037		Southern homebuilding	119,311		72,957		323,628		218,236
Financial services (a)	Financial services (a)	10,820		19,887		50,381		37,706		Financial services (a)	9,233		10,820		32,774		50,381
Less: Corporate selling, general and administrative expense	Less: Corporate selling, general and administrative expense	(17,566)		(18,017)		(50,361)		(41,891)		Less: Corporate selling, general and administrative expense	(20,872)		(17,566)		(57,254)		(50,361)
Total operating income	Total operating income	$	125,220	$	96,096	$	378,231	$	216,339	Total operating income	$	167,295	$	125,220	$	473,065	$	378,231

Interest expense (income):	Interest expense (income):									Interest expense (income):
Northern homebuilding	Northern homebuilding	$	—	$	122	$	76	$	2,636	Northern homebuilding	$	2	$	—	$	2	$	76
Southern homebuilding	Southern homebuilding	(381)		409		(224)		3,759		Southern homebuilding	(651)		(381)		(653)		(224)
Financial services (a)	Financial services (a)	885		708		2,777		2,059		Financial services (a)	1,350		885		3,169		2,777
Corporate	Corporate	(578)		—		(1,075)		—		Corporate	—		(578)		(453)		(1,075)
Total interest (income) expense		$	(74)	$	1,239	$	1,554	$	8,454
Total interest expense (income)										Total interest expense (income)	$	701	$	(74)	$	2,065	$	1,554

Equity in loss (income) from joint venture arrangements		50		(252)		(145)		(307)
Other loss (income)										Other loss (income)	$	—	$	50	$	(17)	$	(145)
Loss on early extinguishment of debt	Loss on early extinguishment of debt	9,072		—		9,072		—		Loss on early extinguishment of debt	—		9,072		—		9,072

Income before income taxes	Income before income taxes	$	116,172	$	95,109	$	367,750	$	208,192	Income before income taxes	$	166,594	$	116,172	$	471,017	$	367,750

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

The following tables show total assets by segment at September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30, 2021										September 30, 2022
(In thousands)	(In thousands)	Northern		Southern			Corporate, Financial Services and Unallocated		Total		(In thousands)	Northern		Southern			Corporate, Financial Services and Unallocated		Total
Deposits on real estate under option or contract	Deposits on real estate under option or contract	$	4,079	$	44,521		$	—	$	48,600	Deposits on real estate under option or contract	$	6,939	$	49,738		$	—	$	56,677
Inventory (a)	Inventory (a)	950,220		1,354,323			—		2,304,543		Inventory (a)	1,165,675		1,794,383			—		2,960,058
Investments in joint venture arrangements	Investments in joint venture arrangements	—		42,466			—		42,466		Investments in joint venture arrangements	—		51,700			—		51,700
Other assets	Other assets	40,229		72,983		(b)	537,779		650,991		Other assets	41,927		95,321		(b)	382,230		519,478
Total assets	Total assets	$	994,528	$	1,514,293		$	537,779	$	3,046,600	Total assets	$	1,214,541	$	1,991,142		$	382,230	$	3,587,913


		December 31, 2020										December 31, 2021
(In thousands)	(In thousands)	Northern		Southern			Corporate, Financial Services and Unallocated		Total		(In thousands)	Northern		Southern			Corporate, Financial Services and Unallocated		Total
Deposits on real estate under option or contract	Deposits on real estate under option or contract	$	5,031	$	40,326		$	—	$	45,357	Deposits on real estate under option or contract	$	4,123	$	48,795		$	—	$	52,918
Inventory (a)	Inventory (a)	847,524		1,023,727			—		1,871,251		Inventory (a)	987,258		1,412,258			—		2,399,516
Investments in joint venture arrangements	Investments in joint venture arrangements	1,378		33,295			—		34,673		Investments in joint venture arrangements	—		57,121			—		57,121
Other assets	Other assets	37,465		57,588		(b)	596,711		691,764		Other assets	37,527		63,844		(b)	628,927		730,298
Total assets	Total assets	$	891,398	$	1,154,936		$	596,711	$	2,643,045	Total assets	$	1,028,908	$	1,582,018		$	628,927	$	3,239,853

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

(b)Includes development reimbursements from local municipalities.

NOTE 12. Share Repurchase Program

On July 28, 2021, the Company announced that its Board of Directors ~~had~~ approved a new share repurchase program pursuant to which the Company may purchase up to $100 million of its outstanding common shares (the “2021 Share Repurchase

Program”)~~, which replaced and superseded~~. On February 17, 2022, the ~~share repurchase program authorized by the~~Company announced that its Board of Directors ~~in 2018 (the “2018 Share Repurchase Program”). Prior~~approved an increase to its ~~replacement, the Company did not repurchase any outstanding common shares under the 2018~~2021 Share Repurchase Program ~~during 2021.~~by an additional $100 million.

Pursuant to the 2021 Share Repurchase Program, the Company may purchase up to ~~$100~~$200 million of its outstanding common shares through open market transactions, privately negotiated transactions or otherwise in accordance with all applicable laws. The timing, amount and ~~amount~~other terms and conditions of any ~~purchases~~additional repurchases under the 2021 Share Repurchase Program will be determined by the Company’s management at its discretion based on a variety of factors, including the market price of the Company’s common shares, business considerations, general market and economic conditions and legal requirements. The 2021 Share Repurchase Program ~~has no~~does not have an expiration date and the Board may ~~be modified, discontinued~~modify, discontinue or ~~suspended~~suspend it at any time.

During the third quarter ~~of 2021,~~2022, the Company repurchased ~~0.2~~0.3 million outstanding common shares at an aggregate purchase price of ~~$15.5~~$15.1 million under the 2021 Share Repurchase Program. As of September 30, ~~2021, $84.5~~2022, $93.1 million remained available for repurchases under the 2021 Share Repurchase Program.

NOTE 13. Revenue Recognition

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

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

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

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

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

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

We recognize the majority of the revenue associated with our mortgage loan operations when the mortgage loans are sold and/or related servicing rights are sold to third party investors or retained and managed under a third party sub-service arrangement. The revenue recognized is reduced by the fair value of the related guarantee provided to the investor. The fair value of the

guarantee is recognized in revenue when the Company is released from its obligation under the guarantee (note that guarantees are excluded from the scope of ASC 606, Revenue from Contracts with Customers). We recognize financial services revenue associated with our title operations as homes are delivered, closing services are rendered, and title policies are issued, all of

which generally occur simultaneously as each home is delivered. All of the underwriting risk associated with title insurance policies is transferred to third-party insurers.

The following table presents our revenues disaggregated by revenue source:


		Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	(Dollars in thousands)	2021		2020			2021		2020			(Dollars in thousands)	2022		2021		2022		2021

Housing	Housing	$	878,602	$	812,999		$	2,604,387	$	2,067,148		Housing	$	986,843	$	878,602	$	2,837,912	$	2,604,387
Land sales	Land sales	4,922		5,976			10,669		11,109			Land sales	5,986		4,922		12,897		10,669
Financial services (a)	Financial services (a)	20,795		28,946		(b)	79,079		61,461		(b)	Financial services (a)	20,099		20,795		63,584		79,079
Total revenue	Total revenue	$	904,319	$	847,921		$	2,694,135	$	2,139,718		Total revenue	$	1,012,928	$	904,319	$	2,914,393	$	2,694,135

(a)Revenue includes hedging gains of $13.8 million and hedging losses of $3.1 ~~million and $5.7~~ million for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and hedging gains of ~~$0.8~~$32.1 million and ~~hedging losses of $16.3~~$0.8 million for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Hedging gains/losses do not represent revenue recognized from contracts with customers.

~~(b)~~Revenue for the three and nine months ended September 30, 2020 includes $0.1 million and $0.5 million of net impairment charges taken on our mortgage serving rights, respectively, which was recorded as a reduction of revenue. The net impairment charges were caused by the disruption in the mortgage industry as a result of the COVID-19 pandemic.

Refer to Note 11 for presentation of our revenues disaggregated by geography. As our homebuilding operations accounted for over 97% of our total revenues for the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, with most of those revenues generated from home purchase contracts with customers, we believe the disaggregation of revenues as disclosed above and in Note 11 fairly depict how the nature, amount, timing and uncertainty of cash flows are affected by economic factors.

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

OVERVIEW

M/I Homes, Inc. and subsidiaries (the “Company” or “we”) is one of the nation’s leading builders of single-family homes having sold over ~~135,000~~142,400 homes since commencing homebuilding activities in 1976. The Company’s homes are marketed and sold primarily under the M/I Homes brand. The Company has homebuilding operations in Columbus and Cincinnati, Ohio; Indianapolis, Indiana; Chicago, Illinois; Minneapolis/St. Paul, Minnesota; Detroit, Michigan; Tampa, Sarasota and Orlando, Florida; Austin, Dallas/Fort Worth, Houston and San Antonio, Texas; Charlotte and Raleigh, North Carolina; and Nashville, Tennessee.

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

•Information Relating to Forward-Looking Statements;

•Application of Critical Accounting Estimates and Policies;

•Results of Operations;

•Discussion of Our Liquidity and Capital Resources;

•~~Summary of Our Contractual Obligations;~~

•~~Discussion of Our Utilization of Off-Balance Sheet Arrangements;~~ and

•Impact of Interest Rates and Inflation.

FORWARD-LOOKING STATEMENTS

Certain information included in this report or in other materials we have filed or will file with the Securities and Exchange Commission (the “SEC”) (as well as information included in oral statements or other written statements made or to be made by us) contains or may contain forward-looking statements, including, but not limited to, statements regarding our future financial performance and financial condition. Words such as “expects,” “anticipates,” “envisions,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements involve a number of risks and uncertainties. Any forward-looking statements that we make herein and in future reports and statements are not guarantees of future performance, and actual results may differ materially from those in such forward-looking statements as a result of various risk factors, including, without limitation, factors relating to the economic environment, ~~the impact of the COVID-19 pandemic,~~ interest rates, availability of resources, competition, market concentration, land development activities, construction defects, product liability and warranty claims and various governmental rules and regulations. See “Item 1A. Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (the ~~“2020~~“2021 Form 10-K”), as the same may be updated from time to time in our subsequent filings with the SEC, for more information regarding those risk factors.

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

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES AND POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates and assumptions on historical experience and various other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. On an ongoing basis, management evaluates such estimates and assumptions and makes adjustments as deemed necessary. Actual results could differ from these estimates using different estimates and assumptions, or if conditions are significantly different in the future. See Note 1 (Summary of Significant Accounting Policies) to our consolidated financial statements included in our ~~2020~~2021 Form 10-K for additional information about our accounting policies.

We believe that there have been no significant changes to our critical accounting policies during the quarter ended September 30, ~~2021~~2022 as compared to those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our ~~2020~~2021 Form 10-K.

RESULTS OF OPERATIONS

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


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

~~In October 2021, we announced our entry into the Nashville, Tennessee market.~~

Overview

~~For both~~During the third quarter of 2022, we continued to experience the weakening in homebuyer demand that started in the latter half of our 2022 second quarter. The robust housing market of the last 18 months began to decline as a result of the uncertain macroeconomic conditions in the broader U.S. economy, particularly the historic rise in mortgage interest rates and ~~nine months ended September 30, 2021,~~the high rate of inflation not experienced since the 1970s. These economic conditions, together with housing affordability issues and consumer fears of an economic recession, have resulted in many potential homebuyers postponing their homebuying decisions. We continue to believe long-term housing market fundamentals remain strong, including favorable demographics and a limited supply of new and resale inventory. Nevertheless, these conditions, along with a lower average community count (173 in 2022 from 176 in 2021) negatively impacted our new contracts which declined 31% for the third quarter of 2022 from the third quarter of 2021. Our home deliveries for the third quarter of 2022 also declined 1% compared to 2021's third quarter primarily due to the impact of Hurricane Ian on our Florida markets.

Despite the challenges mentioned above, we achieved record ~~levels of~~third quarter revenue, income before income taxes and ~~number of homes in backlog. For the nine months ended September 30, 2021, we achieved all-time records for income before income taxes,~~ net ~~income~~income. Our improved profitability is attributable primarily to improved margins and ~~backlog sales value. In addition, our financial services operations achieved year-to-date records for revenue, income before income taxes and number of loans originated.~~

~~During the~~overhead leverage when compared to 2021’s third quarter ~~we believe that the homebuilding industry continued to benefit from low interest rates, a continued undersupply of available homes and increased~~as consumer demand for ~~single family~~housing remained robust in 2021 and early 2022 when the majority of our homes ~~in suburban locations. However, our number of new contracts for the three months ended September 30, 2021 declined 33% from~~delivered during the third quarter of ~~2020 due to several factors, including (1) a reduction in the number of~~2022 were placed under contract, driving record financial results for our average selling communities to 176 in 2021 from 214 in 2020, (2) limitations we imposed on sales in a majority of our communities in order to match our production timelines and lot availability, (3) the record sales pace we achieved in the third quarter of 2020, and (4) a reversion toward a more typical sales pace and seasonality. In addition, while our income before income taxes for the third quarter was a record, we continued to experience construction delays and supply chain challenges which have impacted the homebuilding industry and many of our product manufacturers, including raw material availability, extension of product lead times, labor and transportation issues, and overall demand outpacing production or shipping capacities. These challenges have resulted in a significant increase in our build cycle times, which we expect to continue for the foreseeable future, and led, in part, to our home deliveries for the third quarter declining 4% compared to 2020's third quarter. Despite these challenges, demand for new homes remains strong and continues to outstrip supply, even as the housing market reverts back to a more traditional seasonality, and we ended the quarter with an all-time record sales backlog value of $2.5 billion.business.

During the third quarter and nine months ended September 30, ~~2021,~~2022, we achieved the following results in comparison to the third quarter and nine months ended September 30, ~~2020:~~

•~~New contracts decreased 33% to 1,964 from 2,949 and increased 1% to 7,340 from 7,299, respectively~~

•~~Homes delivered decreased 4% to 2,045 homes and increased 16% to 6,322 homes, respectively~~

•~~Number of homes in backlog at September 30, 2021 increased 20% to a third-quarter record 5,407 homes~~

•~~Total sales value in backlog increased 40% to $2.5 billion, an all-time record~~2021:

•Revenue increased 7%12% to ~~$904.3 million~~$1.01 billion (a ~~third-quarter~~third quarter record) and ~~26%~~8% to ~~$2.7~~$2.91 billion (a year-to-date record), respectively

•Income before income taxes increased ~~22%~~43% to ~~$116.2~~$166.6 million (a ~~third-quarter~~third quarter record) and ~~77%~~28% to ~~$367.8~~$471.0 million ~~(an all-time~~(a year-to-date record), respectively

•Net income increased ~~24%~~45% to ~~$91.0~~$131.6 million (a third quarter record) and ~~77%~~27% to ~~$283.5~~$360.3 million ~~(an all-time~~(a year-to-date record), respectively

In addition to the results described above, our financial services operations also achieved record income before income taxes for the nine months ended September 30, 2021, benefiting from the number of mortgages originated and higher margins, as well as technology enabled efficiencies.

Our company-wide absorption pace of sales per community for the third quarter of ~~2021~~2022 declined to ~~3.7~~2.6 per month compared to ~~the record pace of 4.6~~3.7 per month for the prior year’s third quarter as a result of the declining market conditions described above, the decline in our ~~active~~average communities ~~and a reversion to more traditional seasonality and demand compared to prior year~~ and the decrease in the number of new contracts during the quarter compared to prior year. Partially as a result of the accelerated sales pace we experienced in 2020 and ~~during the first half of~~ 2021, our average number of ~~active~~selling communities declined to ~~176 from 207 at the end of~~173 during the third quarter of ~~2020.~~2022 from 176 for the third quarter of 2021. We ~~believe we maintain~~plan to open a ~~strong land position, and we continue to place additional land under contract for~~number of new communities ~~that will be brought online in future periods. However, delays in our ability to replace existing communities that are selling out~~ in the ~~short-term could negatively impact~~fourth quarter of 2022, increasing our ~~number~~community count by approximately 10% from the end of ~~active~~third quarter of 2022. However, given the uncertainty in the housing market as a result of current economic conditions, we may choose to delay the development and opening of some new communities ~~throughout~~to match homebuyer demand in the remainder of ~~2021~~2022 and into 2022, given land development challenges and delays in approvals for entitlements and permits due to volume, COVID-19 related factors or other delays. We continue to work to open new communities to grow our community count. We are also actively managing sales pace, in part by selectively increasing prices and limiting sales in the majority of our communities, to optimize our availability of lots and maximize returns, while also maintaining a manageable timeline for construction and delivery of our homes.

In August 2021, we issued $300.0 million aggregate principal amount of 3.95% Senior Notes due 2030 (the “2030 Senior Notes”) for net proceeds of approximately $296.0 million. We used $257.9 million of the net proceeds from this offering to redeem all $250.0 million aggregate principal amount of our outstanding 5.625% Senior Notes due 2025 (the “2025 Senior Notes”) at a redemption price of 102.813% of the principal amount, plus accrued and unpaid interest thereon. In association with the early redemption of our 2025 Senior Notes, we incurred a $9.1 million loss on early extinguishment of debt, consisting of a $7.1 million prepayment premium due to early redemption and $2.0 million for the write-off of unamortized debt issuance costs.2023.

Summary of Company Financial Results

Income before income taxes for the third quarter of ~~2021~~2022 increased ~~22%~~43% from ~~$95.1~~$116.2 million in the third quarter of ~~2020~~2021 to a third quarter record ~~$116.2~~$166.6 million in 2022. We also achieved a third quarter record net income of $131.6 million, or $4.67 per diluted share, in 2022's third quarter, compared to net income of $91.0 million, or $3.03 per diluted share, in 2021's third quarter. Our effective tax rate was 21.0% in 2022’s third quarter compared to 21.7% in 2021. For the nine months ended September 30, ~~2021,~~2022, income before income taxes increased ~~77%~~28.1% from ~~$208.2~~$367.8 million ~~for the nine months ended September 30, 2020 to an all-time record $367.8 million. We achieved net income of $91.0 million ($3.03 per diluted share),~~ in 2021's third quarter, a 24% increase, or $17.5 million, from net income of $73.5 million ($2.51 per diluted share), in 2020's third quarter. Our effective tax rate was 21.7% in 2021’s third quarter compared to 22.7% in 2020. For the nine months ended September 30, 2021 weto a year-to-date record $471.0 million in 2022. We achieved ~~an all-time~~year-to-date record net income of $360.3 million, or $12.59 per diluted share, compared to net income of $283.5 million, or $9.46 per diluted share, ~~compared to net income of $159.8 million, or $5.50 per diluted share,~~ in the nine months ended September 30, ~~2020.~~2021. Our effective tax rate was ~~22.9%~~23.5% in ~~2021's~~2022's first nine months compared to ~~23.3%~~22.9% in the same period in ~~2020.~~2021. Income before income taxes and net income for the third quarter and first nine months of 2021 was unfavorably impacted by a $9.1 million pre-tax charge for loss on early extinguishment of debt related to the redemption of our 2025 Senior ~~Notes (as described above).~~Notes.

During the quarter ended September 30, ~~2021,~~2022, we recorded ~~third-quarter~~third quarter record total revenue of ~~$904.3 million,~~$1.01 billion, of which ~~$878.6~~$986.8 million was from homes delivered, ~~$4.9~~$6.0 million was from land sales and ~~$20.8~~$20.1 million was from our financial services operations. Revenue from homes delivered increased 8%12% in ~~2021's~~2022's third quarter compared to the same period in ~~2020~~2021 driven primarily by a 13% increase in the average sales price of homes delivered ($~~50,000~~57,000 per home delivered), which was ~~primarily~~mainly in response to robust consumer demand in 2021 and early 2022 when the ~~result~~majority of ~~strong demand,~~our homes delivered during the quarter were placed under contract, partially offset by a 4%1% decrease in the number of homes delivered ~~(92~~(19 units) ~~which~~. The decline in homes delivered was due primarily to delays in deliveries in our Florida markets related to Hurricane Ian as well as construction and supply chain ~~issues that created delays in home closings.~~issues. Revenue from land sales ~~decreased~~increased $1.1 million from the third quarter of ~~2020 due to fewer land sales in 2021's third quarter~~2021 compared to the prior year. Revenue from our financial services segment decreased ~~28%~~3% to ~~$20.8~~$20.1 million in the third quarter of ~~2021~~2022 as a result of a decrease in loans closed

and sold as well as lower margins on loans sold during the period compared to the third quarter of ~~2020,~~2021, which ~~was a record quarter and therefore~~ provided difficult comparisons for the third quarter ~~2021.~~of 2022. For the nine months ended September 30, ~~2021,~~2022, we recorded year-to-date record total revenue of ~~$2.7~~$2.91 billion, of which ~~$2.6~~$2.84 billion was from homes delivered, ~~$10.7~~$12.9 million was from land sales and ~~$79.1~~$63.6 million was from our financial services operations. Revenue from homes delivered increased ~~26%~~9% in the nine months ended September 30, ~~2021~~2022 compared to the same period in ~~2020~~2021 driven primarily by a ~~16% increase in the number of homes delivered (855 units) and a 9%~~15% increase in the average sales price of homes delivered ($~~34,000~~62,000 per home delivered)., which was primarily in response to robust consumer demand in 2021 and early 2022 when the majority of our homes delivered during the quarter were placed under contract, partially offset by a 5% decrease in the number of homes delivered (340 units), which was due to construction and supply chain issues that created delays in home closings as well as fewer communities delivering homes and increased cycle time compared to prior year. Revenue from land sales ~~decreased $0.4~~increased $2.2 million from the nine months ended September 30, ~~2020~~2021 due to ~~fewer~~increased land sales in ~~2021's~~2022's first nine months compared to the prior year. Revenue from our financial services segment ~~increased 29%~~decreased 20% to ~~$79.1~~$63.6 million in the first nine months of ~~2021~~2022 as a result of ~~an increase~~a decrease in loans closed and sold in the first nine months of ~~2021,~~2022, in addition to ~~higher~~lower margins on loans sold during the period compared to the prior ~~year.~~year, which was a year-to-date record nine months for our financial services segment.

Total gross margin (total revenue less total land and housing costs) increased ~~$27.2~~$50.2 million in the third quarter of ~~2021~~2022 compared to the third quarter of ~~2020~~2021 as a result of a ~~$35.4~~$50.9 million improvement in the gross margin of our homebuilding operations (housing gross margin and land sales gross margin), offset partially by ~~an $8.2~~a $0.7 million decrease in the gross margin of

our financial services operations. With respect to our homebuilding gross margin, our gross margin on homes delivered (housing gross margin) ~~improved $34.2~~increased $50.9 million primarily as a result of the 13% increase in average sales price of homes delivered, partially offset by the 4%1% decrease in the number of homes delivered. Our housing gross margin percentage improved ~~240~~270 basis points from ~~20.3%~~22.7% in prior year's third quarter to ~~22.7%~~25.4% in ~~2021's~~2022's third quarter, primarily as a result of ~~strong demand during 2021's third quarter and~~ increased average sales prices. Our gross margin on land sales (land sale gross margin) ~~improved $1.2 million~~remained flat in the third quarter of ~~2021~~2022 compared to the third quarter of ~~2020.~~2021. The gross margin of our financial services operations decreased ~~$8.2~~$0.7 million in the third quarter of ~~2021~~2022 compared to the third quarter of ~~2020~~2021 as a result of a decrease in the number of loan originations and lower margins on loans sold, partially offset by an increase in the average loan amount during the third quarter of ~~2021~~2022 compared to the third quarter of ~~2020.~~2021. Total gross margin increased ~~$197.7~~$104.0 million in the nine months ended September 30, ~~2021~~2022 compared to the same period in ~~2020~~2021 as a result of a ~~$180.1~~$119.5 million improvement in the gross margin of our homebuilding operations, ~~and~~offset partially by a ~~$17.6~~$15.5 million ~~improvement~~decline in the gross margin of our financial services operations. With respect to our homebuilding gross margin, our gross margin on homes delivered improved ~~$177.8~~$119.1 million as a result of the ~~16% increase in the number of homes delivered and the 9%~~15% increase in the average sales price of homes delivered, partially offset by the 5% decrease in the number of homes delivered. Our housing gross margin percentage improved ~~280~~240 basis points from ~~19.6%~~22.4% in prior year’s first nine months to ~~22.4%~~24.8% in ~~2021's~~2022's first nine months, primarily as a result of ~~strong demand during the period.~~increased average sales prices. Our gross margin on land sales improved ~~$2.3~~$0.3 million in ~~2021's~~2022's first nine months compared to the same period in ~~2020.~~2021. The gross margin of our financial services operations ~~increased $17.6~~decreased $15.5 million in the nine months ended September 30, ~~2021~~2022 compared to the same period in ~~2020~~2021 as a result of ~~increases~~decreases in the number of loan originations, in addition to ~~higher~~lower margins on loans sold during the first nine months of ~~2021~~2022 compared to the nine months ended September 30, ~~2020.~~2021. Our housing gross margin may fluctuate from quarter to quarter depending on the mix of communities delivering homes, due to the variation in margin between different communities.

~~As a result of the record number of sales in 2020~~Headwinds from supply chain issues and ~~during the first nine months of 2021, we are selling through communities faster,~~regulatory delays have impacted development completions and model openings which ~~has negatively impacted our number of active communities.~~have delayed planned community openings. We opened 6376 new communities during the nine months ended September 30, ~~2021~~2022 and closed ~~out of 89~~73 communities.

For the three months ended September 30, ~~2021,~~2022, selling, general and administrative expense ~~decreased $1.9~~increased $8.1 million, which ~~aided~~partially offset the increase in our total gross margin ~~dollars~~ discussed above, ~~and declined~~but improved as a percentage of revenue from ~~11.6% in the third quarter of 2020 to~~ 10.7% in the third quarter of 2021 to 10.3% in the third quarter of 2022 (a third quarter record). Selling expense decreased $2.4 million from 2020's third quarter and improved as a percentage of revenue to 5.2% in 2021's third quarter from 5.8% for the same period in 2020. Variable selling expense for sales commissions contributed $1.0 million to the decrease due to the lower number of homes delivered in the quarter. The decrease in selling expense was also attributable to a $1.4 million decrease in non-variable selling expense primarily related to decreased costs associated with our sales offices and models as a result of our decreased community count. General and administrative expense increased ~~$0.5~~$8.8 million compared to the third quarter of ~~2020 but declined~~2021 and also increased as a percentage of revenue from 5.5% in the third quarter of 2021 to 5.8% in the third quarter of ~~2020 to 5.5% in the third quarter of 2021.~~2022. The ~~dollar~~ increase in general and administrative expense was primarily due to ana $5.2 million increase in compensation-related expenses due to our increased headcount and our strong financial performance during the quarter, a $1.6 million increase in land-related costs and a $2.0 million increase in miscellaneous expenses. Partially offsetting this increase was a decrease in selling expense of $0.7 million from 2021's third quarter. Selling expense improved as a percentage of revenue to 4.6% in 2022's third quarter from 5.2% for the same period in 2021. Variable selling expense for sales commissions contributed $1.8 million to the decrease due to the lower number of homes delivered during the third quarter of 2022, which was partially offset by a $1.1 million increase in non-variable selling expense primarily related to increased costs associated with our sales offices and models. For the nine months ended September 30, ~~2021,~~2022, selling, general and administrative expense increased ~~$35.8~~$9.2 million, which partially offset the increase in our gross margin dollars discussed above, but declined as a percentage of revenue from ~~11.7% in the nine months ended September 30, 2020 to~~ 10.7% in the nine months ended September 30, ~~2021. Selling expense increased $15.9 million from~~2021 to 10.2% in the nine months ended September 30, 2020 but improved as a percentage of revenue to 5.3% in 2021's first nine months from 6.0% for the same period in 2020. Variable selling expense for sales commissions contributed $16.5 million to the increase due to the higher number of homes delivered during the first nine months of 2021. The increase in selling expense was partially offset by a $0.6 million decrease in non-variable selling expense primarily related to decreased costs associated with our sales offices and models as a result of our decreased community count.2022. General and administrative expense increased ~~$19.9~~$18.5 million compared to the nine months ended September 30, ~~2020 but declined~~2021 and also increased as a percentage of revenue from ~~5.8% in the nine months ended September 30,~~

~~2020 to~~ 5.3% in the nine months ended September 30, ~~2021.~~2021 to 5.6% in the nine months ended September 30, 2022. The dollar increase in general and administrative expense was primarily due to a ~~$16.6~~$10.1 million increase in compensation-related expenses due to our increased headcount and our strong financial performance during the period, a ~~$1.2 million increase in computer costs related to our investment in new information systems, a $1.1~~$2.4 million increase in land-related ~~expenses, a $0.5 million increase in charitable contributions,~~costs primarily due to write-offs of abandoned land transaction costs and a ~~$0.5~~$6.0 million increase in miscellaneous expenses. Selling expense decreased $9.3 million from the nine months ended September 30, 2021 and improved as a percentage of revenue to 4.6% in 2022's first nine months from 5.3% for the same period in 2021, partially offsetting the increase in general and administrative expense above. Variable selling expense for sales commissions contributed $10.7 million to the decrease due to the lower number of homes delivered during the first nine months of 2022, which was partially offset by a $1.4 million increase in non-variable selling expense primarily related to increased costs associated with our sales offices and models.

Outlook

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

Despite these negative economic developments, we believe that ~~new home sales~~the homebuilding industry will continue to benefit over the long term from ~~low interest rates,~~ a continued undersupply of available homes, ~~and~~positive consumer demographics, ~~including a growing number~~scarcity of ~~millennial homebuyers. However, we expect a reversion to a more traditional seasonal sales pace than the pace we experienced in the final half of 2020~~rentals and the first half of 2021. In addition, the supply chain for various materials and labor for both land development (which impacts new communities and lot availability in existing communities) and home construction is experiencing substantial challenges and delays, causing us to limit our sales in a majority of communities to match our production timelines. As a result, we expect that the industry will not be able to quickly remedy the supply shortage of new homes with increased production and is likely to continue to experience extended build cycles and home delivery timelines. Accordingly, we remain focused on managing our sales pace closely with our ability to build and deliver homes, while balancing price appreciation as an offset to further cost escalations in order to maintain margins.increasing rent prices.

~~In the first nine months of 2021,~~We believe that we ~~continued~~are well positioned to ~~experience cost increases in certain construction materials,~~manage through these challenging economic conditions with our affordable product offerings, lot supply and we continue to actively manage and monitor those costs. We have been able to raise home prices in many of our communities to offset these cost increases and preserve or increase our margins. During the third quarter, our ability to raise prices, together with cost management and lower lumber prices, allowed us to achieve a total gross margin percentage of 24.5%, an improvement of 160 basis points compared with 2020’s third quarter. We may experience future shortages in materials and labor as well as price increases for materials and labor and may not be able to maintain our current level of direct construction costs as a percentage of average sales price.planned new community openings. We remain sensitive to the changes in market conditions, and continue to focus on controlling overhead leverage, ~~and~~ carefully managing our investment in land and land development ~~spending.~~spending and offering incentives, including interest rate buy-downs, to retain our backlog and improve our sales pace. Our strong balance sheet and liquidity position should also provide us with the flexibility to operate effectively through changing economic conditions. However, we cannot provide any assurances that the strategic business objectives listed below will remain successful, and we may need to adjust elements of our strategy to effectively address evolving market conditions.

We expect to continue to emphasize the following strategic business objectives throughout the remainder of ~~2021~~2022 and into ~~2022:~~2023:

•managing our land spend and inventory levels;

•~~manage our community sales pace to maximize returns;~~

•~~accelerating the readiness of~~opening new ~~communities wherever possible;~~communities;

•maintaining a strong balance sheet and liquidity levels;

•expanding the availability of our more affordable Smart Series homes; and

•emphasizing customer service, product quality and design, and premier locations.

During the nine months ended September 30, ~~2021,~~2022, we invested ~~$473.8~~$289.6 million in land acquisitions and ~~$281.2~~$349.2 million in land development. We continue to closely review all of our land acquisition and land development spending and monitor our ongoing pace of home sales and deliveries, and we ~~will~~may adjust our land ~~spending~~ and investment ~~in inventory homes~~spend accordingly. As a result of the ~~uncertainty of the~~unprecedented current ~~environment,~~market conditions with municipality delays, extended cycle times, and ~~complexity of land transactions, including zoning and approvals, along with timing of development,~~rising mortgage interest rates impacting sales, we are not providing land spending estimates ~~for 2021~~ at this time.

AsWe ended the third quarter of ~~September 30, 2021, we had~~2022 with approximately ~~43,000~~46,100 lots under control, which represents approximately a 9%5.5-year supply of lots based on the past twelve months of homes delivered, including certain lots that we anticipate selling to third parties. This represents a 7% increase from our approximately ~~39,600~~43,000 lots under control at the end of last year’s third quarter. We opened 6376 communities and closed 8973 communities in the nine months ended September 30, ~~2021,~~2022, ending the third quarter with ~~a total of 176~~178 active communities, compared to ~~207~~176 at the end of last year’s third quarter. Of87 of our ~~total~~active communities at the end of the third quarter of ~~2021, 70~~2022 offered our more affordable Smart Series designs, which are primarily designed for first-time homebuyers. We are actively managing our sales pace to optimize our availability of lots and maximize financial returns, while also maintaining a manageable timeline for construction and delivery of our homes. The specific

Although the timing of opening new communities and closing ~~out~~existing communities ~~has been faster than anticipated and difficult~~is subject to ~~project throughout 2021. However, based on our planned community openings~~substantial variation, we expect to open a record number of new communities in ~~the fourth quarter of 2021 and during~~ 2022, ~~we estimate that~~growing our community count ~~will increase in 2022, ending~~by approximately 10% by the ~~year with between 200 and 220 active communities.~~end of 2022.

We believe that our ability to design and develop attractive homes in desirable locations at an affordable cost, and to grow our business while also leveraging our fixed costs, has enabled us to maintain and improve our strong financial results. ~~We further~~While we believe 2023 will be a very challenging year compared to the past few years of historically strong market conditions, we believe that we are well positioned with a strong balance sheet and backlog to manage through the current economic ~~environment.~~environment and that we will achieve another year of strong results in 2022. However, the challenging macroeconomic conditions described above could materially and negatively affect our performance in 2023, particularly when compared to our performance over the past few years.

The following table shows, by segment, revenue; gross margin; selling, general and administrative expense; operating income (loss); and interest expense (income) for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	(In thousands)	2021		2020		2021		2020		(In thousands)	2022		2021		2022		2021
Revenue:	Revenue:									Revenue:
Northern homebuilding	Northern homebuilding	$	400,564	$	350,591	$	1,151,349	$	890,201	Northern homebuilding	$	415,741	$	400,564	$	1,242,341	$	1,151,349
Southern homebuilding	Southern homebuilding	482,960		468,384		1,463,707		1,188,056		Southern homebuilding	577,088		482,960		1,608,468		1,463,707
Financial services (a)	Financial services (a)	20,795		28,946		79,079		61,461		Financial services (a)	20,099		20,795		63,584		79,079
Total revenue	Total revenue	$	904,319	$	847,921	$	2,694,135	$	2,139,718	Total revenue	$	1,012,928	$	904,319	$	2,914,393	$	2,694,135

Gross margin:	Gross margin:									Gross margin:
Northern homebuilding	Northern homebuilding	$	88,209	$	67,644	$	246,674	$	167,270	Northern homebuilding	$	89,295	$	88,209	$	260,695	$	246,674
Southern homebuilding	Southern homebuilding	112,750		97,924		339,560		238,865		Southern homebuilding	162,521		112,750		445,032		339,560
Financial services (a)	Financial services (a)	20,795		28,946		79,079		61,461		Financial services (a)	20,099		20,795		63,584		79,079
Total gross margin	Total gross margin	$	221,754	$	194,514	$	665,313	$	467,596	Total gross margin	$	271,915	$	221,754	$	769,311	$	665,313

Selling, general and administrative expense:	Selling, general and administrative expense:									Selling, general and administrative expense:
Northern homebuilding	Northern homebuilding	$	29,200	$	29,279	$	86,699	$	75,783	Northern homebuilding	$	29,672	$	29,200	$	86,778	$	86,699
Southern homebuilding	Southern homebuilding	39,793		42,063		121,324		109,828		Southern homebuilding	43,210		39,793		121,404		121,324
Financial services (a)	Financial services (a)	9,975		9,059		28,698		23,755		Financial services (a)	10,866		9,975		30,810		28,698
Corporate	Corporate	17,566		18,017		50,361		41,891		Corporate	20,872		17,566		57,254		50,361
Total selling, general and administrative expense	Total selling, general and administrative expense	$	96,534	$	98,418	$	287,082	$	251,257	Total selling, general and administrative expense	$	104,620	$	96,534	$	296,246	$	287,082

Operating income (loss):	Operating income (loss):									Operating income (loss):
Northern homebuilding	Northern homebuilding	$	59,009	$	38,365	$	159,975	$	91,487	Northern homebuilding	$	59,623	$	59,009	$	173,917	$	159,975
Southern homebuilding	Southern homebuilding	72,957		55,861		218,236		129,037		Southern homebuilding	119,311		72,957		323,628		218,236
Financial services (a)	Financial services (a)	10,820		19,887		50,381		37,706		Financial services (a)	9,233		10,820		32,774		50,381
Less: Corporate selling, general and administrative expense	Less: Corporate selling, general and administrative expense	(17,566)		(18,017)		(50,361)		(41,891)		Less: Corporate selling, general and administrative expense	(20,872)		(17,566)		(57,254)		(50,361)
Total operating income	Total operating income	$	125,220	$	96,096	$	378,231	$	216,339	Total operating income	$	167,295	$	125,220	$	473,065	$	378,231

Interest (income) expense:
Interest expense (income):										Interest expense (income):
Northern homebuilding	Northern homebuilding	$	—	$	122	$	76	$	2,636	Northern homebuilding	$	2	$	—	$	2	$	76
Southern homebuilding	Southern homebuilding	(381)		409		(224)		3,759		Southern homebuilding	(651)		(381)		(653)		(224)
Financial services (a)	Financial services (a)	885		708		2,777		2,059		Financial services (a)	1,350		885		3,169		2,777
Corporate	Corporate	(578)		—		(1,075)		—		Corporate	—		(578)		(453)		(1,075)
Total interest (income) expense		$	(74)	$	1,239	$	1,554	$	8,454
Total interest expense (income)										Total interest expense (income)	$	701	$	(74)	$	2,065	$	1,554

Equity in loss (income) of joint venture arrangements		50		(252)		(145)		(307)
Loss on early extinguishment of debt	Loss on early extinguishment of debt	9,072		—		9,072		—		Loss on early extinguishment of debt	$	—	$	9,072	$	—	$	9,072

Other loss (income)										Other loss (income)	—		50		(17)		(145)

Income before income taxes	Income before income taxes	$	116,172	$	95,109	$	367,750	$	208,192	Income before income taxes	$	166,594	$	116,172	$	471,017	$	367,750

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

The following tables show total assets by segment at September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		At September 30, 2021										At September 30, 2022
(In thousands)	(In thousands)	Northern		Southern			Corporate, Financial Services and Unallocated		Total		(In thousands)	Northern		Southern			Corporate, Financial Services and Unallocated		Total
Deposits on real estate under option or contract	Deposits on real estate under option or contract	$	4,079	$	44,521		$	—	$	48,600	Deposits on real estate under option or contract	$	6,939	$	49,738		$	—	$	56,677
Inventory (a)	Inventory (a)	950,220		1,354,323			—		2,304,543		Inventory (a)	1,165,675		1,794,383			—		2,960,058
Investments in joint venture arrangements	Investments in joint venture arrangements	—		42,466			—		42,466		Investments in joint venture arrangements	—		51,700			—		51,700
Other assets	Other assets	40,229		72,983		(b)	537,779		650,991		Other assets	41,927		95,321		(b)	382,230		519,478
Total assets	Total assets	$	994,528	$	1,514,293		$	537,779	$	3,046,600	Total assets	$	1,214,541	$	1,991,142		$	382,230	$	3,587,913


		At December 31, 2020										At December 31, 2021
(In thousands)	(In thousands)	Northern		Southern			Corporate, Financial Services and Unallocated		Total		(In thousands)	Northern		Southern			Corporate, Financial Services and Unallocated		Total
Deposits on real estate under option or contract	Deposits on real estate under option or contract	$	5,031	$	40,326		$	—	$	45,357	Deposits on real estate under option or contract	$	4,123	$	48,795		$	—	$	52,918
Inventory (a)	Inventory (a)	847,524		1,023,727			—		1,871,251		Inventory (a)	987,258		1,412,258			—		2,399,516
Investments in joint venture arrangements	Investments in joint venture arrangements	1,378		33,295			—		34,673		Investments in joint venture arrangements	—		57,121			—		57,121
Other assets	Other assets	37,465		57,588		(b)	596,711		691,764		Other assets	37,527		63,844		(b)	628,927		730,298
Total assets	Total assets	$	891,398	$	1,154,936		$	596,711	$	2,643,045	Total assets	$	1,028,908	$	1,582,018		$	628,927	$	3,239,853

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

(b)Includes development reimbursements from local municipalities.

Reportable Segments

The following table presents, by reportable segment, selected operating and financial information as of and for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	(Dollars in thousands)	2021		2020		2021		2020		(Dollars in thousands)	2022		2021		2022		2021
Northern Region	Northern Region									Northern Region
Homes delivered	Homes delivered	876		868		2,638		2,190		Homes delivered	850		876		2,610		2,638
New contracts, net	New contracts, net	772		1,176		2,962		2,951		New contracts, net	466		772		2,378		2,962
Backlog at end of period	Backlog at end of period	2,139		1,904		2,139		1,904		Backlog at end of period	1,658		2,139		1,658		2,139
Average sales price of homes delivered	Average sales price of homes delivered	$	454	$	402	$	435	$	405	Average sales price of homes delivered	$	489	$	454	$	475	$	435
Average sales price of homes in backlog	Average sales price of homes in backlog	$	475	$	427	$	475	$	427	Average sales price of homes in backlog	$	517	$	475	$	517	$	475
Aggregate sales value of homes in backlog	Aggregate sales value of homes in backlog	$	1,014,981	$	813,909	$	1,014,981	$	813,909	Aggregate sales value of homes in backlog	$	856,410	$	1,014,981	$	856,410	$	1,014,981
Housing revenue	Housing revenue	$	397,922	$	348,774	$	1,146,977	$	887,662	Housing revenue	$	415,740	$	397,922	$	1,240,406	$	1,146,977
Land sale revenue	Land sale revenue	$	2,642	$	1,817	$	4,372	$	2,539	Land sale revenue	$	1	$	2,642	$	1,935	$	4,372
Operating income homes (a)	Operating income homes (a)	$	58,225	$	38,308	$	158,859	$	91,385	Operating income homes (a)	$	59,621	$	58,225	$	173,758	$	158,859
Operating income land	Operating income land	$	784	$	57	$	1,116	$	102	Operating income land	$	2	$	784	$	159	$	1,116
Number of average active communities	Number of average active communities	82		90		85		94		Number of average active communities	90		82		91		85
Number of active communities, end of period	Number of active communities, end of period	85		86		85		86		Number of active communities, end of period	91		85		91		85
Southern Region	Southern Region									Southern Region
Homes delivered	Homes delivered	1,169		1,269		3,684		3,277		Homes delivered	1,176		1,169		3,372		3,684
New contracts, net	New contracts, net	1,192		1,773		4,378		4,348		New contracts, net	883		1,192		3,305		4,378
Backlog at end of period	Backlog at end of period	3,268		2,599		3,268		2,599		Backlog at end of period	2,878		3,268		2,878		3,268
Average sales price of homes delivered	Average sales price of homes delivered	$	411	$	366	$	396	$	360	Average sales price of homes delivered	$	486	$	411	$	474	$	396
Average sales price of homes in backlog	Average sales price of homes in backlog	$	468	$	387	$	468	$	387	Average sales price of homes in backlog	$	543	$	468	$	543	$	468
Aggregate sales value of homes in backlog	Aggregate sales value of homes in backlog	$	1,530,983	$	1,005,322	$	1,530,983	$	1,005,322	Aggregate sales value of homes in backlog	$	1,562,881	$	1,530,983	$	1,562,881	$	1,530,983
Housing revenue	Housing revenue	$	480,680	$	464,225	$	1,457,410	$	1,179,486	Housing revenue	$	571,103	$	480,680	$	1,597,506	$	1,457,410
Land sale revenue	Land sale revenue	$	2,280	$	4,159	$	6,297	$	8,570	Land sale revenue	$	5,985	$	2,280	$	10,962	$	6,297
Operating income homes (a)	Operating income homes (a)	$	72,396	$	55,731	$	216,831	$	128,888	Operating income homes (a)	$	117,963	$	72,396	$	320,879	$	216,831
Operating income land	Operating income land	$	561	$	130	$	1,405	$	149	Operating income land	$	1,348	$	561	$	2,749	$	1,405
Number of average active communities	Number of average active communities	94		124		100		125		Number of average active communities	83		94		83		100
Number of active communities, end of period	Number of active communities, end of period	91		121		91		121		Number of active communities, end of period	87		91		87		91
Total Homebuilding Regions	Total Homebuilding Regions									Total Homebuilding Regions
Homes delivered	Homes delivered	2,045		2,137		6,322		5,467		Homes delivered	2,026		2,045		5,982		6,322
New contracts, net	New contracts, net	1,964		2,949		7,340		7,299		New contracts, net	1,349		1,964		5,683		7,340
Backlog at end of period	Backlog at end of period	5,407		4,503		5,407		4,503		Backlog at end of period	4,536		5,407		4,536		5,407
Average sales price of homes delivered	Average sales price of homes delivered	$	430	$	380	$	412	$	378	Average sales price of homes delivered	$	487	$	430	$	474	$	412
Average sales price of homes in backlog	Average sales price of homes in backlog	$	471	$	404	$	471	$	404	Average sales price of homes in backlog	$	533	$	471	$	533	$	471
Aggregate sales value of homes in backlog	Aggregate sales value of homes in backlog	$	2,545,964	$	1,819,231	$	2,545,964	$	1,819,231	Aggregate sales value of homes in backlog	$	2,419,291	$	2,545,964	$	2,419,291	$	2,545,964
Housing revenue	Housing revenue	$	878,602	$	812,999	$	2,604,387	$	2,067,148	Housing revenue	$	986,843	$	878,602	$	2,837,912	$	2,604,387
Land sale revenue	Land sale revenue	$	4,922	$	5,976	$	10,669	$	11,109	Land sale revenue	$	5,986	$	4,922	$	12,897	$	10,669
Operating income homes (a)	Operating income homes (a)	$	130,621	$	94,039	$	375,690	$	220,273	Operating income homes (a)	$	177,584	$	130,621	$	494,637	$	375,690
Operating income land	Operating income land	$	1,345	$	187	$	2,521	$	251	Operating income land	$	1,350	$	1,345	$	2,908	$	2,521
Number of average active communities	Number of average active communities	176		214		185		219		Number of average active communities	173		176		174		185
Number of active communities, end of period	Number of active communities, end of period	176		207		176		207		Number of active communities, end of period	178		176		178		176

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	(Dollars in thousands)	2021		2020		2021		2020		(Dollars in thousands)	2022		2021		2022		2021
Financial Services	Financial Services									Financial Services
Number of loans originated	Number of loans originated	1,554		1,636		4,833		4,142		Number of loans originated	1,263		1,554		3,877		4,833
Value of loans originated	Value of loans originated	$	542,555	$	513,456	$	1,630,588	$	1,287,426	Value of loans originated	$	486,588	$	542,555	$	1,482,628	$	1,630,588

Revenue	Revenue	$	20,795	$	28,946	$	79,079	$	61,461	Revenue	$	20,099	$	20,795	$	63,584	$	79,079
Less: Selling, general and administrative expenses	Less: Selling, general and administrative expenses	9,975		9,059		28,698		23,755		Less: Selling, general and administrative expenses	10,866		9,975		30,810		28,698
Less: Interest expense	Less: Interest expense	885		708		2,777		2,059		Less: Interest expense	1,350		885		3,169		2,777

Income before income taxes	Income before income taxes	$	9,935	$	19,179	$	47,604	$	35,647	Income before income taxes	$	7,883	$	9,935	$	29,605	$	47,604

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

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

Cancellation Rates

The following table sets forth the cancellation rates for each of our homebuilding segments for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Northern	Northern	8.2	%	8.2	%	6.7	%	9.7	%	Northern	15.6	%	8.2	%	10.1	%	6.7	%
Southern	Southern	7.5	%	10.4	%	7.7	%	12.6	%	Southern	17.7	%	7.5	%	11.6	%	7.7	%

Total cancellation rate	Total cancellation rate	7.8	%	9.5	%	7.3	%	11.5	%	Total cancellation rate	17.0	%	7.8	%	11.0	%	7.3	%

Seasonality

Typically, our homebuilding operations experience significant seasonality and quarter-to-quarter variability in homebuilding activity levels. In general, homes delivered increase substantially in the second half of the year compared to the first half of the year. We believe that this seasonality reflects the tendency of homebuyers to shop for a new home in the spring with the goal of closing in the fall or winter, as well as the scheduling of construction to accommodate seasonal weather conditions. Our financial services operations also experience seasonality because loan originations correspond with the delivery of homes in our homebuilding operations. Additionally, given the disruption in economic activity caused by the COVID-19 pandemic, and the uneven impact of the recovery on housing sales, our results for the nine months ended September 30, 2021 are not necessarily indicative of the results that we may achieve in future periods.

Year Over Year Comparison

Three Months Ended September 30, ~~2021~~2022 Compared to Three Months Ended September 30, ~~2020~~2021

Northern Region. During the three months ended September 30, ~~2021,~~2022, homebuilding revenue in our Northern region increased ~~$50.0~~$15.1 million, from ~~$350.6 million in the third quarter of 2020 to~~ $400.6 million in the third quarter of ~~2021.~~2021 to $415.7 million in the third quarter of 2022. This ~~14%~~4% increase in homebuilding revenue was primarily the result of ~~a 13%~~an 8% increase in the average sales price of homes delivered ($~~52,000~~35,000 per home delivered), which was primarily in response to robust consumer demand in 2021 and early 2022 when the majority of our homes delivered during the quarter were placed under contract, offset partially by a ~~1% increase~~3% decrease in the number of homes delivered (8(26 units) ~~which were~~ due to ~~increased demand during the period.~~construction and supply chain issues that delayed closings. Operating income in our Northern region increased ~~$20.6~~$0.6 million from ~~$38.4~~$59.0 million in the third quarter of ~~2020~~2021 to ~~$59.0~~$59.6 million during the quarter ended September 30, ~~2021.~~2022. This increase in operating income was the result of a ~~$20.5~~$1.1 million improvement in our gross margin ~~in addition to~~partially offset by a ~~$0.1~~$0.5 million ~~decrease~~increase in selling, general and administrative expense. With respect to our homebuilding gross margin, our housing gross margin improved ~~$19.8~~$1.9 million primarily due to the increase in average sales price of homes delivered and the slight increase in the number of homes delivered noted above. Our housing gross margin percentage improved 260 basis points to 22.0% in the third quarter of 2021 from 19.4% in the prior year’s third quarter. The improvement in housing gross margin percentage was primarily due to increased demand during the period. Our land sale gross margin increased $0.7 million in the third quarter of 2021 compared to the same period in 2020 due to more land sales during the period.

Selling, general and administrative expense decreased $0.1 million, from $29.3 million for the quarter ended September 30, 2020 to $29.2 million for the quarter ended September 30, 2021, and improved as a percentage of revenue to 7.3% in 2021's third quarter from 8.4% in 2020's third quarter. The decrease in selling, general and administrative expense was attributable, in part, to a $0.3 million decrease in general and administrative expense primarily related to a decrease in land-related expenses which was partially offset by a $0.2 million increase in selling expense. The increase in selling expense was due to a $0.5 million increase in variable selling expenses resulting from increases in sales commissions produced by the higher number of homes delivered, partially offset by a $0.3 million decrease in non-variable selling expenses primarily related to a decrease in advertising costs.

During the three months ended September 30, 2021, we experienced a 34% decrease in new contracts in our Northern region, from 1,176 in the third quarter of 2020 to 772 in the third quarter of 2021 primarily due to our decreased community count. Homes in backlog increased 12% from 1,904 homes at September 30, 2020 to 2,139 homes at September 30, 2021 and average sales price in backlog increased to $475,000 at September 30, 2021 compared to $427,000 at September 30, 2020 which was primarily due to strong demand. During the three months ended September 30, 2021, we opened 14 new communities in our Northern region compared to opening five communities during 2020's third quarter. Our monthly absorption rate in our Northern region declined to 3.1 per community in the third quarter of 2021 compared to 4.4 per community in 2020's third quarter due to the decline in new contracts during the quarter.

~~Southern Region.~~During the three month period ended September 30, 2021, homebuilding revenue in our Southern region increased $14.6 million, from $468.4 million in the third quarter of 2020 to $483.0 million in the third quarter of 2021. This 3% increase in homebuilding revenue was the result of a 12% increase in the average sales price of homes delivered ($45,000 per home delivered) which was due to strong demand, offset partially by an 8% decrease in the number of homes delivered (100 units) which was due to construction and supply chain issues that created delays in closings. Operating income in our Southern region increased $17.1 million from $55.9 million in the third quarter of 2020 to $73.0 million during the quarter ended September 30, 2021. This increase in operating income was the result of a $14.8 million improvement in our gross margin in addition to a $2.3 million decrease in selling, general, and administrative expense. With respect to our homebuilding gross margin, our housing gross margin improved $14.4 million, due primarily to the increase in average sales price of homes delivered, offset partially by the decrease in the number of homes delivered noted above. Our housing gross margin percentage ~~improved~~declined 50 basis points to 21.5% in the third quarter of 2022 from ~~21.1%~~22.0% in the prior year’s third quarter. The decline in housing gross margin percentage was primarily due to increased construction and lot costs, offset partially by the increase in average sales price of homes delivered compared to prior year. Our land sale gross margin declined $0.8 million in the third quarter of 2022 compared to ~~23.3%~~the same period in 2021 due to fewer land sales during the period.

Selling, general and administrative expense increased $0.5 million, from $29.2 million for the quarter ended September 30, 2021 to $29.7 million for the quarter ended September 30, 2022, but improved as a percentage of revenue to 7.1% in 2022's third quarter from 7.3% in 2021's third quarter. The increase in selling, general and administrative expense was primarily attributable to a $0.5 million increase in land related expenses.

During the three months ended September 30, 2022, we experienced a 40% decrease in new contracts in our Northern region, from 772 in the third quarter of 2021 ~~largely~~to 466 in the third quarter of 2022. Homes in backlog decreased 22% from 2,139 homes at September 30, 2021 to 1,658 homes at September 30, 2022. The decreases in new contracts and backlog were primarily due to

decreased demand as a result of the macroeconomic conditions described above in our Overview section, in addition to difficult comps versus last year. Average sales price in backlog increased to $517,000 at September 30, 2022 compared to $475,000 at September 30, 2021. During the third quarter of 2022, we opened five new communities in our Northern region compared to 14 during the third quarter of 2021. Our monthly absorption rate in our Northern region declined to 1.7 per community in the third quarter of 2022 compared to 3.1 per community in 2021's third quarter due to the ~~more affordable mix of communities delivering homes and strong demand. Our land sale gross margin improved $0.4~~decline in new contracts during the quarter.

Southern Region.During the three month period ended September 30, 2022, homebuilding revenue in our Southern region increased $94.1 million, from $483.0 million in the third quarter of 2021 to $577.1 million in the third quarter of 2022. This 19% increase in homebuilding revenue was the result of an 18% increase in the average sales price of homes delivered ($75,000 per home delivered) and a 1% increase in the number of homes delivered (7 units) which was primarily in response to robust consumer demand in 2021 and early 2022 when the majority of our homes delivered during the quarter were placed under contract, despite the impact of Hurricane Ian on our Florida markets which delayed a number of our deliveries for the quarter. Operating income in our Southern region increased $46.3 million from $73.0 million in the third quarter of 2021 to $119.3 million during the quarter ended September 30, 2022. This increase in operating income was the result of a $49.8 million improvement in our gross margin, offset partially by a $3.4 million increase in selling, general, and administrative expense. With respect to our homebuilding gross margin, our housing gross margin improved $49.0 million, due primarily to the increase in average sales price of homes delivered in addition to the increase in the number of homes delivered noted above. Our housing gross margin percentage improved from 23.3% in prior year’s third quarter to 28.2% in the third quarter of 2022, largely due to the increase in average sales price of homes delivered compared to prior year. Our land sale gross margin improved $0.8 million in the third quarter of 2022 compared to the third quarter of ~~2020. We did not record any additional warranty charges for stucco-related repair costs in our Florida communities~~2021 due to increased land sales during the third quarter of 2021. With respect to this matter, during the quarter ended September 30, 2021, we identified 21 additional homes in need of repair and completed repairs on 38 homes, and, at September 30, 2021, we have 83 homes in various stages of repair. See ~~Note 6~~ ~~to our financial statements for further information.~~period.

Selling, general and administrative expense ~~decreased $2.3~~increased $3.4 million from ~~$42.1 million in the third quarter of 2020 to~~ $39.8 million in the third quarter of 2021 ~~and~~to $43.2 million in the third quarter of 2022 but declined as a percentage of revenue to ~~8.2%~~7.5% from ~~9.0%~~8.2% in the third quarter of ~~2020.~~2021. The ~~decrease~~increase in selling, general and administrative expense was attributable to a ~~$2.8~~$0.4 million ~~decrease~~increase in selling expense primarily due to ~~a $1.5 million decrease~~an increase in variable selling expenses resulting from ~~decreases~~increases in sales commissions produced by the ~~lower~~higher number of homes ~~delivered~~delivered. The increase in selling, general and ~~a $1.3 million decrease in non-variable selling expenses primarily related~~administrative expense was also attributable to a ~~decrease in model and sales office costs associated with our decreased community count, partially offset by a $0.5~~$3.0 million increase in general and administrative expense, which was primarily related to ana $1.4 million increase in compensation-related expenses due to our increased headcount and our strong financial ~~performance.~~performance during the period, a $1.2 million increase in land-related costs, and a $0.4 million increase in miscellaneous expenses.

During the three months ended September 30, ~~2021,~~2022, we experienced a ~~33%~~26% decrease in new contracts in our Southern region, from ~~1,773 in the third quarter of 2020 to~~ 1,192 in the third quarter of 2021 to 883 in the third quarter of 2022. Homes in backlog decreased 12% from 3,268 homes at September 30, 2021 to 2,878 homes at September 30, 2022. The decreases in new contracts and backlog were primarily due to ~~the difficult comparison from the record new contracts achieved during the same period last year as well as a result of~~ our decreased community count compared to prior ~~year. Homes in backlog increased 26% from 2,599 homes at September 30, 2020 to 3,268 homes at September 30, 2021 primarily due to improving~~year and decreased demand as a result of the macroeconomic conditions described above in our ~~more affordable communities compared to prior year.~~Overview section. Average sales price in backlog ~~also~~ increased to $543,000 at September 30, 2022 from $468,000 at September 30, ~~2021 from $387,000 at September 30, 2020 due to strong demand.~~2021. During the three months ended September 30, ~~2021,~~2022, we opened 1220 new communities in our Southern region compared to opening ~~seven~~12 communities during ~~2020's~~2021's third quarter. Our monthly absorption rate in our Southern region declined slightly to 3.6 per community in the third quarter of 2022 compared to 4.3 per community in the third quarter of 2021 ~~compared to 4.8 per community~~as a result of the decline in our average communities and the decrease in the ~~third quarter~~number of ~~2020 due to the decline in~~ new contracts during the ~~quarter.~~quarter compared to prior year.

Financial Services. Revenue from our mortgage and title operations decreased ~~28%~~3% to $20.1 million in the third quarter of 2022 from $20.8 million in the third quarter of 2021 ~~from $28.9 million in the third quarter of 2020~~ due to a 5%19% decrease in the number of loan originations from ~~1,636~~1,554 in ~~2020's~~2021's third quarter to ~~1,554~~1,263 in the third quarter of ~~2021~~2022 and lower margins on loans sold during the period compared to prior year’s third quarter, ~~which was a record third quarter and resulted in difficult comparisons for the third quarter of 2021,~~ partially offset by an increase in the average loan amount from ~~$314,000 in the quarter ended September 30, 2020 to~~ $349,000 in the quarter ended September 30, ~~2021.~~2021 to $385,000 in the quarter ended September 30, 2022.

WeOur financial services segment experienced a ~~$9.1~~$1.6 million decrease in operating income in the third quarter of ~~2021~~2022 compared to ~~2020's~~2021's third quarter, which was primarily due to the decrease in revenue discussed above in addition to a $0.9 million increase in selling, general and administrative expense compared to the third quarter of ~~2020. This increase~~2021, which was primarily the result of an increase in compensation-related expenses due to our increase in employee ~~headcount due to new mortgage locations and our strong financial performance.~~

headcount.

At September 30, ~~2021,~~2022, M/I Financial ~~LLC (“M/I Financial”)~~ provided financing services in all of our markets.

Approximately ~~85%~~76% of our homes delivered during the third quarter of ~~2021~~2022 were financed through M/I Financial, ~~the same as~~compared to 85% in the third quarter of ~~2020.~~2021. Capture rate is influenced by financing availability and competition in the mortgage market, and can fluctuate from quarter to quarter.

Corporate Selling, General and Administrative Expense. Corporate selling, general and administrative expense ~~decreased $0.4~~increased $3.3 million from ~~$18.0 million for the third quarter of 2020 to~~ $17.6 million for the third quarter of ~~2021.~~2021 to $20.9 million for the third quarter of 2022. This ~~decrease~~increase primarily resulted from a ~~decrease~~$2.3 million increase in compensation-related ~~expenses.~~

~~Equity~~expenses due to increased headcount and a $1.0 million increase in ~~Loss (Income) from Joint Venture Arrangements.~~ Equity in loss or income from joint venture arrangements represents our portion of pre-tax loss or earnings from our joint venture arrangements where a special purpose entity is established (“LLCs”) with the other partners. The Company had less than $0.1 million of equity in loss and earned $0.3 million of equity in income from its LLCs during the three months ended September 30, 2021 and 2020, respectively.miscellaneous expenses.

Interest ~~(Income)~~ Expense ~~- Net.~~(Income). Interest expense for the Company ~~decreased $1.3 million~~increased from ~~$1.2 million for the three months ended September 30, 2020 to~~ interest income of $0.1 million for the three months ended September 30, ~~2021.~~2021 to interest expense of $0.7 million for the three months ended September 30, 2022. This ~~decrease~~increase in interest expense was primarily ~~the result of higher interest capitalization~~ due to ~~the high level of inventory we have under development compared to the prior year. Our~~an increase in our weighted average borrowings ~~decreased~~ from ~~$736.3 million in 2020's third quarter to~~ $728.2 million in 2021's third quarter ~~and our weighted average borrowing rate decreased from 5.57%~~to $835.0 million in ~~the~~2022's third ~~quarter of 2020 to 5.41% for third quarter of 2021.~~quarter.

Loss on Early Extinguishment of Debt. We recognized a loss on early extinguishment of debt of $9.1 million during the quarter ended September 30, 2021 as a result of the write-off of unamortized debt issuance costs and a prepayment premium associated with the redemption of our 2025 Senior Notes.

Income Taxes. Our overall effective tax rate was 21.0% for the three months ended September 30, 2022 and 21.7% for the three months ended September 30, ~~2021 and 22.7% for the same period in 2020.~~2021. The decrease in the effective rate from the three months ended September 30, ~~2020~~2021 was ~~primarily attributable~~due to ~~a $2.1 million~~an increase in tax benefit from energy efficient home credits ~~(see~~ ~~Note 10~~ ~~to our financial statements~~ for ~~more information).~~2022.

Nine Months Ended September 30, ~~2021~~2022 Compared to Nine Months Ended September 30, ~~2020~~2021

Northern Region. During the nine months ended September 30, ~~2021,~~2022, homebuilding revenue in our Northern region increased ~~$261.1~~$91.0 million, from ~~$890.2 million in the nine months ended September 30, 2020 to~~ $1.15 billion in the nine months ended September 30, ~~2021.~~2021 to $1.24 billion in the nine months ended September 30, 2022. This ~~29%~~8% increase in homebuilding revenue was primarily the result of a ~~20% increase in the number of homes delivered (448 units), a 7%~~9% increase in the average sales price of homes delivered ($~~30,000~~40,000 per home delivered), offset partially by a 1% decrease in the number of homes delivered (28 units) and a ~~$1.8~~$2.4 million ~~increase~~decrease in land sale revenue. Operating income in our Northern region increased ~~$68.5~~$13.9 million, from ~~$91.5 million during the nine months ended September 30, 2020 to~~ $160.0 million during the nine months ended September 30, ~~2021.~~2021 to $173.9 million during the nine months ended September 30, 2022. The increase in operating income was primarily the result of a ~~$79.4~~$14.0 million increase in our gross ~~margin, offset, in part, by a $10.9 million increase in selling, general, and administrative expense.~~margin. With respect to our homebuilding gross margin, our housing gross margin improved ~~$78.4~~$15.0 million, primarily due to the increase in the average sale price of homes ~~delivered and the 20% increase in the number of homes~~ delivered. Our housing gross margin percentage ~~improved 260~~declined 40 basis points from ~~18.8%~~21.4% in the nine months ended September 30, ~~2020~~2021 to ~~21.4%~~21.0% for the same period in ~~2021,~~2022, primarily due to ~~strong demand compared to the prior year.~~increased construction and lot costs. Our land sale gross margin ~~increased~~decreased by $1.0 million in the nine months ended September 30, ~~2021~~2022 compared to the same period in ~~2020.~~2021 due to fewer land sales during the period.

Selling, general and administrative expense increased ~~$10.9~~$0.1 million, from ~~$75.8 million for the nine months ended September 30, 2020 to~~ $86.7 million for the nine months ended September 30, 2021 ~~but~~to $86.8 million for the nine months ended September 30, 2022, and declined as a percentage of revenue to ~~7.5%~~7.0% in the first nine months of ~~2021~~2022 compared to ~~8.5%~~7.5% in the same period in ~~2020.~~2021. The increase in selling, general and administrative expense was attributable in part, to an $8.6 million increase in selling expense due to (1) an $8.1 million increase in variable selling expenses resulting from increases in sales commissions produced by the higher number of homes delivered, and (2) a $0.5 million increase in non-variable selling expenses primarily related to costs associated with our additional sales offices and models as a result of increased headcount. The increase in selling, general and administrative expense was also attributable to a ~~$2.3~~$3.4 million increase in general and administrative expense, which was primarily related to an increase in compensation-related expenses due to our increased headcount and our strong financial performance during the ~~period.~~period, partially offset by a $3.3 million decrease in selling expense primarily due to a decrease in variable selling expenses resulting from decreases in sales commissions produced by the lower number of homes delivered.

During the nine months ended September 30, ~~2021,~~2022, we experienced ~~an increase~~a 20% decrease in new contracts in our Northern region, from ~~2,951~~2,962 in the nine months ended September 30, ~~2020~~2021 to ~~2,962~~2,378 in the first nine months of ~~2021, and a 12% increase in homes~~2022. Homes in backlog also decreased 22% from ~~1,904~~2,139 at September 30, 2021 to 1,658 homes at September 30, ~~2020 to 2,139 homes at September 30, 2021.~~2022. The ~~increases~~decreases in new contracts and

~~homes in~~ backlog were partially due to ~~strong~~the limitations we imposed on sales in certain of our communities during the first half of the period as well as decreased demand ~~compared to prior year.~~beginning in the latter part of 2022’s second quarter as a result of the macroeconomic conditions described above in our Overview section. Average sales price in backlog increased to $517,000 at September 30, 2022 compared to $475,000 at September 30, ~~2021 compared to $427,000 at September 30, 2020, which was primarily due to strong demand compared to prior year.~~2021. During the nine months ended September 30, ~~2021,~~2022, we opened 3225 new communities in our Northern region compared to 21opening 32 during the same period in ~~2020.~~2021. Our monthly absorption rate in our Northern region ~~improved~~declined to ~~3.9~~2.9 per community in the nine months ended September 30, ~~2021~~2022 from ~~3.5~~3.9 per community in the same period in ~~2020.~~2021 as a result of the decrease in the number of new contracts during the period compared to prior year.

Southern Region. During the nine months ended September 30, ~~2021,~~2022, homebuilding revenue in our Southern region increased ~~$275.7~~$144.8 million from ~~$1.19 billion in the nine months ended September 30, 2020 to~~ $1.46 billion in the nine months ended September 30, ~~2021.~~2021 to $1.61 billion in the nine months ended September 30, 2022. This ~~23%~~10% increase in homebuilding revenue was the result of a ~~12% increase in the number of homes delivered (407 units) and a 10%~~20% increase in the average sales price of homes delivered ($~~36,000~~78,000 per home delivered), and a $4.7 million increase in land sale revenue, offset partially by ~~a $2.3 million~~an 8% decrease in ~~land sale revenue.~~the number of homes delivered (312 units) which was in part due to the impact of Hurricane Ian on our Florida markets which delayed a number of our deliveries during the third quarter. Operating income in our Southern region increased ~~$89.2~~$105.4 million from ~~$129.0~~$218.2 million in the nine months ended September 30, ~~2020~~2021 to ~~$218.2~~$323.6 million during the nine months

ended September 30, ~~2021.~~2022. This increase in operating income was the result of a ~~$100.7~~$105.5 million improvement in our gross margin, offset ~~in part,~~partially by ~~an $11.5~~a $0.1 million increase in selling, general, and administrative expense. With respect to our homebuilding gross margin, our gross margin on homes delivered improved ~~$99.4~~$104.1 million, due primarily to the increase in average sale price of homes ~~delivered and the increase in the number of homes delivered noted above.~~delivered. Our housing gross margin percentage improved ~~300~~450 basis points from ~~20.2%~~23.2% in the nine months ended September 30, ~~2020~~2021 to ~~23.2%~~27.7% in the same period in ~~2021,~~2022, largely due to ~~strong demand~~the increase in average sales price of homes delivered compared to prior year. Our land sale gross margin improved $1.3 million in the nine months ended September 30, ~~2021~~2022 compared to the same period in ~~2020.~~2021.

Selling, general and administrative expense increased ~~$11.5~~$0.1 million from ~~$109.8 million in the nine months ended September 30, 2020 to~~ $121.3 million in the nine months ended September 30, 2021 to $121.4 million in the nine months ended September 30, 2022 but declined as a percentage of revenue to ~~8.3%~~7.5% from ~~9.2%~~8.3% for the nine months ended September 30, ~~2020.~~2021. The increase in selling, general and administrative expense was attributable to a $6.7 million increase in selling expense due to a $8.4 million increase in variable selling expenses resulting from increases in sales commissions produced by the higher number of homes delivered, offset partially by a $1.7 million decrease in non-variable selling expenses primarily related to the timing of sales office and model openings and a reduction in marketing costs. The increase in selling, general and administrative expense was also attributable to a $4.8$6.4 million increase in general and administrative expense, which was primarily related to a ~~$1.3~~$2.7 million increase in land-related expenses primarily due to write-offs of abandoned land transaction costs, a $2.5 million increase in compensation-related expenses due to our increased headcount and our strong financial performance, and a $1.2 million increase in miscellaneous expenses. The increase in general and administrative expense was partially offset by a $6.3 million decrease in selling expense primarily due to a decrease in variable selling expenses resulting from decreases in sales commissions produced by the lower number of homes delivered.

During the nine months ended September 30, 2022, we experienced a 25% decrease in new contracts in our Southern region, from 4,378 in the nine months ended September 30, 2021 to 3,305 in the first nine months of 2022. Homes in backlog decreased 12% from 3,268 homes at September 30, 2021 to 2,878 homes at September 30, 2022. The decreases in new contracts and backlog were primarily due to the decrease in our average number of communities compared to prior year, the limitations we imposed on sales in certain of our communities during the first half of the period, and decreased demand beginning in the latter part of 2022’s second quarter as a result of the macroeconomic conditions described above in our Overview section. Average sales price in backlog increased from $468,000 at September 30, 2021 to $543,000 at September 30, 2022. During the nine months ended September 30, 2022, we opened 51 communities in our Southern region, compared to opening 31 during the nine months ended September 30, 2021. Our monthly absorption rate in our Southern region declined to 4.4 per community in the nine months ended September 30, 2022 from 4.9 per community in the nine months ended September 30, 2021 as a result of the decline in our average communities and the decrease in the number of new contracts during the period compared to prior year.

Financial Services. Revenue from our mortgage and title operations decreased 20% from $79.1 million in the nine months ended September 30, 2021 to $63.6 million in the nine months ended September 30, 2022 due to a 20% decrease in the number of loan originations from 4,833 in the nine months ended September 30, 2021 to 3,877 in the nine months ended September 30, 2022 and lower margins on loans sold during the period compared to 2021's first nine months due to increased competition for sales of loans, offset partially by an increase in the average loan amount from $337,000 in the nine months ended September 30, 2021 to $382,000 in the nine months ended September 30, 2022.

Our financial services segment experienced a $17.6 million decrease in operating income in the nine months ended September 30, 2022 compared to the same period in 2021, which was primarily due to the decrease in revenue discussed above, and a $2.1 million increase in selling, general and administrative expense compared to the nine months ended September 30, 2021. The increase in selling, general and administrative expense was primarily attributable to an increase in compensation-related expenses due to an increase in employee headcount.

At September 30, 2022, M/I Financial provided financing services in all of our markets. Approximately 78% of our homes delivered during the nine months ended September 30, 2022 were financed through M/I Financial, compared to 84% in the nine months ended September 30, 2021. Capture rate is influenced by financing availability and can fluctuate from quarter to quarter.

Corporate Selling, General and Administrative Expense. Corporate selling, general and administrative expense increased $6.9 million from $50.4 million for the nine months ended September 30, 2021 to $57.3 million for the nine months ended September 30, 2022. The increase was primarily due to a $3.4 million increase in compensation-related expenses due to our increased headcount and our strong financial performance and a $3.5 million increase in ~~land-related expenses.~~

During the nine months ended September 30, 2021, we experienced a 1% increase in new contracts in our Southern region, from 4,348 in the nine months ended September 30, 2020 to 4,378 in the first nine months of 2021, and a 26% increase in backlog from 2,599 homes at September 30, 2020 to 3,268 homes at September 30, 2021. The increases in new contracts and backlog were primarily due to strong demand compared to prior year. Average sales price in backlog also increased from $387,000 at September 30, 2020 to $468,000 at September 30, 2021 due to strong demand. During the nine months ended September 30, 2021, we opened 31 communities in our Southern region, compared to 30 during the nine months ended September 30, 2020. Our monthly absorption rate in our Southern region improved to 4.9 per community in the nine months ended September 30, 2021 from 3.9 per community in the nine months ended September 30, 2020.

~~Financial Services.~~ Revenue from our mortgage and title operations increased $17.6 million (29%) from $61.5 million in the nine months ended September 30, 2020 to $79.1 million in the nine months ended September 30, 2021 due to a 17% increase in the number of loan originations from 4,142 in the nine months ended September 30, 2020 to 4,833 in the nine months ended September 30, 2021 and an increase in the average loan amount from $311,000 in the nine months ended September 30, 2020 to $337,000 in the nine months ended September 30, 2021. We also experienced higher margins on loans sold during the period compared to 2020's first nine months.

We experienced a $12.7 million increase in operating income in the nine months ended September 30, 2021 compared to the same period in 2020, which was primarily due to the increase in revenue discussed above, offset partially by a $4.9 million increase in selling, general and administrative expense compared to the nine months ended September 30, 2020. The increase in selling, general and administrative expense was primarily attributable to a $3.2 million increase in compensation-related expenses due to an increase in employee headcount and an increase in incentive compensation due to improved results, a $0.4 million increase in professional fees, and a $1.3 million increase in other miscellaneous expenses.

At September 30, 2021, M/I Financial provided financing services in all of our markets. Approximately 84% of our homes delivered during the nine months ended September 30, 2021 were financed through M/I Financial, the same as in the nine months ended September 30, 2020. Capture rate is influenced by financing availability and can fluctuate from quarter to quarter.

~~Corporate Selling, General and Administrative Expense.~~ Corporate selling, general and administrative expense increased $8.5 million from $41.9 million for the nine months ended September 30, 2020 to $50.4 million for the nine months ended September 30, 2021. The increase was primarily due to a $6.3 million increase in compensation-related expenses due to our increased headcount and our strong financial results during the period, a $1.1 million increase in computer costs, a $0.6 million increase in advertising costs and a $0.5 million increase in other miscellanous expenses.

~~Equity in Income from Joint Venture Arrangements.~~ ~~The Company earned $0.1 million and $0.3 million of equity in income from its LLCs during the nine months ended September 30, 2021 and 2020, respectively.~~

Interest Expense - Net. Interest expense for the Company ~~decreased $6.9 million~~increased from ~~$8.5 million in the nine months ended September 30, 2020 to~~ $1.6 million in the nine months ended September 30, ~~2021. This decrease was primarily the result of a decrease in average borrowings under our Credit Facility (as defined below) during the first nine months of~~ 2021 ~~compared~~ to ~~prior year in addition to higher interest capitalization due to the high level of inventory we have under development compared to the prior year. Our weighted average borrowings decreased from $783.3~~$2.1 million in the nine months ended September 30, ~~2020~~2022. This increase in interest expense was primarily due to ~~$712.9 million~~an increase in ~~the nine months ended September 30, 2021, but~~ our weighted average ~~borrowing rate increased~~borrowings from ~~5.51% in 2020's first nine months to 5.63%~~$712.9 million in 2021's first nine months ~~as a result of a change~~to $806.5 million in ~~the mix of borrowings in the current year compared to prior year.~~2022's first nine months.

Loss on Early Extinguishment of Debt. We recognized a loss on early extinguishment of debt of $9.1 million during the nine months ended September 30, 2021 as a result of the write-off of unamortized debt issuance costs and a prepayment premium associated with the redemption of our 2025 Senior Notes.

Income Taxes. Our overall effective tax rate was 23.5% for the nine months ended September 30, 2022 and 22.9% for the nine months ended September 30, ~~2021 and 23.2% for~~2021. The increase in the effective rate from the nine months ended September 30, ~~2020.~~2021 was due to a decrease in tax benefit from equity compensation for 2022.

LIQUIDITY AND CAPITAL RESOURCES

Overview of Capital Resources and Liquidity.

At September 30, ~~2021,~~2022, we had ~~$221.2~~$67.8 million of cash, cash equivalents and restricted cash, with ~~$220.9~~$67.0 million of this amount comprised of unrestricted cash and cash equivalents, which represents a ~~$39.8~~$169.0 million decrease in unrestricted cash and cash equivalents from December 31, ~~2020.~~2021. Our principal uses of cash for the nine months ended September 30, ~~2021~~2022 were investment in land and land development, construction of homes, mortgage loan originations, investment in joint ventures, operating expenses, short-term working capital, and debt service requirements, including the ~~redemption of our 2025 Senior Notes and the~~ repayment of amounts outstanding under our credit facilities, and the repurchase of ~~$15.5~~$55.3 million of our outstanding common shares under our 2021 Share Repurchase Program (as defined below) during the ~~third quarter of 2021 .~~nine months ended September 30, 2022. In order to fund these uses of cash, we used proceeds from home deliveries, ~~the sale of mortgage loans and the sale of mortgage servicing rights,~~ as well as excess cash balances, ~~proceeds from the issuance of our 2030 Senior Notes (as described below),~~ borrowings under our credit facilities, and other sources of liquidity.

The Company is a party to three primary credit agreements: (1) a $550 million unsecured revolving credit facility, dated July 18, 2013, as amended ~~most recently on June 10, 2021~~ (the “Credit Facility”), with M/I Homes, Inc. as borrower and guaranteed by the Company’s wholly owned homebuilding subsidiaries; (2) a ~~$175~~$200 million secured mortgage warehousing agreement, dated ~~June 24, 2016, as amended most recently on~~ May ~~28, 2021,~~27, 2022, with M/I Financial as borrower (the “MIF Mortgage Warehousing Agreement”); and (3) a $90 million mortgage repurchase agreement, dated October 30, 2017, as amended most recently on October ~~25, 2021,~~24, 2022, with M/I Financial as borrower (the “MIF Mortgage Repurchase Facility”).

~~In August 2021,~~As of September 30, 2022, we ~~issued $300.0 million~~had outstanding notes payable (consisting primarily of notes payable for our financial services operations, the 2030 Senior Notes and the 2028 Senior Notes) with varying maturities in an aggregate principal amount of ~~our 2030 Senior Notes at par, for net proceeds~~$889.4 million, with $189.4 million payable within 12 months. Future interest payments associated with these notes payable totaled $198.4 million as of ~~approximately $296.0 million. We used $257.9~~September 30, 2022, with $16.4 million of the net proceeds to redeem all $250.0 million aggregate principal amount of our outstanding 2025 Senior Notes at a redemption price of 102.813% of the principal amount, plus accrued and unpaid interest thereon.

payable within 12 months.

As of September 30, ~~2021,~~2022, there were no borrowings outstanding and ~~$94.4~~$96.6 million of letters of credit outstanding under our $550 million Credit Facility, leaving ~~$455.6~~$453.4 million available. We expect to continue managing our balance sheet and liquidity carefully in 2022 by managing our spending on land acquisition and development and construction of inventory homes, as well as overhead expenditures, relative to our ongoing volume of home deliveries, and we expect to meet our current and anticipated ~~capital~~cash requirements in 2022 from cash receipts, excess cash balances and availability under our ~~Credit Facility.~~credit facilities.

During the nine months ended September 30, ~~2021,~~2022, we delivered ~~6,322~~5,982 homes, started ~~7,393~~6,693 homes, and spent ~~$473.8~~$289.6 million on land purchases and ~~$281.2~~$349.2 million on land development.

We are selectively acquiring and developing lots in our markets to

replenish our lot supply and will continue to monitor market conditions and our pace of home sales and deliveries and adjust our land spending accordingly. Pursuant to our land option agreements, as of September 30, ~~2021,~~2022, we had a total of ~~20,331~~21,155 lots under contract, with an aggregate purchase price of approximately ~~$866.7~~$982.4 million, to be acquired during the remainder of ~~2021~~2022 through ~~2028.~~2029.

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

Operating Cash Flow Activities. During the nine-month period ended September 30, ~~2021,~~2022, we used ~~$34.3~~$14.1 million of cash ~~from~~in operating activities, compared to ~~generating $197.2~~using $34.3 million of cash in operating activities during the nine months ended September 30, ~~2020.~~2021. The cash used in operating activities in the first nine months of 2022 was primarily a result of a $533.0 million increase in inventory and an increase in other assets of $37.4 million, offset, in part, by net income of $360.3 million, $85.1 million of proceeds from the sale of mortgage loans net of mortgage loan originations, and an increase in accounts payable, customer deposits and other liabilities totaling $91.8 million. The cash used in operating activities in the first nine months of 2021 was primarily a result of a $412.2 million increase in inventory and a decrease in accrued compensation and

other liabilities of $9.6 million offset, in part, by net income of $283.5 million, $16.5 million of proceeds from the sale of mortgage loans net of mortgage loan originations, and an increase in accounts payable and customer deposits totaling $84.3 million. The $197.2 million of cash generated in operating activities in 2020's first nine months was primarily a result of net income of $159.8 million, $14.3 million of proceeds from the sale of mortgage loans net of mortgage loan originations, and an increase in accounts payable, other liabilities and customer deposits totaling $92.9 million, offset, in part, by a $62.5 million increase in inventory, and an increase in other assets of $18.5 million.

Investing Cash Flow Activities. During the nine months ended September 30, ~~2021,~~2022, we used ~~$31.9~~$19.1 million of cash from investing activities, compared to using ~~$31.3~~$31.9 million of cash infrom investing activities during the nine months ended September 30, ~~2020.~~2021. The cash used from investing activities in the first nine months of 2022 was primarily a result of a $17.4 million increase in our investment in joint venture arrangements. The cash used from investing activities during the nine months ended September 30, 2021 was primarily a result of a $34.7 million increase in our investment in joint venture arrangements, partially offset by $4.3 million of proceeds from the sale of a portion of our mortgage servicing rights in the nine months ended September 30, 2021. Our cash used during the first nine months of 2020 was primarily due to an increase in our investment in joint venture arrangements as well as an increase in purchases of property and equipment during the period.

Financing Cash Flow Activities. During the nine months ended September 30, ~~2021,~~2022, we ~~generated $26.6~~used $135.4 million of cash from financing activities, compared to generating ~~$30.5~~$26.6 million of cash during the nine months ended September 30, ~~2020.~~2021. The cash used in financing activities in 2022 was primarily due to repayments of $76.8 million (net of proceeds from borrowings) under our two M/I Financial credit facilities in addition to the repurchase of $55.3 million of our outstanding common shares during the nine months ended September 30, 2022. The cash generated from financing activities in first nine months of 2021 was primarily due to the issuance of $300.0 million of our 2030 Senior Notes, net of debt issuance costs, for $296.0 million, offset partially by the redemption of all $250.0 million of our then outstanding 2025 Senior Notes, and the repurchase of $15.5 million of our outstanding common shares during the nine months ended September 30, 2021. The cash generated from financing activities in 2020 was primarily due to the issuance of $400.0 million aggregate principal amount of our 4.95% Senior Notes due 2028 (the “2028 Senior Notes”), net of debt issuance costs, for $393.8 million, offset partially by the redemption of all $300.0 million of our then outstanding 6.75% Senior Notes due 2021, and repayments of $66.0 million (net of proceeds from borrowings) under our Credit Facility during the first nine months of 2020.

On July 28, 2021, the Company announced that its Board of Directors authorized a new share repurchase program ~~(the “2021 Repurchase Program”)~~ pursuant to which the Company may purchase up to $100 million of its outstanding common ~~shares.~~shares (the “2021 Share Repurchase Program”). On February 17, 2022, the Company announced that its Board of Directors approved an increase to its 2021 Share Repurchase Program, for a total of $200 million authorized for repurchases. During the ~~third quarter of 2021,~~nine months ended September 30, 2022, the Company repurchased ~~0.2~~1.2 million outstanding common shares with an aggregate purchase price of ~~$15.5~~$55.3 million under the 2021 Share Repurchase Program which was funded with cash on hand. As of September 30, ~~2021,~~2022, the Company is authorized to repurchase an additional ~~$84.5~~$93.1 million of outstanding common shares under the 2021 Share Repurchase Program (see Note 12 to our financial statements for more information). Based on current market conditions, expected capital needs and availability, and the current market price of the Company’s common shares, we expect to continue repurchasing shares during the fourth quarter of 2021.

The timing and amount of any future purchases under the 2021 Share Repurchase Program will be determined by the Company’s management at its discretion based on a variety of factors, including the market price of the Company’s common shares, business considerations, general market and economic conditions and legal requirements. The 2021 Repurchase Program replaced and superseded the share repurchase program authorized by the Board of Directors in 2018 which authorized the repurchase of $50 million of the Company’s common shares (the “2018 Share Repurchase Program”).

At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, our ratio of homebuilding debt to capital was ~~31%~~26% and ~~34%~~30%, respectively, calculated as the carrying value of our outstanding homebuilding debt (which consists of borrowings under our Credit Facility, our 2030 Senior Notes, our 2028 Senior Notes, ~~our 2025 Senior Notes,~~ and Notes ~~Payable- Other)~~Payable-Other) divided by the sum of the carrying value of our outstanding homebuilding debt plus shareholders’ equity. We believe that this ratio provides useful information for understanding our financial position and the leverage employed in our operations, and for comparing us with other homebuilders.

We fund our operations with cash flows from operating activities, including proceeds from home deliveries, land sales and the sale of mortgage loans. We believe that these sources of cash, along with our balance of unrestricted cash and borrowings available under our credit facilities, will be sufficient to fund our currently anticipated working capital needs, investment in land and land development, construction of homes, operating expenses, planned capital spending, and debt service requirements for at least the next twelve months. In addition, we routinely monitor current and anticipated operational and debt service requirements, financial market conditions, and credit relationships, and we may choose to seek additional capital by issuing new

debt and/or equity securities or engaging in other financial transactions to strengthen our liquidity or our long-term capital structure. The financing needs of our homebuilding and financial services operations depend on anticipated sales and home delivery volume in the current year as well as future years, inventory levels and related turnover, forecasted land and lot purchases, debt maturity dates, and other factors. If we seek such additional capital or engage in such other financial transactions, there can be no assurance that we would be able to obtain such additional capital or consummate such other financial transactions on terms acceptable to us, if at all, and such additional equity or debt financing or other financial transactions could dilute the interests of our existing shareholders, add operational limitations and/or increase our interest costs.

Included in the table below is a summary of our available sources of cash from the Credit Facility, the MIF Mortgage Warehousing Agreement and the MIF Mortgage Repurchase Facility as of September 30, ~~2021:~~2022:


(In thousands)	(In thousands)	Expiration Date	Outstanding Balance		Available Amount		(In thousands)	Expiration Date	Outstanding Balance		Available Amount
Notes payable – homebuilding (a)	Notes payable – homebuilding (a)	(a)	$	—	$	455,577	Notes payable – homebuilding (a)	(a)	$	—	$	453,371
Notes payable – financial services (b)	Notes payable – financial services (b)	(b)	$	211,281	$	2,189	Notes payable – financial services (b)	(b)	$	189,371	$	2,334

(a)The available amount under the Credit Facility is computed in accordance with the borrowing base calculation under the Credit Facility, which applies various advance rates for different categories of inventory and totaled ~~$1.13~~$1.53 billion of availability for additional senior debt at September 30, ~~2021.~~2022. As a result, the full $550 million commitment amount of the facility was available, less any borrowings and letters of credit outstanding. There were no borrowings outstanding and ~~$94.4~~$96.6 million of letters of credit outstanding at September 30, ~~2021,~~2022, leaving ~~$455.6~~$453.4 million available. The Credit Facility has an expiration date of July 18, 2025.

(b)The available amount is computed in accordance with the borrowing base calculations under the MIF Mortgage Warehousing Agreement and the MIF Mortgage Repurchase Facility, each of which may be increased by pledging additional mortgage collateral, not to exceed the maximum aggregate commitment amount of M/I Financial’s warehousing agreements, which was ~~$300~~$365 million as of September 30, ~~2021.~~2022. The MIF Mortgage Warehousing Agreement has an expiration date of May ~~27, 2022.~~ 26, 2023. Subsequent to the quarter ended September 30, ~~2021,~~2022, M/I Financial entered into an amendment to the MIF Mortgage Repurchase Facility which extended its term for an additional year to October ~~24, 2022.~~23, 2023.

Notes Payable - Homebuilding.

Homebuilding Credit Facility. The Credit Facility provides for an aggregate commitment amount of $550 million and also includes an accordion feature pursuant to which the maximum borrowing availability may be increased to an aggregate of $700 million, subject to obtaining additional commitments from lenders. The Credit Facility matures on July 18, 2025. Interest on amounts borrowed under the Credit Facility is payable at a rate which is adjusted daily and is equal to the sum of ~~the~~ one-month LIBOR (subject to a floor of 0.25%) plus a margin of 175 basis points (subject to adjustment in subsequent quarterly periods based on the Company’s leverage ratio). The Credit Facility includes a provision for the replacement of LIBOR under certain circumstances where one-month LIBOR is no longer available.

Borrowings under the Credit Facility constitute senior, unsecured indebtedness and availability is subject to, among other things, a borrowing base calculated using various advance rates for different categories of inventory. The Credit Facility also provides for a $150 million sub-facility for letters of credit. The Credit Facility contains various representations, warranties and covenants which require, among other things, that the Company maintain (1) a minimum level of Consolidated Tangible Net Worth of ~~$1.03~~$1.26 billion at September 30, 2022 (subject to increase over time based on earnings and proceeds from equity offerings), (2) a leverage ratio not in excess of 60%, and (3) either a minimum Interest Coverage Ratio of 1.5 to 1.0 or a minimum amount of available liquidity. In addition, the Credit Facility contains covenants that limit the Company’s number of unsold housing units and model homes, as well as the amount of Investments in Unrestricted Subsidiaries and Joint Ventures (each as defined in the Credit Facility). On February 16, 2022, the Company amended its Credit Facility to eliminate specified limits on the Company to make investments in its subordinated debt and capital stock. Such investments are subject to the Company’s compliance with the other covenants and provisions in the Credit Facility.

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

As of September 30, ~~2021,~~2022, the Company was in compliance with all covenants of the Credit Facility, including financial covenants. The following table summarizes the most significant restrictive covenant thresholds under the Credit Facility and our compliance with such covenants as of September 30, ~~2021:~~2022:

Financial Covenant

Covenant Requirement

Actual

Financial Covenant

Covenant Requirement

Actual

(Dollars in millions)

Consolidated Tangible Net Worth

≥

1,034.8

1,468.8

Consolidated Tangible Net Worth

≥

1,256.1

1,846.9

Leverage Ratio

≤

0.60

0.27

Leverage Ratio

≤

0.60

0.28

Interest Coverage Ratio

≥

1.5 to 1.0

16.0 to 1.0

Interest Coverage Ratio

≥

1.5 to 1.0

20.7 to 1.0

Investments in Unrestricted Subsidiaries and Joint Ventures

≤

440.6

0.5

Investments in Unrestricted Subsidiaries and Joint Ventures

≤

554.1

5.9

Unsold Housing Units and Model Homes

≤

3,012

649

Unsold Housing Units and Model Homes

≤

2,911

1,557

Notes Payable - Financial Services.

MIF Mortgage Warehousing Agreement. The MIF Mortgage Warehousing Agreement is used to finance eligible residential mortgage loans originated by M/I Financial. The MIF Mortgage Warehousing Agreement provides for a maximum borrowing availability of ~~$175~~$200 million, which increased to ~~$210~~$275 million from September ~~25, 2021~~19, 2022 to ~~October 15, 2021~~November 13, 2022 and increases to ~~$235~~$300 million from November ~~15, 2021 to~~14, 2022 through February ~~4, 2022,~~6, 2023, which are periods of expected increases in the volume of mortgage originations. The MIF Mortgage Warehousing Agreement expires on May ~~27, 2022.~~26, 2023. Interest on amounts borrowed under the MIF Mortgage Warehousing Agreement is payable at a per annum rate equal to the one-month ~~LIBOR~~BSBY rate (subject to a floor of ~~0.5%~~0.25%) plus a spread of 190 basis points.~~The MIF Mortgage Warehousing Agreement includes a provision for the replacement of LIBOR under certain circumstances where one-month LIBOR is no longer available.~~

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

As of September 30, ~~2021,~~2022, there was ~~$141.5~~$112.2 million outstanding under the MIF Mortgage Warehousing Agreement and M/I Financial was in compliance with all covenants thereunder. The financial covenants, as more fully described and defined in the MIF Mortgage Warehousing Agreement, are summarized in the following table, which also sets forth M/I Financial’s compliance with such covenants as of September 30, ~~2021:~~2022:


Financial Covenant	Financial Covenant		Covenant Requirement		Actual		Financial Covenant		Covenant Requirement		Actual
			(Dollars in millions)						(Dollars in millions)
Leverage Ratio	Leverage Ratio	≤	10.0 to 1.0		7.8 to 1.0		Leverage Ratio	≤	12.0 to 1.0		6.4 to 1.0
Liquidity	Liquidity	≥	$	7.00	$	23.8	Liquidity	≥	$	10.0	$	46.6
Adjusted Net Income	Adjusted Net Income	>	$	0.0	$	39.6	Adjusted Net Income	>	$	0.0	$	22.0
Tangible Net Worth	Tangible Net Worth	≥	$	15.0	$	30.3	Tangible Net Worth	≥	$	20.0	$	37.1

MIF Mortgage Repurchase Facility. The MIF Mortgage Repurchase Facility is used to finance eligible residential mortgage loans originated by M/I Financial and is structured as a mortgage repurchase facility. The MIF Mortgage Repurchase Facility provides for a maximum borrowing availability of $90 million. The MIF Mortgage Repurchase Facility was scheduled to expire on October ~~25, 2021.~~24, 2022. Before entering into the amendment to the MIF Mortgage Repurchase Facility discussed below, M/I Financial ~~pays~~paid interest on each advance under the MIF Mortgage Repurchase Facility at a per annum rate equal to the one-month LIBOR rate (subject to a ~~floor)~~floor of 0.75% or 0.625% based on the type of loan) plus ~~a spread of~~ 175 or 200 basis points depending on the loan type.

~~The MIF Mortgage Repurchase Facility includes a provision for the replacement of LIBOR under certain circumstances where one-month LIBOR is no longer available.~~

Subsequent to the quarter ended September 30, ~~2021,~~2022, M/I Financial entered into an amendment to the MIF Mortgage Repurchase Facility with an effective date of October ~~25, 2021.~~24, 2022. The amendment, among other things, extends the term of the MIF Mortgage Repurchase Facility for an additional year to October ~~24, 2022, reduces~~23, 2023, replaces the LIBOR rate with the One-Month Term SOFR (“SOFR”) rate (subject to an all-in floor ~~on one-month LIBOR from 1.0% to 0.75% (or 0.625%~~of 2.375% or 2.75% based on the type of loan), ~~increases the required minimum level of Minimum Tangible Net Worth from $12.5 million to $15.0 million, increases the required minimum level of liquidity from $6.25 million to $7.0 million~~ and ~~updated the provision for LIBOR replacement.~~adjusts certain financial covenant limits.

The covenants in the MIF Mortgage Repurchase Facility are substantially similar to the covenants in the MIF Mortgage Warehousing Agreement. The MIF Mortgage Repurchase Facility provides for limits with respect to certain loan types that can secure outstanding borrowings, which are substantially similar to the restrictions in the MIF Mortgage Warehousing Agreement. There are no guarantors of the MIF Mortgage Repurchase Facility. As of September 30, ~~2021,~~2022, there was

$~~69.8~~77.2 million outstanding under the MIF Mortgage Repurchase Facility. M/I Financial was in compliance with all financial covenants under the MIF Mortgage Repurchase Facility as of September 30, ~~2021.~~2022.

Senior Notes.

3.95% Senior Notes. On August 23, 2021, the Company issued $300.0 million aggregate principal amount of 3.95% Senior Notes due 2030. The 2030 Senior Notes contain certain covenants, as more fully described and defined in the indenture governing the 2030 Senior Notes, which limit the ability of the Company and the restricted subsidiaries to, among other things: incur certain liens securing indebtedness without equally and ratably securing the 2030 Senior Notes and the guarantees thereof; enter into certain sale and leaseback transactions; and consolidate or merge with or into other companies, liquidate or sell or otherwise dispose of all or substantially all of the Company’s assets. These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2030 Senior Notes. As of September 30, ~~2021,~~2022, the Company was in compliance with all terms, conditions, and covenants under the indenture.

We used a portion of the net proceeds from the issuance of the 2030 Senior Notes to redeem all of our outstanding 2025 Senior Notes at a redemption price of 102.813% of the principal amount, plus accrued and unpaid interest thereon, on August 24, 2021. In connection with the early redemption of our 2025 Senior Notes, we incurred a $9.1 million loss on early extinguishment of debt, consisting of a prepayment premium of $7.1 million and the write-off of unamortized debt issuance costs of $2.0 million. See ~~Note 8~~ ~~to our Consolidated Financial Statements for more information regarding the 2030 Senior Notes.~~

4.95% Senior Notes. On January 22, 2020, the Company issued $400.0 million aggregate principal amount of 4.95% Senior Notes due 2028. The 2028 Senior Notes contain certain covenants, as more fully described and defined in the indenture governing the 2028 Senior Notes, which limit the ability of the Company and the restricted subsidiaries to, among other things: incur additional indebtedness; make certain payments, including dividends, or repurchase any shares, in an aggregate amount exceeding our “restricted payments basket”; make certain investments; and create or incur certain liens, consolidate or merge with or into other companies, or liquidate or sell or transfer all or substantially all of our assets. These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2028 Senior Notes. As of September 30, ~~2021,~~2022, the Company was in compliance with all terms, conditions, and covenants under the indenture.

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

Supplemental Financial Information.

As of September 30, ~~2021,~~2022, M/I Homes, Inc. had $300.0 million aggregate principal amount of its 2030 Senior Notes and $400.0 million aggregate principal amount of its 2028 Senior Notes outstanding.

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

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

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

otherwise ceases to be a Restricted Subsidiary (including by way of liquidation or merger)) in compliance with the terms of the applicable indenture; (4) M/I Homes, Inc. exercises its legal defeasance option or covenant defeasance option under the applicable indenture; or (5) all obligations under the applicable indenture are discharged in accordance with the terms of the applicable indenture.

The enforceability of the obligations of the Subsidiary Guarantors under their guarantees may be subject to review under applicable federal or state laws relating to fraudulent conveyance or transfer, voidable preference and similar laws affecting the

rights of creditors generally. In certain circumstances, a court could void the guarantees, subordinate amounts owing under the guarantees or order other relief detrimental to the holders of the 2030 Senior Notes and the 2028 Senior Notes.

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

Summarized Balance Sheet Data


(In thousands)	(In thousands)	As of September 30, 2021		As of December 31, 2020		(In thousands)	As of September 30, 2022		As of December 31, 2021
Assets:	Assets:					Assets:
Cash	Cash	$	194,339	$	223,284	Cash	$	18,821	$	203,381
Investment in joint venture arrangements	Investment in joint venture arrangements	$	42,314	$	33,764	Investment in joint venture arrangements	$	46,196	$	50,648
Amounts due from Non-Guarantor Subsidiaries	Amounts due from Non-Guarantor Subsidiaries	$	205	$	2,073	Amounts due from Non-Guarantor Subsidiaries	$	16,245	$	6,455
Total assets	Total assets	$	2,768,069	$	2,343,936	Total assets	$	3,294,937	$	2,897,385

Liabilities and Shareholders’ Equity	Liabilities and Shareholders’ Equity					Liabilities and Shareholders’ Equity

Total liabilities	Total liabilities	$	1,269,883	$	1,133,884	Total liabilities	$	1,410,007	$	1,320,337
Shareholders’ equity	Shareholders’ equity	$	1,498,186	$	1,210,052	Shareholders’ equity	$	1,884,930	$	1,577,048

Summarized Statement of Income Data


	Nine Months Ended
(In thousands)	September 30, ~~2021~~2022
Revenues	$	~~2,615,057~~2,850,809
Land and housing costs	$	~~2,028,822~~2,145,082
Selling, general and administrative expense	$	~~257,280~~264,494
Income before income taxes	$	~~321,106~~442,337
Net income	$	~~246,800~~337,336

Weighted Average Borrowings. For the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, our weighted average borrowings outstanding were ~~$728.2~~$835.0 million and ~~$736.3~~$728.2 million, respectively, with a weighted average interest rate of ~~5.41%~~4.98% and ~~5.57%~~5.41%, respectively. The ~~decrease~~increase in our weighted average borrowings related to ~~decreased~~increased borrowings under our two M/I Financial ~~Credit Facilities~~credit facilities during the third quarter of ~~2021~~2022 compared to the same period in ~~2020.~~2021. The decrease in our weighted average borrowing rate was due to lower interest rates on our credit facilities in 2022 compared to the prior year.

At both September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had no borrowings outstanding under the Credit Facility. During the nine months ended September 30, 2022, the average daily amount outstanding under the Credit Facility was $7.3 million and the maximum amount outstanding under the Credit Facility was $82.5 million. Based on our currently anticipated spending on home construction, overhead expenses and land acquisition and development during the remainder of ~~2021,~~2022, offset by ~~our cash balances and~~ expected cash receipts from home deliveries ~~the likelihood of borrowing under the Credit Facility during the remainder of 2021 is low~~ and ~~to the extent that we do borrow under the Credit Facility during the remainder of the year,~~other sources, we do not expect the peak amount outstanding under the Credit Facility to exceed ~~$50~~approximately $200 million. The actual amount borrowed during the remainder of ~~2021~~2022 and the related timing will be subject to numerous factors, ~~including~~which are subject to significant variation as a result of the timing and amount of land and house construction expenditures, payroll and other general and administrative expenses, and cash receipts from home deliveries. The amount borrowed will also be impacted by other cash receipts and payments, any capital markets transactions or other additional financings by the Company, any repayments or redemptions of outstanding debt, any additional share repurchases under the 2021 Share Repurchase Program and any other extraordinary events or transactions. The Company may also experience significant variation in cash and Credit Facility balances from week to week due to the timing of such receipts and payments.

There were ~~$94.4~~$96.6 million of letters of credit issued and outstanding under the Credit Facility at September 30, ~~2021.~~2022. During the nine months ended September 30, ~~2021,~~2022, the average daily amount of letters of credit outstanding under the Credit Facility was ~~$74.7~~$92.7 million and the maximum amount of letters of credit outstanding under the Credit Facility was ~~$94.5~~$107.8 million.

At September 30, ~~2021,~~2022, M/I Financial had ~~$141.5~~$112.2 million outstanding under the MIF Mortgage Warehousing Agreement. During the nine months ended September 30, ~~2021,~~2022, the average daily amount outstanding under the MIF Mortgage Warehousing Agreement was ~~$8.5~~$59.1 million and the maximum amount outstanding was ~~$168.1~~$196.8 million, which occurred during January ~~2021,~~2022 while the temporary increase provision was in effect and the maximum borrowing availability was ~~$185.0~~$235.0 million.

At September 30, ~~2021,~~2022, M/I Financial had ~~$69.8~~$77.2 million outstanding under the MIF Mortgage Repurchase Facility. During the nine months ended September 30, ~~2021,~~2022, the average daily amount outstanding under the MIF Mortgage Repurchase Facility was ~~$43.6~~$38.1 million and the maximum amount outstanding was ~~$78.6~~$77.2 million, which occurred during ~~April 2021.~~September 2022.

Universal Shelf Registration. In June ~~2019,~~2022, the Company filed a ~~$400 million~~ universal shelf registration statement with the SEC, which registration statement became effective upon filing and will expire in June ~~2022.~~2025. Pursuant to the registration statement, the Company may, from time to time, offer debt securities, common shares, preferred shares, depositary shares, warrants to purchase debt securities, common shares, preferred shares, depositary shares or units of two or more of those securities, rights to purchase debt securities, common shares, preferred shares or depositary shares, stock purchase contracts and units. The timing and amount of offerings, if any, will depend on market and general business conditions.

~~CONTRACTUAL OBLIGATIONS~~

Our contractual obligations as of September 30, 2021 have not changed materially from those reported in the Contractual Obligations section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2020 Form 10-K, except that:

•~~In May 2021, we entered into the Fifth Amendment to the MIF Warehousing Agreement;~~

•~~In June 2021, we entered into the Fourth Amendment to the Credit Facility;~~

•~~In August 2021, we issued $300 million in aggregate principal amount of 2030 Senior Notes, and used a portion of the proceeds to redeem all of our then outstanding 2025 Senior Notes; and~~

•~~In October 2021, we entered into the Fourth Amendment to the MIF Mortgage Repurchase Facility.~~

~~Included in the table below is a summary of future cash requirements under the Company’s contractual obligations with regard to our long-term debt and interest commitments as of September 30, 2021:~~

Payments due by period
October 1, 2021 through December 31, 2023 January 1, 2024 through December 31, 2025
(In thousands) Total Thereafter
Notes payable bank – homebuilding operations (a)
$ — $ — $ — $ —
Notes payable bank – financial services (b)
211,351 211,351 — —
Senior notes (including interest) 929,162 63,037 63,300 802,825
Total $ 1,140,513 $ 274,388 $ 63,300 $ 802,825

~~(a)At September 30, 2021, there were no borrowings outstanding under the Credit Facility.~~

~~(b)~~Borrowings under the MIF Mortgage Warehousing Agreement are at the one-month LIBOR rate (subject to a floor of 0.5%) plus a spread of 190 basis points. Borrowings under the MIF Mortgage Repurchase Facility are at the one-month LIBOR rate (subject to a floor) plus a spread of 175 or 200 basis points, depending on the loan type. Total borrowings outstanding under both agreements at September 30, 2021 had a weighted average interest rate of 2.5%. Interest payments by period will be based upon the outstanding borrowings and the applicable interest rate(s) in effect.

~~See~~ ~~Note 8~~ ~~of our Unaudited Condensed Consolidated Financial Statements and the “Liquidity and Capital Resources” section above for further information.~~

~~OFF-BALANCE SHEET ARRANGEMENTS~~

~~Notes~~ 3, 5 ~~and~~ 6 to our Condensed Consolidated Financial Statements discuss our off-balance sheet arrangements with respect to land acquisition contracts and option agreements, and land development joint ventures, including the nature and amounts of financial obligations relating to these items. In addition, these Notes discuss the nature and amounts of certain types of commitments that arise in the ordinary course of our land development and homebuilding operations, including commitments of land development joint ventures for which we might be obligated.

Our off-balance sheet arrangements relating to our homebuilding operations include joint venture arrangements, land option agreements, guarantees and indemnifications associated with acquiring and developing land, and the issuance of letters of credit and completion bonds. Our use of these arrangements is for the purpose of securing the most desirable lots on which to build

homes for our homebuyers in a manner that we believe reduces the overall risk to the Company. Additionally, in the ordinary course of its business, M/I Financial issues guarantees and indemnities relating to the sale of loans to third parties.

~~Land Option Agreements.~~ In the ordinary course of business, the Company enters into land option or purchase agreements for which we generally pay non-refundable deposits. Pursuant to these land option agreements, the Company provides a deposit to the seller as consideration for the right to purchase land at different times in the future, usually at predetermined prices. In accordance with Accounting Standards Codification 810-10 ~~Consolidation~~ (“ASC 810”), we analyze our land option or purchase agreements to determine whether the corresponding land sellers are variable interest entities (“VIE”) and, if so, whether we are the primary beneficiary. Although we do not have legal title to the optioned land, ASC 810 requires a company to consolidate a VIE if the company is determined to be the primary beneficiary. In cases where we are the primary beneficiary, even though we do not have title to such land, we are required to consolidate these purchase/option agreements and reflect such assets and liabilities as Consolidated Inventory not Owned in our Unaudited Condensed Consolidated Balance Sheets. At both September 30, 2021 and December 31, 2020, we have concluded that we were not the primary beneficiary of any VIEs from which we are purchasing under land option or purchase agreements.

In addition, we evaluate our land option or purchase agreements to determine for each contract if (1) a portion or all of the purchase price is a specific performance requirement, or (2) the amount of deposits and prepaid acquisition and development costs have exceeded certain thresholds relative to the remaining purchase price of the lots. If either is the case, then the remaining purchase price of the lots (or the specific performance amount, if applicable) is recorded as an asset and liability in Consolidated Inventory Not Owned on our Consolidated Balance Sheets.

At September 30, 2021, “Consolidated Inventory Not Owned” was $4.4 million. At September 30, 2021, the corresponding liability of $4.4 million has been classified as Obligation for Consolidated Inventory Not Owned on our Unaudited Condensed Consolidated Balance Sheets.

Other than the Consolidated Inventory Not Owned balance, the Company currently believes that its maximum exposure as of September 30, 2021 related to our land option agreements is equal to the amount of the Company’s outstanding deposits and prepaid acquisition costs, which totaled $71.8 million, including cash deposits of $48.6 million, prepaid acquisition costs of $9.2 million, letters of credit of $12.6 million and $1.4 million of other non-cash deposits.

~~Letters of Credit and Completion Bonds.~~ The Company provides standby letters of credit and completion bonds for development work in progress, deposits on land and lot purchase agreements and miscellaneous deposits. As of September 30, 2021, the Company had outstanding $363.6 million of completion bonds and standby letters of credit, some of which were issued to various local governmental entities, that expire at various times through November 2027. Included in this total are: (1) $263.6 million of performance and maintenance bonds and $81.4 million of performance letters of credit that serve as completion bonds for land development work in progress; (2) $13.0 million of financial letters of credit; and (3) $5.6 million of financial bonds. The development agreements under which we are required to provide completion bonds or letters of credit are generally not subject to a required completion date and only require that the improvements are in place in phases as houses are built and sold. In locations where development has progressed, the amount of development work remaining to be completed is typically less than the remaining amount of bonds or letters of credit due to timing delays in obtaining release of the bonds or letters of credit.

~~Guarantees and Indemnities~~.In the ordinary course of business, M/I Financial enters into agreements that guarantee purchasers of its mortgage loans that M/I Financial will repurchase a loan if certain conditions occur. The risks associated with these guarantees are offset by the value of the underlying assets, and the Company accrues its best estimate of the probable loss on these loans. Additionally, the Company has provided certain other guarantees and indemnities in connection with the acquisition and development of land by our homebuilding operations. See ~~Note 5~~ ~~to our Condensed Consolidated Financial Statements for additional details relating to our guarantees and indemnities.~~

INTEREST RATES AND INFLATION

Our business is significantly affected by general economic conditions within the United States and, particularly, by the impact of interest rates and inflation. ~~Inflation can~~The annual rate of inflation in the United States hit 8.2% in September 2022, as measured by the Consumer Price Index (CPI), down slightly from 9.1% in June 2022, which represented the highest inflation rate in 40 years. As a result, we have ~~a long-term impact on us because increasing~~experienced an increase in the costs of land, materials and labor ~~can~~that we have been able to pass along to the consumer. However, inflation has also reduced the purchasing power of potential homebuyers and may negatively impact their ability and desire to buy a home and our ability to pass along our increased costs to our homebuyers.

Beginning in the latter part of the second quarter of 2022, the pace of sales across the homebuilding industry declined significantly from the unprecedented levels experienced over the previous 18 months as a result of the sharp increase in ~~a need to increase the sales prices of homes. In addition, inflation is often accompanied by higher~~mortgage interest rates ~~which can~~from approximately 4% in December 2021 to nearly 7% at the end of 2022’s third quarter, the highest rates in over a decade, as well as significant inflation in the broader economy (as discussed above), the substantial rise in home prices and stock market volatility. These macroeconomic trends have ~~a negative impact on~~pressured housing ~~demand~~affordability, negatively impacted homebuyer sentiment and impacted the costs of financing land development activities and housing construction. ~~Higher~~The higher mortgage interest rates ~~also may decrease our potential market by~~and the high rate of inflation are making it more difficult for homebuyers to qualify for mortgages or to obtain mortgages at interest rates that are acceptable to them. The impact of increased rates can be offset, in part, by offering variable rate loans with lower interest rates. In conjunction with our mortgage financing services, hedging methods are used to reduce our exposure to interest rate fluctuations between the commitment date of the loan and the

~~time the loan closes.~~ Rising interest rates, as well as increased materials and labor costs, ~~may~~can also reduce gross margins. An increase in material and labor costs is particularly a problem during a period of declining home prices. Conversely, deflation can impact the value of real estate and make it difficult for us to recover our land costs. Therefore, either inflation or deflation could adversely impact our future results of operations.

4341

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary market risk results from fluctuations in interest rates. We are exposed to interest rate risk through borrowings under our revolving credit facilities, consisting of the Credit Facility, the MIF Mortgage Warehousing Agreement, and the MIF Mortgage Repurchase Facility which permitted borrowings of up to ~~$850~~$915 million as of September 30, ~~2021,~~2022, subject to availability constraints. Additionally, M/I Financial is exposed to interest rate risk associated with its mortgage loan origination services.

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

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

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

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

The table below shows the notional amounts of our financial instruments at September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30,		December 31,			September 30,		December 31,
Description of Financial Instrument (in thousands)	Description of Financial Instrument (in thousands)	2021		2020		Description of Financial Instrument (in thousands)	2022		2021
Whole loan contracts and related committed IRLCs	Whole loan contracts and related committed IRLCs	$	5,294	$	2,354	Whole loan contracts and related committed IRLCs	$	4,169	$	782
Uncommitted IRLCs	Uncommitted IRLCs	273,470		208,500		Uncommitted IRLCs	477,065		228,831
FMBSs related to uncommitted IRLCs	FMBSs related to uncommitted IRLCs	258,000		183,000		FMBSs related to uncommitted IRLCs	476,000		223,000
Whole loan contracts and related mortgage loans held for sale	Whole loan contracts and related mortgage loans held for sale	6,813		78,142		Whole loan contracts and related mortgage loans held for sale	18,648		3,785
FMBSs related to mortgage loans held for sale	FMBSs related to mortgage loans held for sale	192,000		131,000		FMBSs related to mortgage loans held for sale	174,000		251,000
Mortgage loans held for sale covered by FMBSs	Mortgage loans held for sale covered by FMBSs	192,672		148,331		Mortgage loans held for sale covered by FMBSs	172,151		263,088

The table below shows the measurement of assets and liabilities at September 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		September 30,		December 31,			September 30,		December 31,
Description of Financial Instrument (in thousands)	Description of Financial Instrument (in thousands)	2021		2020		Description of Financial Instrument (in thousands)	2022		2021
Mortgage loans held for sale	Mortgage loans held for sale	$	215,857	$	234,293	Mortgage loans held for sale	$	183,327	$	275,655
Forward sales of mortgage-backed securities	Forward sales of mortgage-backed securities	3,253		(1,640)		Forward sales of mortgage-backed securities	26,676		4,477
Interest rate lock commitments	Interest rate lock commitments	745		1,664		Interest rate lock commitments	(16,173)		(487)
Whole loan contracts	Whole loan contracts	(30)		(422)		Whole loan contracts	(181)		(62)
Total	Total	$	219,825	$	233,895	Total	$	193,649	$	279,583

The following table sets forth the amount of gain (loss) recognized on assets and liabilities for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
Description (in thousands)	Description (in thousands)	2021		2020		2021		2020		Description (in thousands)	2022		2021		2022		2021
Mortgage loans held for sale	Mortgage loans held for sale	$	(1,704)	$	(1,338)	$	(1,962)	$	(911)	Mortgage loans held for sale	$	(4,396)	$	(1,704)	$	(7,271)	$	(1,962)
Forward sales of mortgage-backed securities	Forward sales of mortgage-backed securities	3,877		1,670		4,893		507		Forward sales of mortgage-backed securities	24,952		3,877		22,199		4,893
Interest rate lock commitments	Interest rate lock commitments	(1,440)		(853)		(940)		704		Interest rate lock commitments	(13,015)		(1,440)		(15,708)		(940)
Whole loan contracts	Whole loan contracts	49		(20)		413		(68)		Whole loan contracts	(209)		49		(97)		413
Total gain (loss) recognized	Total gain (loss) recognized	$	782	$	(541)	$	2,404	$	232	Total gain (loss) recognized	$	7,332	$	782	$	(877)	$	2,404

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The following table provides the expected future cash flows and current fair values of borrowings under our credit facilities and mortgage loan origination services that are subject to market risk as interest rates fluctuate, as of September 30, ~~2021.~~2022. Because the MIF Mortgage Warehousing Agreement and MIF Mortgage Repurchase Facility are effectively secured by certain mortgage loans held for sale which are typically sold within 30 to 45 days, their outstanding balances are included in the most current period presented. The interest rates for our variable rate debt represent the weighted average interest rates in effect at September 30, ~~2021.~~2022. For fixed-rate debt, changes in interest rates generally affect the fair market value of the debt instrument, but not our earnings or cash flow. Conversely, for variable-rate debt, changes in interest rates generally do not affect the fair market value of the debt instrument, but do affect our earnings and cash flow. We do not have the obligation to prepay fixed-rate debt prior to maturity, and, as a result, interest rate risk and changes in fair market value should not have a significant impact on our fixed-rate debt until we are required or elect to refinance it.


		Expected Cash Flows by Period															Fair Value			Expected Cash Flows by Period													Fair Value
(Dollars in thousands)	(Dollars in thousands)	2021			2022			2023	2024	2025	Thereafter			Total			9/30/2021		(Dollars in thousands)	2022			2023	2024	2025	2026	Thereafter			Total			9/30/2022
ASSETS:	ASSETS:																		ASSETS:
Mortgage loans held for sale:	Mortgage loans held for sale:																		Mortgage loans held for sale:
Fixed rate	Fixed rate	$	221,424		—			—	—	—	—			$	221,424		$	215,857	Fixed rate	$	187,889		—	—	—	—	—			$	187,889		$	183,327
Weighted average interest rate	Weighted average interest rate	2.80		%	—			—	—	—	—			2.80		%			Weighted average interest rate	5.00		%	—	—	—	—	—			5.00		%

LIABILITIES:	LIABILITIES:																		LIABILITIES:
Long-term debt — fixed rate	Long-term debt — fixed rate	$	708		$	44		—	—	—	$	700,000		$	700,752		$	719,739	Long-term debt — fixed rate	—			—	—	—	—	$	700,000		$	700,000		$	548,375
Weighted average interest rate	Weighted average interest rate	5.63		%	5.63		%	—	—	—	4.52		%	4.52		%			Weighted average interest rate	—			—	—	—	—	4.52		%	4.52		%
Short-term debt — variable rate	Short-term debt — variable rate	$	211,281		—			—	—	—	—			$	211,281		$	211,281	Short-term debt — variable rate	$	189,371		—	—	—	—	—			$	189,371		$	189,371
Weighted average interest rate	Weighted average interest rate	2.52		%	—			—	—	—	—			2.52		%			Weighted average interest rate	4.99		%	—	—	—	—	—			4.99		%

4543

ITEM 4: CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company’s legal proceedings are discussed in Note 6 to the Company’s Consolidated Financial Statements.

Item 1A. Risk Factors

~~There~~Except as set forth below, there have been no material changes to the risk factors appearing in our ~~2020~~2021 Form ~~10-K.~~10-K, other than as follows.

A reduction in the availability of mortgage financing or a significant increase in mortgage interest rates or down payment requirements could adversely affect our business.

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

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

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

Mortgage interest rates increased significantly during the first nine months of 2022 from historical lows. These increases and the additional increases forecasted by the Federal Reserve could increase the costs of owning a home and could reduce the demand for our homes.

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

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

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

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

(a) Recent Sales of Unregistered Securities - None.

(b) Use of Proceeds - Not Applicable.

Common shares purchased during the three months ended September 30, ~~2021~~2022 were as follows:

Period Total Number of Shares Purchased Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)
Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs(1)
July 1, 2021 - July 31, 2021 — — — $ 100,000,000
August 1, 2021 - August 31, 2021 100,000 $ 63.71 100,000 $ 93,629,190
September 1, 2021 - September 30, 2021 142,500 $ 64.02 142,500 $ 84,505,757
Quarter ended September 30, 2021 242,500 $ 63.89 242,500 $ 84,505,757


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs(1)


July 1, 2022 - July 30, 2022	10,000	$	46.24	10,000	$	107,351,523
August 1, 2022 - August 31, 2022	230,000	$	45.72	230,000	$	88,273,043
September 1, 2022 - September 30, 2022	100,000	$	41.20	100,000	$	83,402,168

Quarter ended September 30, 2022	340,000	$	44.41	340,000	$	83,402,168

(1) On July 28, 2021, the Company announced that its Board of Directors authorized the 2021 Share Repurchase Program. On February 17, 2022, the Company announced that its Board of Directors approved an increase to the 2021 Share Repurchase Program ~~pursuant to which~~by an additional $100 million. Under the 2021 Share Repurchase Program, the Company may purchase up to ~~$100~~$200 million of its outstanding common shares through open market transactions, privately negotiated transactions or otherwise in accordance with all applicable laws, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934. The 2021 Share Repurchase Program does not have an expiration date and may be modified, suspended or discontinued at any time. ~~The 2021 Share Repurchase Program replaced and superseded the 2018 Share Repurchase Program.~~ See Note 12 to our Condensed Consolidated Financial Statements for additional information.

See Note 8 to our Condensed Consolidated Financial Statements above for more information regarding the limit imposed by the indenture governing our 2028 Senior Notes on our ability to pay dividends on, and repurchase, our common shares and any preferred shares of the Company then outstanding to the amount of the positive balance in our “restricted payments basket,” as defined in the indenture.

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

Note 12 to the Condensed Consolidated Financial Statements and the “Liquidity and Capital Resources” section above for more information regarding the 2021 Share Repurchase Program.

Item 3. Defaults Upon Senior Securities - None.

Item 4. Mine Safety Disclosures - None.

Item 5. Other Information - None.

Item 6. Exhibits

The exhibits required to be filed herewith are set forth below.


Exhibit Number						Description

~~4.1~~						~~Indenture, dated as of August 23, 2021, by and among M/I Homes, Inc., the guarantors named therein and U.S. Bank National Association, as trustee of M/I Homes, Inc.’s 3.95% Senior Notes due 2030~~(~~incorporated herein by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on August 23, 2021~~).

~~4.2~~						~~Form of 3.95% Senior Notes due 2030~~ (~~incorporated herein by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on August 23, 2021~~).

~~4.3~~						~~Registration Rights Agreement, dated as of August 23, 2021, by and among M/I Homes, Inc., the guarantors named therein and the initial purchasers named therein~~(~~incorporated herein by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on August 23, 2021~~).



10.1						~~Fourth~~Fifth Amendment to Second Amended and Restated Master Repurchase Agreement as of October ~~25, 2021~~24, 2022 by and between M/I Financial LLC and ~~Sterling National~~Webster Bank, ~~(Filed herewith).~~N.A.
~~10.2~~						~~Form of Restricted Share Unit Award Agreement for Directors under the M/I Homes, Inc. 2018 Long-Term Incentive Plan~~ (Filed herewith).

22						List of Subsidiary ~~Guarantors (incorporated herein by reference to Exhibit 22 to the Company’s Quarterly Report on Form 10-Q filed on April 28, 2021).~~Guarantors. (Filed herewith.)





31.1						Certification by Robert H. Schottenstein, Chief Executive Officer, pursuant to Item 601 of Regulation S-K as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)

31.2						Certification by Phillip G. Creek, Chief Financial Officer, pursuant to Item 601 of Regulation S-K as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)

32.1						Certification by Robert H. Schottenstein, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)

32.2						Certification by Phillip G. Creek, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)

101.INS						XBRL Instance Document. (Furnished herewith.)

101.SCH						XBRL Taxonomy Extension Schema Document. (Furnished herewith.)

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document. (Furnished herewith.)

101.LAB						XBRL Taxonomy Extension Label Linkbase Document. (Furnished herewith.)

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document. (Furnished herewith.)

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document. (Furnished herewith.)

104						Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101).

4746

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.

M/I Homes, Inc.

(Registrant)

Date:

October ~~29, 2021~~28, 2022

By:

/s/ Robert H. Schottenstein

Robert H. Schottenstein

Chairman, Chief Executive Officer and President

(Principal Executive Officer)

Date:

October ~~29, 2021~~28, 2022

By:

/s/ Ann Marie W. Hunker

Ann Marie W. Hunker

Vice President, Chief Accounting Officer and Controller

(Principal Accounting Officer)

4847


	Payments due by period
			October 1, 2021 through December 31, 2023		January 1, 2024 through December 31, 2025
(In thousands)	Total						Thereafter
Notes payable bank – homebuilding operations (a)	$	—	$	—	$	—	$	—
Notes payable bank – financial services (b)	211,351		211,351		—		—
Senior notes (including interest)	929,162		63,037		63,300		802,825
Total	$	1,140,513	$	274,388	$	63,300	$	802,825