(Mark One)

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

4350 South Monaco Street, Suite 500

80237

Denver, Colorado

(Zip code)

(Address of principal executive offices)

As of ~~November 1~~, ~~2017~~, ~~51,943,156~~April 27, 2021, 70,267,325 shares of M.D.C. Holdings, Inc. common stock were outstanding.

M.D.C. HOLDINGS, INC.

FOR THE QUARTER ENDED~~SEPTEMBER 30~~,~~2017~~

March 31, 2021

Item 1. Unaudited Consolidated Financial ~~Statement~~s

Statements

M.D.C. HOLDINGS, INC.

Consolidated Balance Sheets.


	March 31, 2021		December 31, 2020

	(Dollars in thousands, except per share amounts)
ASSETS
Homebuilding:
Cash and cash equivalents	$	678,194	$	411,362
Restricted cash	17,314		15,343
Trade and other receivables	107,823		72,466
Inventories:
Housing completed or under construction	1,705,424		1,486,587
Land and land under development	1,310,721		1,345,643
Total inventories	3,016,145		2,832,230
Property and equipment, net	60,394		61,880
Deferred tax asset, net	12,802		11,454
Prepaids and other assets	107,428		101,685
Total homebuilding assets	4,000,100		3,506,420
Financial Services:
Cash and cash equivalents	81,100		77,267

Mortgage loans held-for-sale, net	230,789		232,556
Other assets	70,941		48,677
Total financial services assets	382,830		358,500
Total Assets	$	4,382,930	$	3,864,920
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable	$	120,496	$	98,862
Accrued and other liabilities	333,880		300,735
Revolving credit facility	10,000		10,000
Senior notes, net	1,384,475		1,037,391
Total homebuilding liabilities	1,848,851		1,446,988
Financial Services:
Accounts payable and accrued liabilities	101,725		95,630
Mortgage repurchase facility	217,482		202,390
Total financial services liabilities	319,207		298,020
Total Liabilities	2,168,058		1,745,008
Stockholders' Equity
Preferred stock, $0.01 par value; 25,000,000 shares authorized; NaN issued or outstanding	0		0
Common stock, $0.01 par value; 250,000,000 shares authorized; 70,265,205 and 64,851,126 issued and outstanding at March 31, 2021 and December 31, 2020, respectively	703		649
Additional paid-in-capital	1,698,109		1,407,597
Retained earnings	516,060		711,666
Total Stockholders' Equity	2,214,872		2,119,912
Total Liabilities and Stockholders' Equity	$	4,382,930	$	3,864,920

September 30,

December 31,

2017

2016

(Dollars in thousands, except

per share amounts)

(Unaudited)
ASSETS

Homebuilding:

Cash and cash equivalents
$ 351,399 $ 259,087
Marketable securities
- 59,770
Restricted cash
8,723 3,778
Trade and other receivables
42,904 42,492
Inventories:

Housing completed or under construction
969,419 874,199
Land and land under development
863,002 884,615
Total inventories
1,832,421 1,758,814
Property and equipment, net
26,304 28,041
Deferred tax asset, net
64,164 74,888
Metropolitan district bond securities (related party)
- 30,162
Prepaid and other assets
72,808 60,463
Total homebuilding assets
2,398,723 2,317,495
Financial Services:

Cash and cash equivalents
26,419 23,822
Marketable securities
40,221 36,436
Mortgage loans held-for-sale, net
89,804 138,774
Other assets
11,135 12,062
Total financial services assets
167,579 211,094
Total Assets
$ 2,566,302 $ 2,528,589
LIABILITIES AND EQUITY

Homebuilding:

Accounts payable
$ 49,390 $ 42,088
Accrued liabilities
151,661 144,566
Revolving credit facility
15,000 15,000
Senior notes, net
842,532 841,646
Total homebuilding liabilities
1,058,583 1,043,300
Financial Services:

Accounts payable and accrued liabilities
51,697 50,734
Mortgage repurchase facility
65,103 114,485
Total financial services liabilities
116,800 165,219
Total Liabilities
1,175,383 1,208,519
Stockholders' Equity

Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued or outstanding
- -
Common stock, $0.01 par value; 250,000,000 shares authorized; 51,933,969 and 51,485,090 issued and outstanding at September 30, 2017 and December 31, 2016, respectively
519 515
Additional paid-in-capital
995,132 983,532
Retained earnings
392,442 313,952
Accumulated other comprehensive income
2,826 22,071
Total Stockholders' Equity
1,390,919 1,320,070
Total Liabilities and Stockholders' Equity
$ 2,566,302 $ 2,528,589

Consolidated Statements of Operations and Comprehensive Income


	Three Months Ended March 31,
		2021		2020

		(Dollars in thousands, except per share amounts)
Homebuilding:
Home sale revenues		$	1,041,858	$	697,085
Home cost of sales		(813,888)		(558,647)


Gross profit		227,970		138,438
Selling, general and administrative expenses		(114,993)		(89,321)
Interest and other income		967		1,889
Other expense		(437)		(1,337)
Homebuilding pretax income		113,507		49,669

Financial Services:
Revenues		45,023		21,886
Expenses		(15,105)		(10,929)
Other income (expense), net		887		(12,064)
Financial services pretax income (loss)		30,805		(1,107)

Income before income taxes		144,312		48,562
Provision for income taxes		(33,622)		(11,802)
Net income		$	110,690	$	36,760

Comprehensive income		$	110,690	$	36,760

Earnings per share:
Basic		$	1.58	$	0.54
Diluted		$	1.51	$	0.52

Weighted average common shares outstanding:
Basic		69,790,927		67,490,537
Diluted		72,788,177		70,125,723

Dividends declared per share		$	0.37	$	0.31

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(Dollars in thousands, except per share amounts)

(Unaudited)

Homebuilding:

Home sale revenues
$ 584,947 $ 575,722 $ 1,796,046 $ 1,541,337
Land sale revenues
1,340 2,290 2,938 4,930
Total home and land sale revenues
586,287 578,012 1,798,984 1,546,267
Home cost of sales
(485,147 ) (481,511 ) (1,493,166 ) (1,287,373 )
Land cost of sales
(1,259 ) (2,318 ) (2,672 ) (4,197 )
Inventory impairments
(4,540 ) (4,700 ) (9,390 ) (6,300 )
Total cost of sales
(490,946 ) (488,529 ) (1,505,228 ) (1,297,870 )
Gross margin
95,341 89,483 293,756 248,397
Selling, general and administrative expenses
(69,102 ) (61,904 ) (206,109 ) (182,621 )
Interest and other income
54,548 1,869 59,722 5,358
Other expense
(618 ) (1,558 ) (1,635 ) (2,463 )
Other-than-temporary impairment of marketable securities
- (215 ) (51 ) (934 )
Homebuilding pretax income
80,169 27,675 145,683 67,737

Financial Services:

Revenues
17,464 17,408 54,516 44,248
Expenses
(8,849 ) (7,955 ) (25,247 ) (21,739 )
Interest and other income
925 1,035 3,142 2,648
Other-than-temporary impairment of marketable securities
(29 ) (111 ) (160 ) (111 )
Financial services pretax income
9,511 10,377 32,251 25,046

Income before income taxes
89,680 38,052 177,934 92,783
Provision for income taxes
(28,517 ) (11,693 ) (60,651 ) (29,948 )
Net income
$ 61,163 $ 26,359 $ 117,283 $ 62,835

Other comprehensive income (loss) related to available for sale securities, net of tax
(23,175 ) 1,028 (19,245 ) 3,871
Comprehensive income
$ 37,988 $ 27,387 $ 98,038 $ 66,706

Earnings per share:

Basic
$ 1.18 $ 0.51 $ 2.27 $ 1.22
Diluted
$ 1.16 $ 0.51 $ 2.23 $ 1.22

Weighted average common shares outstanding:

Basic
51,650,360 51,297,132 51,502,986 51,286,844
Diluted
52,601,118 51,460,446 52,248,377 51,297,765

Dividends declared per share
$ 0.25 $ 0.24 $ 0.75 $ 0.72

Consolidated Statements of ~~Cash Flows~~

Changes in Stockholders’ Equity

Nine Months Ended

September 30,

2017

2016

(Dollars in thousands)

(Unaudited)

Operating Activities:

Net income
$ 117,283 $ 62,835
Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Stock-based compensation expense
3,100 6,636
Depreciation and amortization
4,205 3,702
Inventory impairments
9,390 6,300
Other-than-temporary impairment of marketable securities
211 1,045
Gain on sale of marketable securities
(18,122 ) (911 )
Gain on sale of metropolitan district bond securities (related party)
(35,847 ) -
Deferred income tax expense
22,795 11,357
Net changes in assets and liabilities:

Restricted cash
(4,945 ) (871 )
Trade and other receivables
119 (21,679 )
Mortgage loans held-for-sale
48,970 (2,319 )
Housing completed or under construction
(101,997 ) (229,739 )
Land and land under development
19,886 141,131
Prepaid expenses and other assets
(11,229 ) (4,573 )
Accounts payable and accrued liabilities
15,345 18,183
Net cash provided by (used in) operating activities
69,164 (8,903 )

Investing Activities:

Purchases of marketable securities
(17,604 ) (28,272 )
Sales of marketable securities
83,315 56,873
Proceeds from sale of metropolitan district bond securities (related party)
44,253 -
Purchases of property and equipment
(1,917 ) (3,865 )
Net cash provided by investing activities
108,047 24,736

Financing Activities:

Advances (payments) on mortgage repurchase facility, net
(49,382 ) 3,400
Dividend payments
(38,793 ) (36,763 )
Payments of deferred financing costs
(2,630 ) -
Proceeds from exercise of stock options
8,503 -
Net cash used in financing activities
(82,302 ) (33,363 )

Net increase (decrease) in cash and cash equivalents
94,909 (17,530 )
Cash and cash equivalents:

Beginning of period
282,909 180,988
End of period
$ 377,818 $ 163,458
(Dollars in thousands, except share amounts)


	Three Months Ended March 31, 2021
	Common Stock			Additional Paid-in Capital		Retained Earnings		Total
	Shares	Amount
Balance at December 31, 2020	64,851,126	$	649	$	1,407,597	$	711,666	$	2,119,912
Net Income	—	—		—		110,690		110,690
Shares issued under stock-based compensation programs, net	221,303	2		1,007		—		1,009
Cash dividends declared	—	—		—		(25,978)		(25,978)
Stock dividend declared	5,192,776	52		279,579		(280,318)		(687)
Stock-based compensation expense	—	—		9,926		—		9,926

Balance at March 31, 2021	70,265,205	$	703	$	1,698,109	$	516,060	$	2,214,872


	Three Months Ended March 31, 2020
	Common Stock			Additional Paid-in Capital		Retained Earnings		Total
	Shares	Amount
Balance at December 31, 2019	62,574,961	$	626	$	1,348,733	$	433,126	$	1,782,485
Cumulative effect of newly adopted accounting standards	—	—		—		(34)		(34)
Balance at January 1, 2020	62,574,961	626		1,348,733		433,092		1,782,451
Net Income	—	—		—		36,760		36,760
Shares issued under stock-based compensation programs, net	477,582	5		8,189		—		8,194
Cash dividends declared	—	—		—		(20,768)		(20,768)
Stock-based compensation expense	—	—		4,440		—		4,440
Forfeiture of restricted stock	(48)	—		—		—		—
Balance at March 31, 2020	63,052,495	$	631	$	1,361,362	$	449,084	$	1,811,077

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

M.D.C. HOLDINGS, INC.

Consolidated Statements of Cash Flows
Three Months Ended
March 31,
2021 2020
(Dollars in thousands)
Operating Activities:
Net income $ 110,690 $ 36,760
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense 9,926 4,440
Depreciation and amortization 7,003 5,152
Net (gain) loss on marketable equity securities 0 13,268
Deferred income tax expense (1,348) 1,131
Net changes in assets and liabilities:
Trade and other receivables (40,282) (1,611)
Mortgage loans held-for-sale, net 1,767 63,100
Housing completed or under construction (218,655) (178,873)
Land and land under development 34,978 29,051
Prepaids and other assets (23,594) (8,460)
Accounts payable and accrued and other liabilities 61,558 (1,131)
Net cash used in operating activities (57,957) (37,173)
Investing Activities:
Purchases of marketable securities 0 (9,782)
Sales of marketable securities 0 9,276
Purchases of property and equipment (5,749) (6,512)
Net cash used in investing activities (5,749) (7,018)
Financing Activities:
Payments on mortgage repurchase facility, net 15,092 (40,872)
Repayment of senior notes 0 (250,000)
Proceeds from issuance of senior notes 347,725 298,050
Dividend payments (26,665) (20,768)
Payments of deferred financing costs (819) 0
Issuance of shares under stock-based compensation programs, net 1,009 8,194
Net cash provided by (used in) financing activities 336,342 (5,396)
Net increase (decrease) in cash, cash equivalents and restricted cash 272,636 (49,587)
Cash, cash equivalents and restricted cash:
Beginning of period 503,972 474,212
End of period $ 776,608 $ 424,625
Reconciliation of cash, cash equivalents and restricted cash:
Homebuilding:
Cash and cash equivalents $ 678,194 $ 386,704
Restricted cash 17,314 15,762
Financial Services:
Cash and cash equivalents 81,100 22,159
Total cash, cash equivalents and restricted cash $ 776,608 $ 424,625

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

Table of Contents

1.	~~Basis of Presentation~~

1. Basis of Presentation

The Unaudited Consolidated Financial Statements of M.D.C. Holdings, Inc. ("MDC," “the Company," “we,” “us,” or “our,,” which refers to M.D.C. Holdings, Inc. and its subsidiaries) have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Accordingly, they do not include all information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. These statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows of MDC at ~~September 30, 2017~~ March 31, 2021 and for all periods presented. These statements should be read in conjunction with MDC’s Consolidated Financial Statements and Notes thereto included in MDC’s Annual Report on Form 10-K10-K for the year ended December 31, ~~2016.~~

2020.

On ~~November 21, 2016,~~ ~~MDC~~’sJanuary 25, 2021, MDC's board of directors declared a 5%an 8% stock dividend that was distributed on ~~December 20, 2016~~ March 17, 2021 to shareholders of record on ~~December 6, 2016.~~ March 3, 2021. In accordance with Accounting Standards Codification ~~(“ASC”~~("ASC") Topic 260,Earnings Per Share (“("ASC ~~260”~~260"), basic and diluted earnings per share amounts, share amounts and dividends declared per share have been restated for any ~~periods~~period or dates prior to the stock dividend record date.

Included in these footnotes are certain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our business, financial condition, results of operations, cash flows, strategies and prospects. These forward-looking statements may be identified by terminology such as “likely,” ~~“may,~~“may,” ~~“will,~~“will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained in this section are reasonable, we cannot guarantee future results. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in subsequent reports on Forms 10~~-K,~~ 10-Q10-K, 10-Q and 8-K8-K should be considered.

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

2.	2. Recently Issued ~~Accounting Standards~~

In ~~May 2014,~~ ~~the Financial~~ Accounting Standards ~~Board (“FASB”) issued~~

Adoption of New Accounting Standards ~~Update (“ASU”)~~ ~~2014~~-~~09,~~~~Revenue from Contracts with Customers~~ ~~("ASU~~ ~~2014~~-~~09"~~~~) and created ASC Topic~~ ~~606~~ ~~(“ASC~~ ~~606”~~~~), which is a comprehensive new revenue recognition model. Under ASU~~ ~~2014~~-~~09,~~ a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. ASU ~~2014~~-09 ~~is effective for our interim and annual reporting periods beginning~~ ~~January 1, 2018,~~ ~~and is to be adopted using either a full retrospective or modified retrospective transition method. We intend to adopt the new standard under the modified retrospective approach in the~~ ~~2018~~~~first~~ ~~quarter.~~

~~Although we are still in the process of evaluating our contracts~~ ~~and updating our accounting policies, we do~~ ~~not~~ ~~believe the adoption of ASC~~ ~~606~~ will have a material impact on the amount or timing of our recognition of revenues. There are certain markets where we are unable to complete certain performance obligations (generally landscaping) at the time of closing due to weather. Based on ASC ~~606,~~ we have concluded that we will defer revenue and the related cost of sales specific to the unfulfilled performance obligations until it is delivered to the homeowner, which is different than our current accounting treatment. We anticipate that these adjustments to revenue and cost of sales will be immaterial each quarter. ASC ~~606~~ also will impact our accounting for land sales. Currently we include the proceeds from land sales in land sale revenues in the homebuilding section of our consolidated statements of operations and comprehensive income and include the associated costs in land cost of sales. Under ASC ~~606,~~ ~~we have concluded that the entities that we typically sell land to will likely~~ ~~not~~ ~~meet the definition of a customer.~~

In those instances in which our land is sold to a non-customer, our gain (loss) from the sale of the land will now be included in interest and other income in the homebuilding section of our consolidated statements of operations and comprehensive income. However, these sales are infrequent and, as such, each contract and the classification of the transaction will be evaluated when executed.

~~In addition, ASU~~ ~~2014~~-09~~eliminates the guidance in ASC Topic~~ ~~970,~~~~Real Estate~~, ~~that currently prescribes the accounting for costs incurred to sell real estate projects. We will apply the new guidance in ASC Topic~~ ~~340~~-~~40,~~~~Other Assets and Deferred Costs — Contracts With Customers~~ ~~(“ASC~~ ~~340~~-40~~), to these costs. Under ASC~~ ~~340~~-~~40,~~ ~~incremental costs of obtaining a contract with a customer (i.e., costs that would~~ ~~not~~ ~~have been incurred if the contract had~~ ~~not~~ ~~been obtained) will be recognized as an asset only if we expect to recover them. We are still evaluating the accounting for marketing costs under ASC~~ ~~340~~-~~40,~~ but have concluded that marketing costs that were previously capitalized to a deferred marketing asset will now either be expensed as incurred or will be capitalized to fixed assets and amortized over the life of the community. As a result of this change, the timing of recognition and classification of certain marketing costs will change from the current accounting treatment. We are continuing to evaluate the exact dollar impact ASU ~~2014~~-09 ~~will have on recording revenue and our marketing costs in our consolidated financial statements and related disclosures.~~

~~- 4 -~~

~~Table of Contents~~

~~M.D.C. HOLDINGS, INC.~~

~~Notes to Unaudited Consolidated Financial Statements~~

In ~~January~~June 2016, the FASB issued ASU ~~2016~~-~~01,~~~~Financial Instruments–Overall: Recognition and Measurement of Financial Assets and Financial Liabilities~~ ~~(“ASU~~ ~~2016~~-~~01”~~), which makes a number of changes to the current GAAP model, including changes to the accounting for equity investments and financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. Under ASU ~~2016~~-~~01,~~ ~~we will primarily be impacted by the changes to accounting for equity instruments with readily determinable fair values as they will~~ no ~~longer be permitted to be classified as available-for-sale (changes in fair value reported through other comprehensive income) and instead, all changes in fair value will be reported in earnings. ASU~~ ~~2016~~-01 ~~is effective for our interim and annual reporting periods beginning~~ ~~January 1, 2018~~ ~~and is to be applied using a modified retrospective transition method. As discussed below, during the~~ ~~2017~~~~third~~ quarter, we sold a significant portion of our investments in equity securities, but there is a possibility we will purchase additional equity securities in the future. If we do have a material amount of investments in equity securities after the date of adoption, we expect that the impact to our consolidated statements of operations and comprehensive income from this update could be material. Furthermore, depending on trends in the stock market, we ~~may~~ ~~see increased volatility in our consolidated statements of operations and comprehensive income.~~

In ~~February 2016,~~ ~~the FASB issued ASU~~ ~~2016~~-~~02,~~~~Leases~~ ~~(“ASU~~ ~~2016~~-~~02”~~), which requires a lessee to recognize a right-of-use asset and a corresponding lease liability for virtually all leases. The liability will be equal to the present value of the remaining lease payments while the right-of-use asset will be based on the liability, subject to adjustment, such as for initial direct costs. In addition, ASU ~~2016~~-02 ~~expands the disclosure requirements for lessees. Upon adoption, we will be required to record a lease asset and lease liability related to our operating leases. ASU~~ ~~2016~~-02 ~~is effective for our interim and annual reporting periods beginning~~ ~~January 1, 2019~~ ~~and is to be applied using a modified retrospective transition method. Early adoption is permitted. We do~~ ~~not~~ ~~plan to early adopt the guidance and we are currently evaluating the impact the update will have on our consolidated financial statements and related disclosures.~~

In ~~March 2016,~~ ~~the FASB issued ASU~~ ~~2016~~-~~09,~~~~Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting~~ ~~(“ASU~~ ~~2016~~-~~09”~~~~), which amends ASC Topic~~ ~~718,~~~~Compensation – Stock Compensation~~ ~~(“ASC~~ ~~718”~~). The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the accounting for income taxes, classification of excess tax benefits on the statement of cash flows, forfeitures, statutory tax withholding requirements, classification of awards as either equity or liabilities, and classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-withholding purposes. ASU ~~2016~~-09 ~~became effective for us in the~~ ~~2017~~~~first~~ ~~quarter.~~ The primary impact from this guidance, on a prospective basis, will be to our provision for income taxes line item on our consolidated statements of operations and comprehensive income. Any excess tax benefits or deficiencies from (1~~) the exercise or expiration of options or (~~2) the vesting of stock awards will now be recognized through our income tax provision as opposed to additional paid-in capital (to the extent we had a sufficient pool of windfall tax benefits). As a result of exercises of stock options and vesting of stock awards during the ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017,~~ ~~we recognized an excess tax deficiency of~~ ~~$0.0~~ ~~million and an excess tax benefit of~~ ~~$0.1~~ ~~million, respectively, in our tax provision for each period. Furthermore, as of~~ ~~September 30, 2017,~~ ~~we had options covering approximately~~ ~~567,000~~ ~~shares (~~1~~) with exercise prices above the MDC closing share price at~~ ~~September 30, 2017~~ ~~and (~~2~~) that will have their ability to exercise expire at some point during the~~ ~~2017~~~~fourth~~ ~~quarter. If the exercise price continues to be greater than the share price of MDC throughout~~ ~~2017,~~ ~~these options will likely expire unexercised and as a result, we could recognize approximately~~ ~~$2.6~~ ~~million in additional expense in our provision for income taxes line item on our consolidated statements of operations and comprehensive income in~~ ~~2017.~~ ~~Another provision of ASU~~ ~~2016~~-09 ~~that is relevant to the Company is the classification of excess tax benefits on the statement of cash flows, which was adopted on a prospective basis. This provision did~~ ~~not~~ ~~have a material effect on the statement of cash flows and is~~ ~~not~~ ~~expected to have a material impact on the statement of cash flows in future quarterly or annual filings. Adoption of ASU~~ ~~2016~~-09 ~~was~~ ~~not~~ ~~material to our statement of cash flows for the periods presented and we do~~ ~~not~~ ~~anticipate it will be material for the year ending~~ ~~December 31,~~ ~~2017.~~

In ~~June 2016,~~ ~~the FASB issued ASU~~ ~~2016~~-~~13,~~2016-13, Financial Instruments—Credit Losses (Topic 326):Measurement of Credit Losses on Financial Instruments(“ (“ASU ~~2016~~-~~13”~~2016-13”), which requires measurement and recognition of expected credit losses for financial assets held. The amendments in ASU ~~2016~~-132016-13 eliminate the probable threshold for initial recognition of a credit loss in current GAAP and reflect an entity’s current estimate of all expected credit losses. ~~ASU~~ ~~2016~~-13 ~~is effective for our interim and annual reporting periods beginning~~ On January 1, ~~2021,~~ ~~and is to be applied~~2020, we adopted ASU 2016-13 using athe modified retrospective transition ~~method. Earlier adoption is permitted.~~ ~~We do~~ method, resulting in a cumulative effect adjustment that decreased the opening balance of retained earnings by less than $0.1 million. The standard did not ~~plan to early adopt ASU~~ ~~2016~~-13 materially impact our consolidated statements of operations and ~~with our current holdings of financial instruments that are subject to credit losses, we do~~ ~~not~~ ~~believe adoption of this guidance will be material to our financial statements.~~

comprehensive income or consolidated cash flows.

3. Segment Reporting

3.	~~Segment Reporting~~

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

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

●

~~West (Arizona, California, Nevada and Washington)~~

●

~~Mountain (Colorado and Utah)~~

●

~~East (Virginia, Florida and Maryland)~~

follows

•West (Arizona, California, Nevada, Oregon and Washington)

•Mountain (Colorado, Idaho and Utah)

•East (mid-Atlantic, which includes Maryland and Virginia, and Florida)

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

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

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

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

~~M.D.C. HOLDINGS, INC.~~

~~Notes to Unaudited Consolidated Financial Statements~~

4. 4.Earnings Per Share

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

Diluted EPS for the three ~~and~~ ~~nine~~ months ended ~~September 30, 2017~~ March 31, 2021 and 2020 excluded options to purchase ~~approximately~~ ~~0.7~~ ~~million~~0 and ~~1.1~~0.4 million shares of common stock, respectively, because the effect of their inclusion would be anti-dilutive. ~~For the same periods in~~ ~~2016,~~ ~~diluted EPS excluded options to purchase approximately~~ ~~5.3~~ ~~million and~~ ~~6.4~~ ~~million shares, respectively. The year-over-year decreases for the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017~~ ~~in anti-dilutive shares and the year-over-year increases in dilutive shares were primarily the result of year-over-year increases in the average price of MDC stock.~~

~~M.D.C. HOLDINGS, INC.~~

~~Notes to Unaudited Consolidated Financial Statements~~

5.	~~Accumulated~~ ~~Other Comprehensive Income~~

~~The following table sets forth our changes in accumulated other comprehensive~~ ~~income (“AOCI”):~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(Dollars in thousands)

Unrealized gains on available-for-sale marketable securities ¹ :

Beginning balance
$ 11,176 $ 5,344 $ 7,730 $ 3,657
Other comprehensive income before reclassifications
1,778 1,156 6,201 2,559
Amounts reclassified from AOCI ²
(10,128 ) (201 ) (11,105 ) 83
Ending balance
$ 2,826 $ 6,299 $ 2,826 $ 6,299

Unrealized gains on available-for-sale metropolitan district bond securities ¹ :

Beginning balance
$ 14,825 $ 13,214 $ 14,341 $ 12,058
Other comprehensive income before reclassifications
7,400 73 7,884 1,229
Amounts reclassified from AOCI
(22,225 ) - (22,225 ) -
Ending balance
$ - $ 13,287 $ - $ 13,287

Total ending AOCI
$ 2,826 $ 19,586 $ 2,826 $ 19,586

(1)

~~All amounts net-of-tax.~~

(2)

~~See separate table below for details about these reclassifications~~

~~The following table sets forth the activity related to reclassifications out of~~ ~~accumulated other comprehensive income related to available for sale securities:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

Affected Line Item in the Statements of Operations

2017

2016

2017

2016

(Dollars in thousands)

Homebuilding: Interest and other income
$ 52,211 $ 555 $ 53,622 $ 817
Homebuilding: Other-than-temporary impairment of marketable securities
- (215 ) (51 ) (934 )
Financial services: Interest and other income
- 94 347 94
Financial services: Other-than-temporary impairment of marketable securities
(29 ) (111 ) (160 ) (111 )
Income before income taxes
52,182 323 53,758 (134 )
Provision for income taxes
(19,829 ) (122 ) (20,428 ) 51
Net income
$ 32,353 $ 201 $ 33,330 $ (83 )

6.	~~Fair Value Measurements~~

~~ASC Topic~~ ~~820,~~5. Fair Value Measurements

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

Fair Value

Financial Instrument

Hierarchy

September 30,
2017

December 31,
2016

(Dollars in thousands)

Marketable equity securities (available-for-sale)

Level 1
$ 40,221 $ 96,206
Mortgage loans held-for-sale, net

Level 2
$ 89,804 $ 138,774
Metropolitan district bond securities (related party) (available-for-sale)

Level 3
$ - $ 30,162

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

~~Marketable s~~~~ecurities~~

Equitysecurities. ~~As of~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016,~~ ~~we held marketable~~Our equity securities ~~which consist~~consisted of holdings in ~~corporate equities, preferred~~common stock and exchange traded ~~funds. As of~~ ~~September 30, 2017~~ funds and ~~December 31, 2016,~~ ~~all of our equity securities~~ were ~~treated as available-for-sale investments and as such, are~~ recorded at fair value with all changes in fair value ~~initially~~ recorded ~~through AOCI, subject~~ to ~~an assessment to determine if an unrealized loss, if applicable, is other-than-temporary.~~

~~Each quarter we assess all of our securities in an unrealized loss position for a potential other-than-temporary impairment (“OTTI”). If the unrealized loss is determined to be other-than-temporary, an OTTI is recorded in other-than-temporary impairment of marketable securities~~other income (expense), net in the ~~homebuilding or financial services sections of our consolidated statements of operations and comprehensive income.~~ ~~During the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017,~~ ~~we recorded pretax OTTI’s of~~ ~~$0.0~~ ~~million and~~ ~~$0.2~~ ~~million, respectively, for certain of our equity securities that were in an unrealized loss position as of the end of each respective period. For the same periods in~~ ~~2016,~~ ~~we recorded pretax OTTI’s of~~ ~~$0.3~~ ~~million and~~ ~~$1.0~~ ~~million, respectively.~~

~~The following tables set forth the cost and~~ ~~estimated fair value of our available-for-sale marketable securities:~~

September 30, 2017

Cost Basis

OTTI

Net Cost Basis

Fair Value

(Dollars in thousands)

Homebuilding equity securities
$ - $ - $ - $ -
Financial services equity securities
36,304 (366 ) 35,938 40,221
Total marketable equity securities
$ 36,304 $ (366 ) $ 35,938 $ 40,221

December 31, 2016

Cost Basis

OTTI

Net Cost Basis

Fair Value

(Dollars in thousands)

Homebuilding equity securities
$ 48,910 $ (685 ) $ 48,225 $ 59,770
Financial services equity securities
35,885 (373 ) 35,512 36,436
Total marketable equity securities
$ 84,795 $ (1,058 ) $ 83,737 $ 96,206

~~As of~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016,~~ ~~our marketable equity securities were in net unrealized gain positions totaling~~ ~~$4.3~~ ~~million and~~ ~~$12.5~~ ~~million, respectively.~~ ~~Our individual marketable equity securities that were in unrealized loss positions, excluding those that were impaired as part of any OTTI, aggregated to an unrealized loss of~~ ~~$0.6~~ ~~million and~~ ~~$0.5~~ ~~million as of~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016,~~ ~~respectively.The table below sets forth the aggregated unrealized losses for individual equity securities that were in unrealized loss positions but did~~ ~~not~~ ~~have OTTIs recognized.~~ ~~We do~~ ~~not~~ ~~believe the decline in the value of these marketable securities as of~~ ~~September 30, 2017~~ ~~is other-than-temporary.~~

~~- 10 -~~

~~Table of Contents~~

~~M.D.C. HOLDINGS, INC.~~

~~Notes to Unaudited Consolidated Financial Statements~~

September 30, 2017

December 31, 2016

Number of
Securities in a
Loss Position

Aggregate
Loss Position

Aggregate
Fair Value of
Securities in
a Loss
Position

Number of
Securities in a
Loss Position

Aggregate
Loss Position

Aggregate
Fair Value of
Securities in
a Loss
Position

(Dollars in thousands)

Marketable equity securities
1 $ (615 ) $ 1,384 5 $ (457 ) $ 6,045

~~The~~ following table sets forth gross realized gains and losses from the sale of available-for-sale marketable securities. We record the net amount of these gains and losses to either other expense or interest and other income, dependent upon whether there is a net realized loss or gain, respectively, in the homebuilding section or financial services section of our consolidated statements of operations and comprehensive income.

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(Dollars in thousands)

Gross realized gains on sales of available-for-sale securities
$ 16,577 $ 740 $ 18,365 $ 2,210
Gross realized losses on sales of available-for-sale securities
(213 ) (91 ) (243 ) (1,299 )
Net realized gain on sales of available-for-sale securities
$ 16,364 $ 649 $ 18,122 $ 911
The following table reconciles the net gain recognized during the three months ended March 31, 2021 and 2020 on equity securities to the unrealized gain recognized during the periods on equity securities still held at the reporting date.

Three Months Ended
March 31,
2021 2020
(Dollars in thousands)
Net loss recognized during the period on equity securities $ 0 $ (13,268)
Less: Net gain recognized during the period on equity securities sold during the period 0 609
Unrealized loss recognized during the reporting period on equity securities still held at the reporting date $ 0 $ (13,877)

Mortgage loans held-for-sale, net. Our mortgage loans held-for-sale, which are measured at fair value on a recurring basis, include (1)(1) mortgage loans held-for-sale that are under commitments to sell and (2)(2) mortgage loans held-for-sale that are not under commitments to sell. At ~~September 30, 2017~~ March 31, 2021 and December 31, ~~2016,~~ 2020, we had ~~$75.3~~$164.3 million and ~~$96.2~~$137.3 million, respectively, of mortgage loans held-for-sale under commitments to sell. The fair value for those loans was based on quoted market prices for those mortgage loans, which are Level 2 fair value inputs. At ~~September 30, 2017~~ March 31, 2021 and December 31, ~~2016,~~ 2020, we had ~~$14.5~~$66.5 million and ~~$42.6~~$95.3 million, respectively, of mortgage loans held-for-sale that were not under commitments to sell. The fair value for those loans was primarily based upon the estimated market price received from an outside party, which is a Level 2 fair value input.

Gains on sales of mortgage loans, net, are included as a component of revenues in the financial services section of our consolidated statements of operations and comprehensive income. For the three ~~and~~ ~~nine~~ months ended ~~September 30, 2017,~~ March 31, 2021, we recorded net gains on the sales of mortgage loans of ~~$9.8~~$23.5 million ~~and~~ ~~$28.5~~ ~~million, respectively,~~, compared to ~~$10.0~~ ~~million and~~ ~~$22.5~~$16.7 million for the same ~~periods~~period in the prior ~~year, respectively.~~

~~Metropolitan district bond securities (related party).~~ The metropolitan district bond securities (the “Metro Bonds”) are included in the homebuilding section of our consolidated balance sheets. We acquired the Metro Bonds from a quasi-municipal corporation in the state of Colorado (the “Metro District”), which was formed to help fund and maintain the infrastructure associated with a master-planned community being developed by our Company. During the ~~2017~~~~third~~ ~~quarter, we sold the Metro Bonds for net proceeds of~~ ~~$44.3~~ ~~million. With a cost basis of~~ ~~$8.4~~ ~~million, we recorded a realized gain of~~ ~~$35.8~~ ~~million, which is included in interest and other income in the homebuilding section of our consolidated statement of operations and comprehensive income.~~

year.

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

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

September 30, 2017

December 31, 2016

Carrying
Amount

Fair Value

Carrying
Amount

Fair Value

(Dollars in thousands)

5⅝% Senior Notes due February 2020, net
$ 247,613 $ 268,113 $ 246,915 $ 265,611
5½% Senior Notes due January 2024, net
248,535 270,250 248,391 258,800
6% Senior Notes due January 2043, net
346,384 340,423 346,340 297,087
Total
$ 842,532 $ 878,786 $ 841,646 $ 821,498


	March 31, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value

	(Dollars in thousands)
$250 million 5.500% Senior Notes due January 2024, net	$	249,292	$	275,306	$	249,233	$	275,463
$300 million 3.850% Senior Notes due January 2030, net	297,518		314,825		297,458		331,384
$350 million 2.500% Senior Notes due January 2031, net	346,916		332,168		0		0
$500 million 6.000% Senior Notes due January 2043, net	490,749		628,353		490,700		667,288
Total	$	1,384,475	$	1,550,652	$	1,037,391	$	1,274,135

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

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

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

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

•estimated future undiscounted cash flows and Operating Margin;

•forecasted Operating Margin for homes in backlog;

•actual and trending net home orders;

•homes available for sale;

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

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

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

~~Impairments of homebuilding inventory by segment for the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016~~ ~~are shown in the table below.~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(Dollars in thousands)

West
$ 1,885 $ - $ 5,985 $ 1,400
Mountain
370 - 370 -
East
2,285 4,700 3,035 4,900
Total inventory impairments
$ 4,540 $ 4,700 $ 9,390 $ 6,300

Impairment Data

Quantitative Data

Three Months Ended

Total
Subdivisions
Tested

Inventory
Impairments

Fair Value of
Inventory
After
Impairments

Number of
Subdivisions
Impaired

Discount Rate

(Dollars in thousands)

March 31, 2017
33 $ 4,850 $ 19,952 2 12% to 18%
June 30, 2017
35 $ - $ - - N/A
September 30, 2017
33 $ 4,540 $ 52,190 9 10% to 15%

March 31, 2016
14 $ - $ - - N/A
June 30, 2016
17 $ 1,600 $ 6,415 2 12% to 15%
September 30, 2016
25 $ 4,700 $ 12,295 2 15% to 18%

7.Capitalization of Interest

~~M.D.C. HOLDINGS, INC.~~

~~Notes to Unaudited Consolidated Financial Statements~~

8.	~~Capitalization of Interest~~

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

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(Dollars in thousands)

Homebuilding interest incurred
$ 13,212 $ 13,187 $ 39,594 $ 39,511
Less: Interest capitalized
(13,212 ) (13,187 ) (39,594 ) (39,511 )
Homebuilding interest expensed
$ - $ - $ - $ -

Interest capitalized, beginning of period
$ 62,091 $ 77,150 $ 68,085 $ 77,541
Plus: Interest capitalized during period
13,212 13,187 39,594 39,511
Less: Previously capitalized interest included in home and land cost of sales
(15,087 ) (15,922 ) (47,463 ) (42,637 )
Interest capitalized, end of period
$ 60,216 $ 74,415 $ 60,216 $ 74,415


	Three Months Ended March 31,
		2021		2020

		(Dollars in thousands)
Homebuilding interest incurred		$	17,332	$	16,534
Less: Interest capitalized		(17,332)		(16,534)
Homebuilding interest expensed		$	0	$	0

Interest capitalized, beginning of period		$	52,777	$	55,310
Plus: Interest capitalized during period		17,332		16,534
Less: Previously capitalized interest included in home cost of sales		(14,841)		(12,767)
Interest capitalized, end of period		$	55,268	$	59,077

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

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

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

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


	Three Months Ended March 31,
		2021		2020

		(Dollars in thousands)
Operating lease cost 1		$	1,977	$	2,046
Less: Sublease income (Note 19)		(39)		(38)
Net lease cost		$	1,938	$	2,008

1Includes variable lease costs, which are immaterial.

Supplemental cash flow information related to leases was as follows:


	Three Months Ended March 31,
		2021		2020

		(Dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$	1,858	$	1,906
Leased assets obtained in exchange for new operating lease liabilities		$	830	$	2,645

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

9.	~~Homebuilding~~ ~~Prepaid~~ ~~and~~ ~~Other Assets~~
		March 31, 2021
Weighted-average remaining lease term (in years)		5.1
Weighted-average discount rate		5.5	%

Maturities of operating lease liabilities were as follows:


	Year Ended December 31,
	(Dollars in thousands)
2021 (excluding the three months ended March 31, 2021)	$	5,051
2022	7,387
2023	6,416
2024	5,717
2025	5,493
Thereafter	4,869
Total operating lease payments	$	34,933

Less: Interest	4,561
Present value of operating lease liabilities 1	$	30,372

1Homebuilding and financial services operating lease liabilities of $29.7 million and $0.6 million, respectively, are included as a component of accrued and other liabilities and accounts payable and accrued liabilities, respectively, in the homebuilding and financial services section of our consolidated balance sheet at March 31, 2021.

9. HomebuildingPrepaidsandOther Assets

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

September 30, December 31,

2017

2016

(Dollars in thousands)

Deferred marketing costs
$ 37,178 $ 35,313
Land option deposits
16,277 8,683
Goodwill
6,008 6,008
Prepaid expenses
6,011 4,735
Deferred debt issuance costs on revolving credit facility, net
6,139 4,340
Other
1,195 1,384
Total
$ 72,808 $ 60,463


	March 31, 2021		December 31, 2020

	(Dollars in thousands)
Operating lease right-of-use asset (Note 8)	$	28,737	$	29,226
Land option deposits	37,138		29,987
Prepaids	26,505		26,929
Goodwill	6,008		6,008
Deferred debt issuance costs on revolving credit facility, net	8,529		9,043
Other	511		492
Total prepaids and other assets	$	107,428	$	101,685

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

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

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

September 30,

December 31,

2017

2016

(Dollars in thousands)

Insurance reserves
$ 43,016 $ 42,204
Accounts payable and other accrued liabilities
8,681 8,530
Total accounts payable and accrued liabilities
$ 51,697 $ 50,734

11.	~~Warranty Accrual~~

-14-

11. Warranty Accrual

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

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

The table set forth below summarizes accrual, adjustment and payment activity related to our warranty accrual for the three ~~and~~ ~~nine~~ months ended ~~September 30, 2017~~ March 31, 2021 and ~~2016.~~ ~~For both the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017,~~ ~~we recorded adjustments to decrease our~~2020. The warranty accrual by ~~$0.4~~ ~~million. The decreases were driven by an adjustment to a specific warranty accrual where we determined that a portion of the previously accrued amount would be covered by insurance. For the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2016,~~ we increased ~~our warranty reserve by~~ ~~$1.8~~ ~~million and~~ ~~$5.1~~ ~~million, respectively. The adjustments made during~~ ~~2016~~ ~~were~~ due to ~~higher than expected recent warranty related expenditures.~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(Dollars in thousands)

Balance at beginning of period
$ 20,965 $ 17,217 $ 20,678 $ 15,328
Expense provisions
2,448 2,390 7,691 6,147
Cash payments
(2,263 ) (2,723 ) (7,269 ) (7,828 )
Adjustments
(425 ) 1,825 (375 ) 5,062
Balance at end of period
$ 20,725 $ 18,709 $ 20,725 $ 18,709

the increase in the number of home closings.


	Three Months Ended March 31,
		2021		2020

		(Dollars in thousands)
Balance at beginning of period		$	33,664	$	31,386
Expense provisions		4,385		3,165
Cash payments		(4,176)		(3,664)

Balance at end of period		$	33,873	$	30,887

12.	~~Insurance~~ ~~and Construction Defect Claim~~ ~~Reserves~~

-15-

12.Insuranceand Construction Defect ClaimReserves

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

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

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(Dollars in thousands)

Balance at beginning of period
$ 49,647 $ 46,900 $ 50,954 $ 45,811
Expense provisions
2,383 1,888 6,884 5,222
Cash payments, net of recoveries
(1,535 ) (635 ) (7,343 ) (2,880 )
Balance at end of period
$ 50,495 $ 48,153 $ 50,495 $ 48,153

13.	~~Income Taxes~~

At the end of each interim period, we are required to estimate our annual effective tax rate for the fiscal year and use that rate to provide for income taxes for the current year-to-date reporting period.

Our overall effective income tax rates were ~~31.8%~~23.3% and ~~34.1%~~24.3% for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2021 and 2020, respectively, ~~compared to 30.7% and 32.3% for the three and nine months ended September 30, 2016, respectively. The rates for the three and nine months ended September 30, 2017 resulted~~resulting in income tax expense of ~~$28.5~~$33.6 million and ~~$60.7 million, respectively, compared to income tax expense of $11.7 million and $29.9~~$11.8 million for the same periods, ~~in 2016.~~respectively. The year-over-year ~~increase~~decrease in our effective tax rate for the three months ended ~~September 30, 2017~~March 31, 2021 was primarily due to an increase in the ~~result~~estimated amount of ~~our estimate of~~energy tax credits to be recognized during the full year effective tax rate for 2016 including an estimate for energy credits whereas our estimate for the 2017 full year includes no such energy credit as the credit has not been approved by the U.S. Congress. Additionally, our 2016 third quarter benefited from certain positive return-to-provision adjustments as a result of filing our 2015 tax returns, whereas our 2017 third quarter included no such adjustments. However, the impact of these items were substantiallyyear. This benefit was partially offset by ~~the release of~~ a valuation allowance on our Metro Bonds as a result of the gain on the sale of those securities at the end of the 2017 third quarter enabling us to utilize the full deferred tax asset recorded on the Metro Bonds. For the nine months ended September 30, 2017, the year-over-year increase in our effective tax rate was due to the foregoing energy credits matter coupled with the establishment of a valuation allowancedecrease in the ~~2017 first quarter against certain state net operating loss carryforwards where realization was more uncertain at~~windfall on non-qualifying stock options exercised and lapsed restricted stock awards and a decrease in the ~~time. These items were somewhat offset by~~amount of executive compensation that is deductible under Internal Revenue Code Section 162(m) during the ~~release~~period.

Table of ~~the Metro Bonds valuation allowance discussed above.~~

At ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~ ~~we had deferred tax assets, net of valuation allowances and deferred tax liabilities, of~~ ~~$64.2~~ ~~million and~~ ~~$74.9~~ million, respectively. The valuation allowances were primarily related to various state net operating loss carryforwards where realization is more uncertain at this time due to the limited carryforward periods that exist in certain states.

Contents

14.	~~Senior Notes~~

14. Senior Notes

The carrying ~~value~~values of our senior notes as of ~~September 30, 2017~~ March 31, 2021 and December 31, ~~2016,~~ 2020, net of any unamortized debt issuance costs or discount, were as follows:

September 30,

December 31,

2017

2016

(Dollars in thousands)

5⅝% Senior Notes due February 2020, net
$ 247,613 $ 246,915
5½% Senior Notes due January 2024, net
248,535 248,391
6% Senior Notes due January 2043, net
346,384 346,340
Total
$ 842,532 $ 841,646


	March 31, 2021		December 31, 2020

	(Dollars in thousands)
5.500% Senior Notes due January 2024, net	$	249,292	$	249,233
3.850% Senior Notes due January 2030, net	297,518		297,458
2.500% Senior Notes due January 2031, net	346,916		0
6.000% Senior Notes due January 2043, net	490,749		490,700
Total	$	1,384,475	$	1,037,391

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

~~- 16 -~~

~~Table of Contents~~

~~M.D.C. HOLDINGS, INC.~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~Subsequent to~~ ~~September 30, 2017,~~ ~~we completed~~ ~~a public offering of an additional~~ ~~$150~~ ~~million principal amount of our~~ 6% ~~senior notes due~~ ~~2043.~~ ~~See Note~~ 20 ~~for additional information.~~

15.	~~Stock-~~~~Based Compensation~~

15. Stock-Based Compensation

We account for share-based awards in accordance with ASC Topic 718Compensation–Stock Compensation (“ASC 718”), which requires the fair value of stock-based compensation awards to be amortized as an expense over the vesting period. Stock-based compensation awards are valued at fair value on the date of grant. The following table sets forth share-based award expense activity for the three ~~and~~ ~~nine~~ months ended ~~September 30, 2017~~ March 31, 2021 and ~~2016:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(Dollars in thousands)

Stock option grants expense
$ 391 $ 328 $ 747 $ 5,621
Restricted stock awards expense
445 145 1,224 1,015
Performance share units expense
226 - 1,129 -
Total stock based compensation
$ 1,062 $ 473 $ 3,100 $ 6,636

On ~~May 18, 2015,~~ ~~the Company granted~~2020, which is included as a ~~non-qualified stock option to each~~component of ~~the Chief Executive Officer~~selling, general and ~~the Chief Operating Officer for~~ ~~1,050,000~~ ~~shares of common stock under the Company~~’s ~~2011~~ ~~Equity Incentive Plan. The terms of each option provide that, over a~~ ~~five~~ ~~year period,~~ ~~one~~~~third~~ ~~of the option shares will vest as of each of the third, fourth,~~administrative expenses and ~~fifth~~ ~~anniversary dates of the grant of the option; provided that all unvested option shares will vest immediately~~expenses in the ~~event the closing price~~homebuilding and financial services sections of ~~the Company’s stock, as reported by the New York Stock Exchange, in any~~ 20 ~~out~~our consolidated statements of 30 ~~consecutive trading days closes at a price equal to or greater than~~ ~~120%~~ ~~of the closing price on the date of grant (the “market-based condition”). The option exercise price is equal to the closing price of the Company’s common stock on the date of grant, which was~~ ~~$27.10~~operations and ~~the expiration date of each option is~~ comprehensive income, respectively:

Three Months Ended
March 31,
2021 2020
(Dollars in thousands)
Stock option grants expense $ 864 $ 495
Restricted stock awards expense 2,469 1,517
Performance share units expense 6,593 2,428
Total stock-based compensation $ 9,926 $ 4,440

On August 20, 2020, August 5, 2019, May ~~18, 2025.~~ ~~In accordance with ASC~~ ~~718,~~ ~~the market-based awards were assigned a fair value of~~ ~~$5.35~~ ~~per share (total value of~~ ~~$11.2~~ ~~million) on the date of grant using a Monte Carlo simulation model~~23, 2018 and ~~as calculated under that model, all expense was recorded on a straight-line basis through the end of the~~ ~~2016~~~~second~~ ~~quarter. Included in the stock option grant expense for the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2016,~~ ~~shown~~ ~~in the table above, was~~ ~~$5.0~~ ~~million of stock option grant expense related to these market-based option grants. During the~~ ~~2017~~~~second~~ ~~quarter, the market-based condition was achieved and, as a result, the shares fully vested and became exercisable.~~

On ~~July 25, 2016~~ ~~and~~ June 20, 2017, the Company granted long term performance ~~stock~~share unit awards (“PSUs”) to each of the ~~CEO,~~Executive Chairman, the ~~COO,~~CEO, and the Chief Financial Officer (“CFO”) under the Company’s 2011 Equity Incentive Plan. The PSUs ~~will be~~are earned based upon the Company’s performance over a period of three ~~year period~~ years (the “Performance Period”), measured by increasing home sale revenues over a “Base ~~Period”.~~Period.” Each award is conditioned upon the Company achieving an average gross margin from home sales ~~percentage~~ (excluding impairments) of at least fifteen percent (~~15%~~(15%) over the Performance Period. Target goals will be earned if the Company’s three year average home sale revenues over the Performance Period (“Performance Revenues”) exceed the home sale revenues over the Base Period (“Base Revenues”) by at least 10% but less than 20%. If Performance Revenues exceed the Base Revenues by at least 5% but less than 10% ~~(“Threshold Goals”)~~, 50% of the Target Goals will be ~~earned.~~earned (“Threshold Goals”). If Performance Revenues exceed the Base Revenues by at least 20%,200% of the Target Goals will be earned (“Maximum Goals”). For the PSUs granted in 2017, 2018, 2019 and 2020, the number of PSUs earned shall be adjusted to be proportional to the partial performance between the Threshold Goals, Target Goals and Maximum Goals. Details for each defined term above for ~~both grants have~~each grant has been provided in the table below.

~~- 17 -~~

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Table of Contents

~~M.D.C. HOLDINGS, INC.~~

~~Notes to Unaudited Consolidated Financial Statements~~

Threshold Goal

Target Goal

Maximum Goal

Maximum
Potential

Awardee

Date of
Award

Performance
Period

Base Period

Base
Period
Revenues

PSUs

Home
Sale
Revenues

PSUs

Home
Sale
Revenues

PSUs

Home
Sale
Revenues

Fair Value
per Share

Expense
to be
Recognized

CEO

July 1, 2016

July 1, 2015 52,500 105,000 210,000 $ 4,815
COO
July 25, 2016 to to $1.975 billion 52,500 $2.074 billion 105,000 $2.173 billion 210,000 $2.370 billion $ 22.93 4,815
CFO
June 30, 2019 June 30, 2016 13,125 26,250 52,500 1,204
$ 10,834

CEO

April 1, 2017

April 1, 2016 55,000 110,000 220,000 $ 6,802
COO
June 20, 2017 to to $2.426 billion 55,000 $2.547 billion 110,000 $2.669 billion 220,000 $2.911 billion $ 30.92 6,802
CFO
March 31, 2020 March 31, 2017 13,750 27,500 55,000 1,701
$ 15,305


				Threshold Goal		Target Goal		Maximum Goal				Maximum Potential Expense to be Recognized *		Maximum Remaining Expense to be Recognized *
Date of Award	Performance Period	Base Period	Base Period Revenues	PSUs	Home Sale Revenues	PSUs	Home Sale Revenues	PSUs	Home Sale Revenues	Fair Value per Share


Jun 20, 2017	April 1, 2017 - March 31, 2020	April 1, 2016 - March 31, 2017	$2.426 billion	155,889	$2.547 billion	311,779	$2.669 billion	623,557	$2.911 billion	$	25.77	$	16,070	$	0

May 23, 2018	April 1, 2018 - March 31, 2021	April 1, 2017 - March 31, 2018	$2.543 billion	157,464	$2.670 billion	314,928	$2.797 billion	629,856	$3.052 billion	$	23.68	$	14,915	$	0

Aug 5, 2019	January 1, 2019 - December 31, 2021	January 1, 2018 - December 31, 2018	$2.982 billion	145,800	$3.131 billion	291,600	$3.280 billion	583,200	$3.578 billion	$	30.19	$	17,604	$	5,505

Aug 20, 2020	January 1, 2020 - December 31, 2022	January 1, 2019 - December 31, 2019	$3.205 billion	145,800	$3.366 billion	291,600	$3.526 billion	583,200	$3.846 billion	$	39.79	$	23,205	$	19,755

_______________________

* Dollars in thousands

In accordance with ASC 718, the PSUs were valued on the date of grant at their fair value. The fair value of these grants was equal to the closing price of MDC stock on the date of grant less the discounted cash flows of expected future dividends over the respective vesting period (as these PSUs do not participate in dividends). The grant date fair value and maximum potential expense if the Maximum Goals were met for these awards has been provided in the table above. ASC 718 does not permit recognition of expense associated with ~~performance based~~performance-based stock awards until achievement of the performance targets are probable of occurring.

2017 PSU Grants. The 2017 PSU awards vested on May 5, 2020 at the Maximum Goal following the achievement of the Maximum Goals and certification by the Compensation Committee that the Maximum Goals had been achieved. For the three months ended March 31, 2020, the Company recorded share-based award expense of $1.4 million related to these awards.

2018 PSU Grants. As of ~~September 30, 2017,~~ March 31, 2021, the Company determined that achievement of the ~~Threshold~~Maximum Goals for these awards was probable ~~for the PSUs granted in~~ ~~2016~~and, as such, the Company recorded share-based award expense related to the awards of ~~$0.2~~$1.3 million ~~and~~ ~~$1.1~~ ~~million, respectively,~~ for the three ~~and~~ ~~nine~~ months ended ~~September 30, 2017.~~ ~~For~~March 31, 2021. As of March 31, 2020, the ~~PSUs granted in~~ ~~2017,~~Company determined that achievement between the Target and Maximum Goals for these awards was probable and as such, the Company recorded share-based award expense related to the awards of $1.0 million for the three months ended March 31, 2020.

2019 PSU Grants. As of March 31, 2021, the Company determined that achievement of the Maximum Goals for these awards was probable and as such, the Company recorded share-based award expense related to the awards of $1.8 million for the three months ended March 31, 2021. As of March 31, 2020, the Company concluded that achievement of any of the performance metrics had not met the level of probability required to record compensation expense ~~at that time~~ and as such, no0 expense related to these awards was recognized.

2020 PSU Grants. As of March 31, 2021, the Company determined that achievement between the Target and Maximum Goals for these awards was probable and as such, the Company recorded share-based award expense related to the ~~grant~~awards of ~~these awards has been recognized as~~$3.5 million for the three months ended March 31, 2021.

-18-

Table of ~~September 30, 2017.~~

Contents

16.	~~Commitments and Contingencies~~

16. Commitments and Contingencies

Surety Bonds and Letters of Credit. We are required to obtain surety bonds and letters of credit in support of our obligations for land development and subdivision improvements, homeowner association dues, warranty work, contractor license fees and earnest money deposits. At ~~September 30, 2017,~~ March 31, 2021, we had outstanding surety bonds and letters of credit totaling ~~$184.9~~$306.7 million and ~~$65.5~~$145.3 million, respectively, including ~~$31.6~~$108.0 million in letters of credit issued by HomeAmerican. The estimated cost to complete obligations related to these bonds and letters of credit were approximately ~~$33.0~~$122.4 million and ~~$25.3~~$86.2 million, respectively. All letters of credit as of ~~September 30, 2017,~~ March 31, 2021, excluding those issued by HomeAmerican, were issued under our unsecured revolving credit facility (see Note 18 for further discussion of the revolving credit facility). We expect that the obligations secured by these performance bonds and letters of credit generally will be performed in the ordinary course of business and in accordance with the applicable contractual terms. To the extent that the obligations are performed, the related performance bonds and letters of credit should be released and we should not have any continuing obligations. However, in the event any such performance bonds or letters of credit are called, our indemnity obligations could require us to reimburse the issuer of the performance bond or letter of credit.

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

~~Litigation~~ ~~Reserves.~~

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

Lot Option Contracts. In the ordinary course of business, we enter into lot option purchase contracts (“Option Contracts”), generally through a deposit of cash or a letter of credit, for the right to purchase land or lots at a future point in time with predetermined terms. The use of such land option and other contracts generally allow us to reduce the risks associated with direct land ownership and development, reduces our capital and financial commitments, and minimizes the amount of land inventories on our consolidated balance sheets. In certain cases, these contracts will be settled shortly following the end of the period. Our obligation with respect to Option Contracts is generally limited to forfeiture of the related deposits. At ~~September 30, 2017,~~ March 31, 2021, we had cash deposits and letters of credit totaling ~~$11.4~~$33.6 million and ~~$3.6~~$9.6 million, respectively, at risk associated with the option to purchase ~~6,306~~9,487 lots.

Coronavirus/COVID-19 Pandemic. In response to the pandemic, many state and local governments instituted restrictions that substantially limited the operations of non-essential businesses and the activities of individuals. While many of these restrictions have been or are in the process of being eased, there is still significant uncertainty as a result of the pandemic and its potential to continue to negatively impact the U.S. economy and consumer confidence. We continue to construct, market and sell homes in all markets in which we operate, but increased restrictions could have a negative impact on traffic at our sales centers and model homes, cancellation rates and our ability to physically construct homes. While the extent to which the pandemic will impact our financial results in the coming periods depends on future developments, including whether there are additional outbreaks of COVID-19 and the actions taken to contain or address the virus, the pandemic and its associated impact on the U.S. economy and consumer confidence could have a material impact to the Company’s future results of operations, financial condition and cash flows.

~~- 18 -~~

-19-

Table of Contents

17. Derivative Financial Instruments

~~M.D.C. HOLDINGS, INC.~~

~~Notes to Unaudited Consolidated Financial Statements~~

17.	~~Derivative Financial Instruments~~

The derivative instruments we utilize in the normal course of business are interest rate lock commitments and forward sales of mortgage-backed securities, both of which typically are short-term in nature. Forward sales of mortgage-backed securities are utilized to hedge changes in fair value of our interest rate lock commitments as well as mortgage loans held-for-sale not under commitments to sell. For forward sales of mortgage-backed securities, as well as interest rate lock commitments that are still outstanding at the end of a reporting period, we record the changes in fair value of the derivatives in revenues in the financial services section of our consolidated statements of operations and comprehensive income with an offset to other assets or accounts payable and accrued liabilities in the financial services section of our consolidated balance sheets, depending on the nature of the change.

At ~~September 30, 2017,~~ March 31, 2021, we had interest rate lock commitments with an aggregate principal balance of ~~$101.2~~$490.0 million. Additionally, we had ~~$14.0~~$65.1 million of mortgage loans held-for-sale at ~~September 30, 2017~~ March 31, 2021 that had not yet been committed to a mortgage purchaser. In order to hedge the changes in fair value of our interest rate lock commitments and mortgage loans held-for-sale that had not yet been committed to a mortgage purchaser, we had forward sales of securities totaling ~~$85.0~~$320.5 million at ~~September 30, 2017.~~

March 31, 2021.

For the three ~~and~~ ~~nine~~ months ended ~~September 30, 2017,~~ March 31, 2021 and 2020, we recorded net ~~losses~~gains on derivatives of ~~$0.5~~$9.0 million and ~~$0.5~~$1.0 million, respectively, onin revenues in the financial services section of our ~~derivatives, compared to net gains~~consolidated statements of ~~$0.1~~ ~~million~~operations and ~~$1.1~~ ~~million for the same periods in~~ ~~2016.~~

comprehensive income.

18.	~~Lines of Credit~~

18. Lines of Credit

Revolving Credit Facility.We have an unsecured revolving credit agreement (“Revolving Credit Facility”) with a group of lenders which may be used for general corporate purposes. This agreement was amended on ~~September 29, 2017~~ December 28, 2020 to (1~~) extend the~~ ~~Revolving Credit Facility~~ ~~maturity to~~ ~~December 16, 2022, (~~2)(1) increase the aggregate commitment from ~~$550~~ ~~million~~$1.0 billion to ~~$700~~ ~~million~~$1.2 billion (the “Commitment”), (2) extend the Revolving Credit Facility maturity of $1.125 billion of the Commitments to December 18, 2025 with the remaining Commitment continuing to termination on December 18, 2023 and (3)(3) provide that the aggregate amount of the commitments may increase to an amount not to exceed ~~$1.25~~$1.7 billion upon our request, subject to receipt of additional commitments from existing or additional lenders and, in the case of additional lenders, the consent of the co-administrative agents. As defined in the Revolving Credit Facility, interest rates on base rate borrowings are equal to the highest of (1) (1) 0.0%, (2) (2) a ~~specified eurocurrency~~prime rate, ~~or (~~3)(3) a federal funds effective rate ~~or prime~~plus 1.50%, and (4) a specified eurocurrency rate plus 1.00% and, in each case, plus a margin that is determined based on our credit ratings and leverage ratio. Interest rates on eurocurrency borrowings are equal to ~~the~~a specified eurocurrency ~~rate.~~rate plus a margin that is determined based on our credit ratings and leverage ratio. At any time at which our leverage ratio, as of the last day of the most recent calendar quarter, exceeds 55%, the aggregate principal amount of all consolidated senior debt borrowings outstanding may not exceed the borrowing base. There is no borrowing base requirement if our leverage ratio, as of the last day of the most recent calendar quarter, is 55% or less.

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

The Revolving Credit Facility is subject to acceleration upon certain specified events of default, including breach of the consolidated tangible net worth covenant, a violation of anti-corruption or sanctions laws, failure to make timely payments, breaches of certain representations or covenants, failure to pay other material indebtedness, or another person becoming beneficial owner of 50% or more of our outstanding common stock. We believe we were in compliance with the representations, warranties and covenants included in the Revolving Credit Facility as of ~~September 30, 2017.~~

March 31, 2021.

We incur costs associated with unused commitment fees pursuant to the terms of the Revolving Credit Facility. At ~~September 30, 2017~~ March 31, 2021 and December 31, ~~2016,~~ 2020, there were ~~$34.0~~$37.3 million and ~~$23.0~~$25.1 million, respectively, in letters of credit outstanding, which reduced the amounts available to be borrowed under the Revolving Credit Facility. At ~~both~~ ~~September 30, 2017~~ March 31, 2021 and December 31, ~~2016,~~ 2020, we had ~~$15.0~~$10.0 million and $10.0 million, respectively, outstanding under the Revolving Credit Facility. As of ~~September 30, 2017,~~ March 31, 2021, availability under the Revolving Credit Facility was approximately ~~$651.0~~ ~~million.~~

$1.15 billion.

~~- 19 -~~

-20-

Table of Contents

~~M.D.C. HOLDINGS, INC.~~

~~Notes to Unaudited Consolidated Financial Statements~~

Mortgage Repurchase Facility.HomeAmerican has a Master Repurchase Agreement (the “Mortgage Repurchase Facility”) with U.S. Bank National Association (“USBNA”). ~~Effective~~ ~~August 10, 2017,~~ t~~he Mortgage Repurchase Facility was amended to extend its termination date to~~ ~~August 9, 2018.~~ The Mortgage Repurchase Facility provides liquidity to HomeAmerican by providing for the sale of up to an aggregate of ~~$75~~$75 million (subject to increase by up to ~~$75~~$75 million under certain conditions) of eligible mortgage loans to USBNA with an agreement by HomeAmerican to repurchase the mortgage loans at a future date. Until such mortgage loans are transferred back to HomeAmerican, the documents relating to such loans are held by USBNA, as custodian, pursuant to the Custody Agreement (“Custody Agreement”), dated as of November 12, 2008, by and between HomeAmerican and USBNA. In the event that an eligible mortgage loan becomes ineligible, as defined under the Mortgage Repurchase Facility, HomeAmerican may be required to repurchase the ineligible mortgage loan immediately. The Mortgage Repurchase Facility terminates on May 20, 2021. The Mortgage Repurchase Facility was amended on September 24, 2020 and again on March 25, 2021 to adjust the commitments to purchase for specific time periods. As part of the amendments, the commitments to purchase were increased to $200 million for the period December 22, 2020 through February 4, 2021 and $175 million for the period March 25, 2021 through April 22, 2021.

The maximum aggregate commitment of the Mortgage Repurchase Facility was temporarily increased by $75 million on March 29, 2021 effective through April 26, 2021. The maximum aggregate commitment of the Mortgage Repurchase Facility was temporarily increased by $50 million on December 28, 2020 effective through January 27, ~~2016~~ ~~from~~ ~~$75~~ ~~million to~~ ~~$125~~2021. At March 31, 2021 and December 31, 2020 HomeAmerican had $217.5 million and ~~was effective through~~ ~~January 25, 2017.~~ At ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016,~~ ~~HomeAmerican had~~ ~~$65.1~~ ~~million and~~ ~~$114.5~~$202.4 million, respectively, of mortgage loans that HomeAmerican was obligated to repurchase under the Mortgage Repurchase Facility. Mortgage loans that HomeAmerican is obligated to repurchase under the Mortgage Repurchase Facility are accounted for as a debt financing arrangement and are reported as mortgage repurchase facility in the consolidated balance sheets. Advances under the Mortgage Repurchase Facility carry a price range that is ~~LIBOR-based.~~

based on a LIBOR rate or successor benchmark rate.

The Mortgage Repurchase Facility contains various representations, warranties and affirmative and negative covenants that we believe are customary for agreements of this type. The negative covenants include, among others, (i) a minimum Adjusted Tangible Net Worth requirement, (ii) a maximum Adjusted Tangible Net Worth ratio, (iii) a minimum adjusted net income requirement, and (iv) a minimum Liquidity requirement. The foregoing capitalized terms are defined in the Mortgage Repurchase Facility. We believe HomeAmerican was in compliance with the representations, warranties and covenants included in the Mortgage Repurchase Facility as of ~~September 30, 2017.~~

March 31, 2021.

~~19.~~

~~Related Party Transactions~~

19. Related Party Transactions

We contributed ~~$1.5~~ ~~million and~~ ~~$1.0~~$2.2 million in cash to the MDC/Richmond American Homes Foundation (the “Foundation”) during the ~~nine~~three months ended ~~September 30, 2017~~ ~~and~~ ~~2016,~~ ~~respectively. The Foundation is a Delaware non-profit corporation that was incorporated on~~ ~~September~~ ~~30,~~~~1999.~~

March 31, 2021. The Foundation is a non-profit organization operated exclusively for charitable, educational and other purposes beneficial to social welfare within the meaning of Section~~501(c)(~~3) 501(c)(3) of the Internal Revenue Code. The following Directors and/or officers of the Company served as directors of the Foundation at ~~September 30, 2017,~~ March 31, 2021, all of whom serve without compensation:

~~Name~~	~~MDC Title~~
Name		MDC Title
Larry A. Mizel		Executive Chairman ~~and CEO~~
David D. Mandarich		President and ~~COO~~ CEO

~~Three~~

NaN other individuals, who are independent of the Company, also serve as directors of the Foundation. All directors of the Foundation serve without compensation.

~~20.~~

Su~~bsequent Events~~

On ~~October 16, 2017,~~ ~~we completed~~The Company has a ~~public offering of an additional~~ ~~$150~~ ~~million principal amount of our~~ 6% ~~senior notes due~~ ~~2043~~~~, which are~~sublease agreement with CVentures, Inc. Larry A. Mizel, the Executive Chairman of the ~~same series~~Company, is the President of CVentures, Inc. The sublease is for office space that CVentures, Inc. has continuously leased from the Company since 2005. The current sublease term commenced November 1, 2016 and ~~have~~will continue through October 31, 2021, with an option to extend to October 31, 2026. The sublease agreement is for approximately 5,437 rentable square feet at a base rent that increases over the ~~same terms as our senior notes issued on~~ ~~January~~ ~~10,~~~~2013~~initial term from $26.50 to $28.68 per rentable square foot per year, and ~~May 13, 2013 (~~~~collectively~~increasing over the ~~“6%~~ ~~Notes”).~~ extension term from $29.26 to $31.67 per rentable square foot per year. The 6% ~~Notes, which pay interest semi-annually in arrears on~~ ~~January~~ 15 ~~and~~ ~~July~~ 15 ~~of each year, are general unsecured obligations of MDC and rank equally and ratably with our other general unsecured and unsubordinated indebtedness. We received proceeds of~~ ~~$144.2~~ ~~million, net of discount and underwriting fees. We plan to use the proceeds~~sublease rent is an allocation of the ~~offering for general corporate purposes, which~~ ~~may~~ ~~include repayment of debt~~.

rent under the master lease agreement based on the sublease square footage.

~~- 20 -~~

-21-

Table of Contents

20. Supplemental Guarantor Information

~~M.D.C. HOLDINGS, INC.~~

~~Notes to Unaudited Consolidated Financial Statements~~

21.	~~Supplemental Guarantor Information~~

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

●

~~M.D.C. Land Corporation~~

●

~~RAH of Florida, Inc.~~

●

~~Richmond American Construction, Inc.~~

●

~~Richmond American Homes of Arizona, Inc.~~

●

~~Richmond American Homes of Colorado, Inc.~~

●

~~Richmond American Homes of Florida, LP~~

●

~~Richmond American Homes of Illinois, Inc.~~

●

~~Richmond American Homes of Maryland, Inc.~~

●

~~Richmond American Homes of Nevada, Inc.~~

●

~~Richmond American Homes of New Jersey, Inc.~~

●

~~Richmond American Homes of~~ ~~Oregon, Inc. (formerly known as Richmond American Homes of Delaware, Inc.)~~

●

~~Richmond American Homes of Pennsylvania, Inc.~~

●

~~Richmond American Homes of Utah, Inc.~~

●

~~Richmond American Homes of Virginia, Inc.~~

●

~~Richmond American Homes of Washington, Inc.~~

Company:

•M.D.C. Land Corporation

•RAH of Florida, Inc.

•Richmond American Construction, Inc.

•Richmond American Homes of Arizona, Inc.

•Richmond American Homes of Colorado, Inc.

•Richmond American Homes of Florida, LP

•Richmond American Homes of Idaho, Inc. (formerly known as Richmond American Homes of Illinois, Inc.)

•Richmond American Homes of Maryland, Inc.

•Richmond American Homes of Nevada, Inc.

•Richmond American Homes of New Jersey, Inc.

•Richmond American Homes of Oregon, Inc.

•Richmond American Homes of Pennsylvania, Inc.

•Richmond American Homes of Utah, Inc.

•Richmond American Homes of Virginia, Inc.

•Richmond American Homes of Washington, Inc.

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

~~We have determined that separate, full financial statements~~

As the combined assets, liabilities and results of operations of M.D.C. Holdings, Inc. and the Guarantor Subsidiaries ~~would~~ (the “Obligor Group”) are not ~~be material to investors~~ materially different from those in the homebuilding section of our consolidated balance sheets and ~~accordingly, supplemental~~consolidated statements of operations and comprehensive income, separate summarized financial information ~~for~~of the ~~Guarantor~~Obligor Group has not been included. As of March 31, 2021 and ~~Non-Guarantor Subsidiaries is presented below.~~

December 31, 2020, amounts due to non-guarantor subsidiaries from the Obligor Group totaled $65.4 million and $65.8 million, respectively.

~~- 21 -~~

-22-

Table of Contents

~~M.D.C. HOLDINGS, INC.~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~Supplemental~~ ~~Condensed~~ ~~Combining Balance Sheet~~

September 30, 2017

Non-

Guarantor

Guarantor

Eliminating

Consolidated

MDC

Subsidiaries

Subsidiaries

Entries

MDC

(Dollars in thousands)

ASSETS

Homebuilding:

Cash and cash equivalents
$ 347,217 $ 4,182 $ - $ - $ 351,399
Marketable securities
- - - - -
Restricted cash
- 8,723 - - 8,723
Trade and other receivables
5,517 39,577 - (2,190 ) 42,904
Inventories:

Housing completed or under construction
- 969,419 - - 969,419
Land and land under development
- 863,002 - - 863,002
Total inventories
- 1,832,421 - - 1,832,421

Intercompany receivables
1,603,012 2,803 5,254 (1,611,069 ) -
Investment in subsidiaries
278,885 - - (278,885 ) -
Property and equipment, net
24,408 1,896 - - 26,304
Deferred tax asset, net
65,284 - - (1,120 ) 64,164
Metropolitan district bond securities (related party)
- - - - -
Prepaid and other assets
8,155 64,653 - - 72,808
Total homebuilding assets
2,332,478 1,954,255 5,254 (1,893,264 ) 2,398,723

Financial Services:

Cash and cash equivalents
- - 26,419 - 26,419
Marketable securities
- - 40,221 - 40,221
Intercompany receivables
- - 35,765 (35,765 ) -
Mortgage loans held-for-sale, net
- - 89,804 - 89,804
Other assets
- - 10,015 1,120 11,135
Total financial services assets
- - 202,224 (34,645 ) 167,579
Total Assets
$ 2,332,478 $ 1,954,255 $ 207,478 $ (1,927,909 ) $ 2,566,302

LIABILITIES AND EQUITY

Homebuilding:

Accounts payable
$ - $ 49,390 $ - $ - $ 49,390
Accrued liabilities
40,205 112,986 98 (1,628 ) 151,661
Advances and notes payable to parent and subsidiaries
43,822 1,572,098 26,802 (1,642,722 ) -
Revolving credit facility
15,000 - - - 15,000
Senior notes, net
842,532 - - - 842,532
Total homebuilding liabilities
941,559 1,734,474 26,900 (1,644,350 ) 1,058,583

Financial Services:

Accounts payable and other liabilities
- - 52,259 (562 ) 51,697
Advances and notes payable to parent and subsidiaries
- - 4,112 (4,112 ) -
Mortgage repurchase facility
- - 65,103 - 65,103
Total financial services liabilities
- - 121,474 (4,674 ) 116,800
Total Liabilities
941,559 1,734,474 148,374 (1,649,024 ) 1,175,383

Equity:

Total Stockholders' Equity
1,390,919 219,781 59,104 (278,885 ) 1,390,919
Total Liabilities and Stockholders' Equity
$ 2,332,478 $ 1,954,255 $ 207,478 $ (1,927,909 ) $ 2,566,302

~~- 22 -~~

~~Table of Contents~~

~~M.D.C. HOLDINGS, INC.~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~Supplemental Co~~~~ndensed Combining Balance Sheet~~

December 31, 2016

Non-

Guarantor

Guarantor

Eliminating

Consolidated

MDC

Subsidiaries

Subsidiaries

Entries

MDC

(Dollars in thousands)

ASSETS

Homebuilding:

Cash and cash equivalents
$ 255,679 $ 3,408 $ - $ - $ 259,087
Marketable securities
59,770 - - - 59,770
Restricted cash
- 3,778 - - 3,778
Trade and other receivables
5,380 39,247 - (2,135 ) 42,492
Inventories:

Housing completed or under construction
- 874,199 - - 874,199
Land and land under development
- 884,615 - - 884,615
Total inventories
- 1,758,814 - - 1,758,814

Intercompany receivables
1,475,291 2,803 5,289 (1,483,383 ) -
Investment in subsidiaries
295,214 - - (295,214 ) -
Property and equipment, net
25,495 2,546 - - 28,041
Deferred tax assets, net
74,119 - - 769 74,888
Metropolitan district bond securities (related party)
30,162 - - - 30,162
Other assets
5,267 55,196 - - 60,463
Total Homebuilding Assets
2,226,377 1,865,792 5,289 (1,779,963 ) 2,317,495

Financial Services:

Cash and cash equivalents
- - 23,822 - 23,822
Marketable securities
- - 36,436 - 36,436
Intercompany receivables
- - 40,042 (40,042 ) -
Mortgage loans held-for-sale, net
- - 138,774 - 138,774
Other assets
- - 12,831 (769 ) 12,062
Total Financial Services Assets
- - 251,905 (40,811 ) 211,094
Total Assets
$ 2,226,377 $ 1,865,792 $ 257,194 $ (1,820,774 ) $ 2,528,589

LIABILITIES AND EQUITY

Homebuilding:

Accounts payable
$ - $ 42,088 $ - $ - $ 42,088
Accrued liabilities
1,527 136,615 143 6,281 144,566
Advances and notes payable to parent and subsidiaries
48,134 1,445,276 26,266 (1,519,676 ) -
Revolving credit facility
15,000 - - - 15,000
Senior notes, net
841,646 - - - 841,646
Total Homebuilding Liabilities
906,307 1,623,979 26,409 (1,513,395 ) 1,043,300

Financial Services:

Accounts payable and accrued liabilities
- - 59,150 (8,416 ) 50,734
Advances and notes payable to parent and subsidiaries
- - 3,749 (3,749 ) -
Mortgage repurchase facility
- - 114,485 - 114,485
Total Financial Services Liabilities
- - 177,384 (12,165 ) 165,219
Total Liabilities
906,307 1,623,979 203,793 (1,525,560 ) 1,208,519

Equity:

Total Stockholders' Equity
1,320,070 241,813 53,401 (295,214 ) 1,320,070
Total Liabilities and Stockholders' Equity
$ 2,226,377 $ 1,865,792 $ 257,194 $ (1,820,774 ) $ 2,528,589

~~- 23 -~~

~~Table of Contents~~

~~M.D.C. HOLDINGS, INC.~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~Supplementa~~~~l Condensed Combining Statement~~ ~~of Operations~~

Three Months Ended September 30, 2017

Non-

Guarantor

Guarantor

Eliminating

Consolidated

MDC

Subsidiaries

Subsidiaries

Entries

MDC

(Dollars in thousands)

Homebuilding:

Revenues
$ - $ 586,287 $ - $ - $ 586,287
Cost of sales
- (486,406 ) - - (486,406 )
Inventory impairments
- (4,540 ) - - (4,540 )
Gross margin
- 95,341 - - 95,341
Selling, general, and administrative expenses
(11,911 ) (56,983 ) - (208 ) (69,102 )
Equity income of subsidiaries
33,329 - - (33,329 ) -
Interest and other income
53,740 941 1 (134 ) 54,548
Other expense
7 (625 ) - - (618 )
Other-than-temporary impairment of marketable securities
- - - - -
Homebuilding pretax income (loss)
75,165 38,674 1 (33,671 ) 80,169
Financial Services:

Financial services pretax income
- - 9,169 342 9,511
Income before income taxes
75,165 38,674 9,170 (33,329 ) 89,680
(Provision) benefit for income taxes
(14,002 ) (11,168 ) (3,347 ) - (28,517 )
Net income
$ 61,163 $ 27,506 $ 5,823 $ (33,329 ) $ 61,163
Other comprehensive income related to available-for-sale securities, net of tax
(23,175 ) - 927 (927 ) (23,175 )
Comprehensive income
$ 37,988 $ 27,506 $ 6,750 $ (34,256 ) $ 37,988

	~~Three Months Ended September 30, 2016~~
							~~Non-~~
				~~Guarantor~~			~~Guarantor~~			~~Eliminating~~			~~Consolidated~~
	~~MDC~~			~~Subsidiaries~~			~~Subsidiaries~~			~~Entries~~			~~MDC~~
	~~(Dollars in thousands)~~
~~Homebuilding:~~
~~Revenues~~	$	-		$	~~578,012~~		$	-		$	-		$	~~578,012~~
~~Cost of sales~~		-			~~(483,829~~	)		-			-			~~(483,829~~	)
~~Inventory impairments~~		-			~~(4,700~~	)		-			-			~~(4,700~~	)
~~Gross margin~~		-			~~89,483~~			-			-			~~89,483~~
~~Selling, general, and administrative expenses~~		~~(8,268~~	)		~~(53,452~~	)		-			~~(184~~	)		~~(61,904~~	)
~~Equity income of subsidiaries~~		~~30,711~~			-			-			~~(30,711~~	)		-
~~Interest and other income~~		~~1,478~~			~~500~~			1			~~(110~~	)		~~1,869~~
~~Other expense~~		1			~~(1,559~~	)		-			-			~~(1,558~~	)
~~Other-than-temporary impairment of marketable securities~~		~~(215~~	)		-			-			-			~~(215~~	)
~~Homebuilding pretax income (loss)~~		~~23,707~~			~~34,972~~			1			~~(31,005~~	)		~~27,675~~
~~Financial Services:~~
~~Financial services pretax income~~		-			-			~~10,083~~			~~294~~			~~10,377~~
~~Income before income taxes~~		~~23,707~~			~~34,972~~			~~10,084~~			~~(30,711~~	)		~~38,052~~
~~(Provision) benefit for income taxes~~		~~2,652~~			~~(10,616~~	)		~~(3,729~~	)		-			~~(11,693~~	)
~~Net income~~	$	~~26,359~~		$	~~24,356~~		$	~~6,355~~		$	~~(30,711~~	)	$	~~26,359~~
~~Other comprehensive income related to available-for-sale securities, net of tax~~		~~1,028~~			-			~~310~~			~~(310~~	)		~~1,028~~
~~Comprehensive income~~	$	~~27,387~~		$	~~24,356~~		$	~~6,665~~		$	~~(31,021~~	)	$	~~27,387~~

~~- 24 -~~

~~Table of Contents~~

~~M.D.C. HOLDINGS, INC.~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~Supplemental Condensed Combining Statement of Operations~~

Nine Months Ended September 30, 2017

Non-

Guarantor

Guarantor

Eliminating

Consolidated

MDC

Subsidiaries

Subsidiaries

Entries

MDC

(Dollars in thousands)

Homebuilding:

Revenues
$ - $ 1,798,984 $ - $ - $ 1,798,984
Home and land cost of sales
- (1,495,838 ) - - (1,495,838 )
Inventory impairments
- (9,390 ) - - (9,390 )
Gross margin
- 293,756 - - 293,756
Selling, general, and administrative expenses
(36,539 ) (168,988 ) - (582 ) (206,109 )
Equity income of subsidiaries
102,469 - - (102,469 ) -
Interest and other income
57,748 2,281 5 (312 ) 59,722
Other expense
23 (1,658 ) - - (1,635 )
Other-than-temporary impairment of marketable securities
(51 ) - - - (51 )
Homebuilding pretax income (loss)
123,650 125,391 5 (103,363 ) 145,683
Financial Services:

Financial services pretax income
- - 31,357 894 32,251
Income before income taxes
123,650 125,391 31,362 (102,469 ) 177,934
(Provision) benefit for income taxes
(6,367 ) (42,742 ) (11,542 ) - (60,651 )
Net income
$ 117,283 $ 82,649 $ 19,820 $ (102,469 ) $ 117,283
Other comprehensive income related to available for sale securities, net of tax
(19,245 ) - 2,217 (2,217 ) (19,245 )
Comprehensive income
$ 98,038 $ 82,649 $ 22,037 $ (104,686 ) $ 98,038

Nine Months Ended September 30, 2016

Non-

Guarantor

Guarantor

Eliminating

Consolidated

MDC

Subsidiaries

Subsidiaries

Entries

MDC

Homebuilding:

(Dollars in thousands)

Revenues
$ - $ 1,546,267 $ - $ - $ 1,546,267
Home and land cost of sales
- (1,291,270 ) (300 ) - (1,291,570 )
Inventory impairments
- (6,300 ) - - (6,300 )
Gross margin
- 248,697 (300 ) - 248,397
Selling, general, and administrative expenses
(31,598 ) (150,492 ) - (531 ) (182,621 )
Equity income of subsidiaries
80,990 - - (80,990 ) -
Interest and other income
3,970 1,652 4 (268 ) 5,358
Interest expense
- - - - -
Other expense
(2 ) (2,461 ) - - (2,463 )
Other-than-temporary impairment of marketable securities
(934 ) - - - (934 )
Homebuilding pretax income (loss)
52,426 97,396 (296 ) (81,789 ) 67,737
Financial Services:

Financial services pretax income
- - 24,247 799 25,046
Income before income taxes
52,426 97,396 23,951 (80,990 ) 92,783
(Provision) benefit for income taxes
10,409 (31,438 ) (8,919 ) - (29,948 )
Net income
$ 62,835 $ 65,958 $ 15,032 $ (80,990 ) $ 62,835
Other comprehensive income related to available for sale securities, net of tax
3,871 - 680 (680 ) 3,871
Comprehensive income
$ 66,706 $ 65,958 $ 15,712 $ (81,670 ) $ 66,706

~~- 25 -~~

~~Table of Contents~~

~~M.D.C. HOLDINGS, INC.~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~Supplementa~~~~l Condensed Combining Statement~~ ~~of Cash Flows~~

Nine Months Ended September 30, 2017

Non-

Guarantor

Guarantor

Eliminating

Consolidated

MDC

Subsidiaries

Subsidiaries

Entries

MDC

(Dollars in thousands)

Net cash provided by (used in) operating activities
$ 26,918 $ (21,023 ) $ 63,269 $ - $ 69,164
Net cash provided by (used in) investing activities
97,540 (198 ) (254 ) 10,959 108,047
Financing activities:

Payments from (advances to) subsidiaries
- 21,995 (11,036 ) (10,959 ) -
Mortgage repurchase facility
- - (49,382 ) - (49,382 )
Dividend payments
(38,793 ) - - - (38,793 )
Payments of deferred financing costs
(2,630 ) - - - (2,630 )
Proceeds from exercise of stock options
8,503 - - - 8,503
Net cash provided by (used in) financing activities
(32,920 ) 21,995 (60,418 ) (10,959 ) (82,302 )

Net increase in cash and cash equivalents
91,538 774 2,597 - 94,909
Cash and cash equivalents:

Beginning of period
255,679 3,408 23,822 - 282,909
End of period
$ 347,217 $ 4,182 $ 26,419 $ - $ 377,818

Nine Months Ended September 30, 2016

Non-

Guarantor

Guarantor

Eliminating

Consolidated

MDC

Subsidiaries

Subsidiaries

Entries

MDC

(Dollars in thousands)

Net cash provided by (used in) operating activities
$ (5,918 ) $ (17,581 ) $ 14,596 $ - $ (8,903 )
Net cash provided by (used in) investing activities
26,166 (1,252 ) (9,797 ) 9,619 24,736
Financing activities:

Payments from (advances to) subsidiaries
- 20,284 (10,665 ) (9,619 ) -
Mortgage repurchase facility
- - 3,400 - 3,400
Dividend payments
(36,763 ) - - - (36,763 )
Payments of deferred financing costs
- - - - -
Proceeds from the exercise of stock options
- - - - -
Net cash provided by (used in) financing activities
(36,763 ) 20,284 (7,265 ) (9,619 ) (33,363 )

Net increase in cash and cash equivalents
(16,515 ) 1,451 (2,466 ) - (17,530 )
Cash and cash equivalents:

Beginning of period
141,245 3,097 36,646 - 180,988
End of period
$ 124,730 $ 4,548 $ 34,180 $ - $ 163,458

~~- 26 -~~

~~Table of Contents~~

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

The following discussion should be read in conjunction with, and is qualified in its entirety by, the Unaudited Consolidated Financial Statements and Notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This item contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are based upon ~~management~~’smanagement’s experiences, observations, and analyses. Actual results may differ materially from those indicated in such forward-looking statements. Factors that may cause such a difference include, but are not limited to, those discussed in "Item ~~1A:~~1A. Risk Factors" of our Annual Report on Form 10-K for the year endedDecember 31, ~~2016~~2020and this Quarterly Report on Form 10-Q.

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Homebuilding:

(Dollars in thousands, except per share amounts)

Home sale revenues
$ 584,947 $ 575,722 $ 1,796,046 $ 1,541,337
Land sale revenues
1,340 2,290 2,938 4,930
Total home and land sale revenues
586,287 578,012 1,798,984 1,546,267
Home cost of sales
(485,147 ) (481,511 ) (1,493,166 ) (1,287,373 )
Land cost of sales
(1,259 ) (2,318 ) (2,672 ) (4,197 )
Inventory impairments
(4,540 ) (4,700 ) (9,390 ) (6,300 )
Total cost of sales
(490,946 ) (488,529 ) (1,505,228 ) (1,297,870 )
Gross margin
95,341 89,483 293,756 248,397
Gross margin %
16.3 % 15.5 % 16.3 % 16.1 %
Selling, general and administrative expenses
(69,102 ) (61,904 ) (206,109 ) (182,621 )
Interest and other income
54,548 1,869 59,722 5,358
Other expense
(618 ) (1,558 ) (1,635 ) (2,463 )
Other-than-temporary impairment of marketable securities
- (215 ) (51 ) (934 )
Homebuilding pretax income
80,169 27,675 145,683 67,737

Financial Services:

Revenues
17,464 17,408 54,516 44,248
Expenses
(8,849 ) (7,955 ) (25,247 ) (21,739 )
Interest and other income
925 1,035 3,142 2,648
Other-than-temporary impairment of marketable securities
(29 ) (111 ) (160 ) (111 )
Financial services pretax income
9,511 10,377 32,251 25,046

Income before income taxes
89,680 38,052 177,934 92,783
Provision for income taxes
(28,517 ) (11,693 ) (60,651 ) (29,948 )
Net income
$ 61,163 $ 26,359 $ 117,283 $ 62,835

Earnings per share:

Basic
$ 1.18 $ 0.51 $ 2.27 $ 1.22
Diluted
$ 1.16 $ 0.51 $ 2.23 $ 1.22

Weighted average common shares outstanding:

Basic
51,650,360 51,297,132 51,502,986 51,286,844
Diluted
52,601,118 51,460,446 52,248,377 51,297,765

Dividends declared per share
$ 0.25 $ 0.24 $ 0.75 $ 0.72

Cash provided by (used in):

Operating Activities
$ (51,723 ) $ 13,183 $ 69,164 $ (8,903 )
Investing Activities
$ 110,004 $ (7,486 ) $ 108,047 $ 24,736
Financing Activities
$ (18,439 ) $ (13,545 ) $ (82,302 ) $ (33,363 )


	Three Months Ended March 31,
		2021			2020

		(Dollars in thousands, except per share amounts)
Homebuilding:
Home sale revenues		$	1,041,858		$	697,085
Home cost of sales		(813,888)			(558,647)


Gross profit		227,970			138,438
Gross margin		21.9		%	19.9		%
Selling, general and administrative expenses		(114,993)			(89,321)
Interest and other income		967			1,889
Other expense		(437)			(1,337)
Homebuilding pretax income		113,507			49,669

Financial Services:
Revenues		45,023			21,886
Expenses		(15,105)			(10,929)
Other income (expense), net		887			(12,064)
Financial services pretax income (loss)		30,805			(1,107)

Income before income taxes		144,312			48,562
Provision for income taxes		(33,622)			(11,802)
Net income		110,690			36,760

Earnings per share:
Basic		$	1.58		$	0.54
Diluted		$	1.51		$	0.52

Weighted average common shares outstanding:
Basic		69,790,927			67,490,537
Diluted		72,788,177			70,125,723

Dividends declared per share		$	0.37		$	0.31

Cash provided by (used in):
Operating Activities		$	(57,957)		$	(37,173)
Investing Activities		$	(5,749)		$	(7,018)
Financing Activities		$	336,342		$	(5,396)

Industry Conditions and Outlook for MDC*

The U.S. economy continued its recovery during the first quarter of 2021 as state and local governments eased COVID-19 related restrictions, and the federal government provided additional economic stimulus to many consumers. Meanwhile, demand for new homes remained strong during the quarter, driven by factors such as a continued undersupply of affordable homes, a renewed focus on homeownership, and low interest rates. This strong demand helped to drive an 81% year-over-year increase in the dollar value of our homes in backlog to $3.93 billion as of March 31, 2021. The improvement in our backlog provides us with the opportunity for significant year-over-year increases in home sale revenues and pretax income for the remainder of 2021. We continue to closely monitor building costs, which have increased as a result of the pandemic. However, we have been successful to this point in offsetting most of these increased costs through home price increases. We are also monitoring our construction cycle times, which are at risk of increasing due to longer lead times for various building products and high demand for the labor required to build homes.

Our land pipeline remains strong and continues to give us confidence in our goal of growing our year-end active community count by at least 10% (from December 31, 2020 to December 31, 2021). To that end, we acquired over 3,200 lots during the quarter across 60 subdivisions, which is a 90% increase from the prior year quarter. This included the acquisition of our first lots within our newly-formed division in the Boise market. In addition, we approved over 4,300 lots for purchase, representing a 108% increase from the prior year quarter.

In preparation for continued growth, we issued $350 million of 10-year senior notes in January of this year at a rate of 2.500%, which is the lowest rate for any senior note issuance in our Company's history. Our financial position remains strong as of March 31, 2021 with a debt to capital ratio of 38.6% and total liquidity of $1.94 billion. In addition, our credit rating was recently raised to BBB- from BB+ by S&P Global Ratings. Importantly, even as we plan for growth, we continue to closely monitor developments related to COVID-19, which are highly uncertain and could adversely impact our operations and financial results in future periods.

Three Months Ended ~~September 30, 2017~~

March 31, 2021

For the three months ended ~~September 30, 2017,~~March 31, 2021, our net income was $~~61.2~~$110.7 million, or ~~$1.16~~$1.51 per diluted share, a ~~132%~~201% increase compared to net income of ~~$26.4~~$36.8 million, or ~~$0.51~~$0.52 per diluted share, for the same period in the prior year. Both our homebuilding and financial services businesses contributed to these year-over-year improvements, as pretax income from our homebuilding operations increased $63.8 million, or 129%, and our financial services pretax income increased $31.9 million to $30.8 million, compared to a loss of $1.1 million in the first quarter of 2020. The increase in homebuilding pretax income was ~~primarily~~ the result of a $52.5 million improvement in our pretax income from homebuilding operations, which benefited from a 2% increase in home sale revenues, an 80 basis point improvement in our gross margin from home sale revenues percentage, and a $52.7 million increase in our interest and other income as a result of the sale of investments held by our Corporate segment. These items were slightly offset by a 100 basis point increase in our selling, general and administrative (“SG&A”) expenses as a percentage of home sale revenues (“SG&A rate”).

Home sale revenues were up from $575.7 million in the 2016 third quarter to $584.9 million in the 2017 third quarter. The $9.2 million improvement was primarily the result of a 2% increase in the number of homes delivered, as our backlog to start the quarter was up 2% year-over-year. Our number of homes delivered during the 2017 third quarter was negatively impacted by the Weyerhaeuser joist issue (see below) and Hurricane Irma (see below). Because of these two issues, approximately 115 homes that had been scheduled to close during the 2017 third quarter were delayed to later periods.

~~The dollar value of net new home orders increased 6% from the prior year period, driven by an 8% increase in~~ our average selling price of net new orders that was offset partially by a 2% decline in our number of net new orders. Our monthly sales absorption pace improved by 2% year-over-year. However, a 4% decline in average active communities for the 2017 third quarter drove the decrease in our number of net new orders.

~~Nine Months Ended September 30, 2017~~

~~For the nine months ended September 30, 2017, our net income was $1~~17.3 million, or $2.23 per diluted share, an 87% increase compared to net income of $62.8 million, or $1.22 per diluted share, for the same period in the prior year. The increase was primarily the result of a $77.9 million improvement in our pretax income from homebuilding operations, which benefited from a 17%49% increase in home sale revenues and a ~~$54.4 million~~380 basis point increase in our operating margin. The increase in operating margin is the result of our improved pricing over the last twelve months as well as better operating leverage as we continue to see strong results in our more traditional markets and the results of better scale within some of our smaller markets. The increase in financial services pretax income was primarily due to our mortgage business, which experienced a higher interest ~~and other income~~rate lock volume, an increase in the number of mortgages we originated as a ~~result~~percentage of our total homes delivered ("Capture Rate"), and an increased profit margin on loans originated during the ~~sale~~quarter. Additionally, $13.9 million of ~~investments held by our Corporate Segment, as discussed above.~~

~~Industry Conditions~~ ~~and Outlook for MDC~~

~~Through the first three quarters of 2017, solid economic fundamentals continued to support the homebuilding industry, driving robust demand for new homes, especially~~unrealized losses on equity securities were recognized in the ~~first-time homebuyer segment. To meet~~prior year quarter, further impacting the ~~growing demand, we have taken a number of steps to grow community count.~~

~~First, we have substantially~~year-over-year increase in financial services pretax income.

The dollar value of our net new home orders increased our approvals of future lots for purchase. During the 2017 third quarter, we approved the purchase of nearly 2,500 lots and year-to-date we have approved the purchase of over 7,800 lots, which is more than double the ~~approvals~~50% from the ~~same~~prior year period, due to a ~~year ago. Increasingly, our lot approvals have focused on the first-time homebuyer segment, which has responded favorably to one of our newest product lines, the Seasons~~^TM ~~collection.~~

~~Second, in September 2017, we announced that we will commence operations~~34% increase in the ~~greater Portland area, giving us additional exposure~~number of net new orders and a 12% increase in the average selling price of those orders. The increase in the number of net new orders was due to ~~the Pacific Northwest, where we have experienced solid results.~~

Third, because our growth initiatives may require additional capital, we (1) expanded the capacity under our line of credit at the end of the third quarter to $700 million and extended its maturity by two years to December 2022, and (2) at the start of the fourth quarter, added $150 million to our senior notes due January 2043.

~~We ended the 2017~~ ~~third quarter with liquidity of $1.08 billion,~~ an increase of 40% over the prior year. The higher liquidity provides us with additional resources to fund our increased lot approval activity, providing us the foundation for community count growth in 2018.*

~~Other~~

~~Defective Weyerhaeuser Joists~~

During the 2017 third quarter, we were notified by Weyerhaeuser Company, a product vendor, of a manufacturing defect with certain of its floor I-joists used in certain homes built in our Colorado market (the “~~joist issue”). The joist issue impacted 216 homes, 23 of which had closed. Of the 193 homes that had not yet closed, approximately 90 were scheduled to close~~ in the 2017 third quarter that did not close. The vendor has committed to us that it will absorb the costs associated with the removal and replacement of the defective joists. While this issue negatively impacted our number of homes delivered,monthly sales absorption rate ~~and cancellation rate in our Colorado market~~driven by strong demand during the quarter ~~and may continue to impact these metrics~~as noted above. The increase in the ~~next two quarters, we do not believe~~average selling price was the ~~resolution~~result of ~~this issue will be material~~price increases implemented over the past twelve months as well as a shift in geographical mix from Nevada to ~~our results of operations, liquidity, or our financial condition.~~

Colorado.

* See "Forward-Looking Statements" below.


		Three Months Ended
	March 31,		Change
			2021		2020		Amount		%

			(Dollars in thousands)
West			$	77,187	$	36,576	$	40,611	111	%
Mountain			45,858		21,512		24,346		113	%
East			7,835		900		6,935		771	%
Corporate			(17,373)		(9,319)		(8,054)		(86)	%
Total Homebuilding pretax income			$	113,507	$	49,669	$	63,838	129	%

For the 2017 third quarter in our Florida market were negatively impacted by Hurricane Irma. Delivery of approximately 25 homes that had been scheduled to close during the 2017 third quarter were delayed to later periods. In addition, sales were also disrupted as sales offices had to be closed for several days. There was no other material impact from this event.

* See ~~"Forward-Looking Statements"~~~~below.~~

~~- 29 -~~

~~Table of Contents~~

~~Homebuilding~~

~~Pretax Income~~

Three Months Ended

Nine Months Ended

September 30,

Change

September 30,

Change

2017

2016

Amount

%

2017

2016

Amount

%

(Dollars in thousands)

West
$ 17,746 $ 18,392 $ (646 ) (4) % $ 54,335 $ 43,830 $ 10,505 24 %
Mountain
18,326 18,856 (530 ) (3) % 61,097 49,688 11,409 23 %
East
2,613 (2,267 ) 4,880 (215) % 9,989 3,600 6,389 177 %
Corporate
41,484 (7,306 ) 48,790 (668) % 20,262 (29,381 ) 49,643 (169) %
Total homebuilding pretax income
$ 80,169 $ 27,675 $ 52,494 190 % $ 145,683 $ 67,737 $ 77,946 115 %

~~Homebuilding~~three months ended March 31, 2021, we recorded homebuilding pretax income ~~for the 2017 third quarter was $80.2~~of $113.5 million, an increase of ~~$52.5 million~~129% from ~~$27.7~~$49.7 million for the same period in the prior year. The increase was ~~primarily attributable~~due to a 2%49% increase in home sale revenues, ~~an 80~~a 200 basis point ~~improvement in our gross margin from home sale revenues percentage, and a $52.7 million~~ increase ~~in our interest and other income as a result of the sale of investments held by our Corporate segment.~~

~~For our West segment, the benefit of a 15% year-over-year improvement in home sale revenues was more than offset by higher G&~~A costs, due mostly to headcount growth, and a one-time legal charge taken during the 2017 third quarter. While our Mountain segment experienced a 13% year-over-year decline in home sale revenues, we were able to mostly offset the impact of the decrease with an improvement in our gross margin from home sales ~~percentage.~~and a 180 basis point decrease in our selling, general and administrative expenses as a percentage of revenue.

Our West segment experienced a $40.6 million year-over-year increase in pretax income, due to a 52% increase in home sales revenue and an improved gross margin. Our Mountain segment experienced a $24.3 million increase in pretax income from the prior year, as a result of a 46% increase in home sales revenue and an improved gross margin. Our East segment experienced a ~~$4.9~~$6.9 million ~~year-over-year improvement~~increase in pretax income from the prior year, due primarily ~~due~~ to ~~a $2.4 million reduction in inventory impairments coupled with~~ an improved gross margin ~~from home sales percentage. The pretax gain for our Corporate segment was driven by the higher interest~~ and ~~other income discussed above, partially offset by an increase in compensation-related expenses that was driven by an increase in headcount as we plan for future growth.~~

For the nine months ended September 30, 2017, we recorded homebuilding pretax income of $145.7 million, compared to $67.7 million for the same period in the prior year, an increase of $77.9 million or 115%. The increase was primarily attributable to a ~~17%~~46% increase in home ~~sale revenues~~sales revenue. Each of our homebuilding segments also benefited from decreased selling, general and ~~a $54.4 million increase in our interest and other income~~administrative expenses as a ~~result~~percentage of ~~the sale of investments held~~revenue driven by ~~our~~improved operating leverage. Our Corporate segment ~~slightly offset by a $3.1~~experienced an $8.1 million ~~increase in inventory impairments and higher compensation-related expenses due to increased headcount. The year-over-year increases~~decrease in pretax income, ~~for our West and Mountain segments were driven~~due primarily by higher home sale revenues of 29% and 9%, respectively. Our East segment had a $6.4 million improvement in pretax income as a result of a $1.9 million reduction in inventory impairments and a slightly improved gross margin from home sales percentage. The pretax gain for our Corporate segment was driven by the higher interest and other income discussed above, partially offset by an increase in compensation-related expenses due to an increase in ~~headcount.~~

~~Assets~~

September 30,

December 31,

Change

2017

2016

Amount

%

(Dollars in thousands)

West
$ 1,052,795 $ 1,035,033 $ 17,762 2 %
Mountain
677,721 571,139 106,582 19 %
East
217,238 256,816 (39,578 ) (15) %
Corporate
450,969 454,507 (3,538 ) (1) %
Total homebuilding assets
$ 2,398,723 $ 2,317,495 $ 81,228 4 %

both stock-based and deferred compensation expenses.

Assets:


	March 31, 2021		December 31, 2020		Change
					Amount		%

	(Dollars in thousands)
West	$	1,968,336	$	1,855,567	112,769		6	%
Mountain	983,488		905,007		78,481		9	%
East	309,571		274,937		34,634		13	%
Corporate	738,705		470,909		267,796		57	%
Total homebuilding assets	$	4,000,100	$	3,506,420	$	493,680	14	%

Total homebuilding assets increased 4%14% from December 31, ~~2016~~2020 to ~~September 30, 2017, mostly driven by~~March 31, 2021. Homebuilding assets increased in each of our ~~Mountain segment, which had (1) higher land and land under development balances~~operating segments largely due to ~~strong land acquisition activity during the nine months ended~~ ~~September 30, 2017, and (2)~~ a ~~higher~~greater number of homes completed or under construction as of period-end. Corporate assets increased as a result of ~~an increase~~operating cash inflows during the quarter as well as the issuance of $350 million of 2.500% senior notes in backlog under construction. The funds for the land acquisition activity came from our Corporate segment, driving a decline in our Corporate segment’s assets that was mostly offset by our positive operating results and gains on the saleJanuary of investments. Homebuilding assets in our East segment are down from December 31, 2017 due to reduced land acquisition activity as our returns in our Maryland and Virginia markets have been lower than the returns we expect to realize.

this year.

New Home ~~and~~ L~~and~~ S~~ale~~ R~~evenues~~

Three Months Ended

Nine Months Ended

September 30,

Change

September 30,

Change

2017

2016

Amount

%

2017

2016

Amount

%

(Dollars in thousands)

West
$ 326,804 $ 284,589 $ 42,215 15 % $ 959,641 $ 745,995 $ 213,646 29 %
Mountain
167,066 192,876 (25,810 ) (13) % 564,558 521,034 43,524 8 %
East
92,417 100,547 (8,130 ) (8) % 274,785 279,238 (4,453 ) (2) %
Total home and land sale revenues
$ 586,287 $ 578,012 $ 8,275 1 % $ 1,798,984 $ 1,546,267 $ 252,717 16 %

~~For the 2017 third quarter,~~Deliveries& Home Sale Revenues:

Changes in home ~~and land~~ sale revenues ~~increased $8.3 million year-over-year to $586.3 million. For the nine months ended September 30, 2017 home and land sale revenues increased $252.7 million from the same period~~are impacted by changes in the ~~prior year to $1.80 billion. The increases~~number of new homes delivered and the average selling price of those delivered homes. Commentary for ~~both the three and nine months ended September 30, 2017 compared to the same periods~~each of our segments on significant changes in ~~the prior year were~~ ~~primarily driven by increases in new home deliveries of 2% and 15%, respectively.~~

N~~ew Home Deliveries~~

Three Months Ended September 30,

2017

2016

% Change

Homes

Dollar
Value

Average
Price

Homes

Dollar
Value

Average
Price

Homes

Dollar
Value

Average
Price

(Dollars in thousands)

Arizona
186 $ 58,640 $ 315.3 221 $ 64,314 $ 291.0 (16) % (9) % 8 %
California
223 135,745 608.7 195 125,602 644.1 14 % 8 % (5) %
Nevada
240 81,483 339.5 177 59,601 336.7 36 % 37 % 1 %
Washington
98 50,936 519.8 75 35,072 467.6 31 % 45 % 11 %
West
747 326,804 437.5 668 284,589 426.0 12 % 15 % 3 %
Colorado
314 146,883 467.8 343 169,858 495.2 (8) % (14) % (6) %
Utah
45 18,843 418.7 55 20,728 376.9 (18) % (9) % 11 %
Mountain
359 165,726 461.6 398 190,586 478.9 (10) % (13) % (4) %
Maryland
41 21,506 524.5 61 27,297 447.5 (33) % (21) % 17 %
Virginia
68 33,537 493.2 78 39,795 510.2 (13) % (16) % (3) %
Florida
102 37,374 366.4 88 33,455 380.2 16 % 12 % (4) %
East
211 92,417 438.0 227 100,547 442.9 (7) % (8) % (1) %
Total
1,317 $ 584,947 $ 444.2 1,293 $ 575,722 $ 445.3 2 % 2 % (0) %

these two metrics is provided below.


	Three Months Ended March 31,
	2021					2020					% Change
	Homes	Home Sale Revenues		Average Price		Homes	Home Sale Revenues		Average Price		Homes		Home Sale Revenues		Average Price

	(Dollars in thousands)
West	1,276	$	616,611	$	483.2	871	$	405,498	$	465.6	46	%	52	%	4	%
Mountain	612	324,717		530.6		435	222,858		512.3		41	%	46	%	4	%
East	290	100,530		346.7		241	68,729		285.2		20	%	46	%	22	%
Total	2,178	$	1,041,858	$	478.4	1,547	$	697,085	$	450.6	41	%	49	%	6	%

~~- 31 -~~West Segment Commentary

Mountain Segment Commentary

For the three months ended March 31, 2021, the increase in new home deliveries was ~~mostly~~ the result of ~~the change~~an increase in the number of homes in ~~beginning backlog. In our California market, we started off~~backlog to begin the ~~quarter with~~period. This increase was partially offset by a decrease in backlog down 8% but were able to achieve a 14% increase in the number of homes delivered primarily due to a shift in the mix of homes delivered to communities that have shorter construction cycle times. While our beginning backlog in our Colorado market was up 4% year-over-year, the number of homes delivered declined by 8%. This decrease is almost solely attributable to the joist issue, which only impacted our Colorado market. Delivery of approximately 90 homes that were previously projected to close in the 2017 third quarter was delayed to later quartersconversion rates as a result of ~~this issue. Furthermore, we anticipate that closings over~~(1) a lower percentage of homes both sold and delivered in the ~~next two quarters will continue~~current quarter as compared to ~~be impacted by this issue*. In our Florida market, despite~~the first quarter of 2020 and (2) the construction status of homes in beginning backlog, ~~being up 31% year-over-year, we only realized~~which on average were at a ~~16%~~more preliminary stage of construction as compared to the prior year. These items, which negatively impacted backlog conversion rates, were partially offset by improved cycle times in our Colorado markets. The increase in the number of homes delivered as a result of Hurricane Irma. Delivery of approximately 25 homes that were previously scheduled to close in the 2017 third quarter was delayed to later quarters as a result of the hurricane.

~~Our Washington, Utah and Maryland markets each experienced notable increases~~ in the average selling price of homes delivered ~~due to~~was the result of price increases implemented over the past ~~year coupled with~~twelve months.

East Segment Commentary

For the three months ended March 31, 2021, the increase in new home deliveries was the result of an increase in the number of homes in backlog to begin the period. This increase was partially offset by a ~~shift in mix to higher priced communities.~~ ~~Our Colorado market had the largest~~ decrease in backlog conversion rates due to a (1) a lower percentage of homes in backlog to start the 2021 first quarter that were under construction at that time and (2) the construction status of homes in beginning backlog, which on average were at a more preliminary stage of construction as compared to the prior year. The average selling price of homes delivered ~~due to~~increased as a ~~significant increase in the share~~result of ~~its closings coming from our more affordable plans designed for the first-time homebuyer. In our California market,~~ price increases implemented inover the ~~past year were more than offset by~~last twelve months as well as a shift in ~~the~~geographic mix of ~~deliveries~~homes delivered to ~~non-coastal communities, which have a lower average selling price. For most~~our mid-Atlantic market.

GrossMarginfromHome Sales:

Our gross margin from home sales for the three months ended March 31, 2021, increased 200 basis points year-over-year from 19.9% to 21.9%. Gross margin from home sales increased across each of our ~~remaining markets, the average selling price benefited from~~segments on both build-to-order and speculative home deliveries driven by price increases ~~that have been~~ implemented across nearly all of our communities over the past twelve months. ~~Any remaining differences~~Our gross margin from home sales in the 2021 first quarter was also positively impacted by a 40 basis point improvement in our capitalized interest in cost of sales as a percentage of home sale revenues. These increases were partially offset by an increase in building costs year-over-year.

Selling, General and Administrative Expenses:


	Three Months Ended March 31,
		2021			2020			Change

		(Dollars in thousands)
General and administrative expenses		$	57,163		$	45,089		$	12,074
General and administrative expenses as a percentage of home sale revenues		5.5		%	6.5		%	-100 bps
Marketing expenses		$	25,703		$	21,446		$	4,257
Marketing expenses as a percentage of home sale revenues		2.5		%	3.1		%	-60 bps
Commissions expenses		$	32,127		$	22,786		$	9,341
Commissions expenses as a percentage of home sale revenues		3.1		%	3.3		%	-20 bps
Total selling, general and administrative expenses		$	114,993		$	89,321		$	25,672
Total selling, general and administrative expenses as a percentage of home sale revenues		11.0		%	12.8		%	-180 bps

General and administrative expenses increased for the three months ended March 31, 2021 due to (1) increased stock-based and deferred compensation expenses and (2) increased expenses related to higher average headcount during the quarter.

Marketing expenses increased for the three months ended March 31, 2021 as a result of (1) increased deferred selling amortization and master marketing fees resulting from increased closings and (2) increased online advertising costs due in part to a shift in ~~mix~~marketing spend from signage to ~~differently priced communities.~~

~~For~~online advertising.

Commissions expenses increased for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021 due to the ~~year-over-year changes~~increase in homes ~~delivered in most~~sale revenues year-over-year.

Other Homebuilding Operating Data

Net New Ordersand Active Subdivisions:

Changes in the ~~number~~dollar value of ~~units in backlog to begin the year. In our Maryland and Virginia markets, while we started the year with beginning backlog units up from the prior year, our number of homes delivered is down year-over-year primarily due to year-over-year declines~~net new orders are impacted by changes in the number of net new orders inand the ~~first part of 2017 as a result of community count decreases. Commentary around~~ average selling price ~~for the nine-months ended September 30, 2017 is consistent with the commentary above for the three-months ended September 30, 2017.~~

* See "~~Forward-Looking Statements~~~~" below~~

~~- 32 -~~

~~Table~~ of ~~Contents~~

~~Gross Margin~~

Our gross margin from home sales percentage for the three months ended September 30, 2017 increased to 16.3% from 15.5% in the three months ended September 30, 2016. During the 2017 and 2016 third quarters, we recorded inventory impairments of $4.5 millio~~n and $4.7 million, respectively. The impairments recorded~~those homes. Commentary for each period negatively impacted gross margin by 80 basis points. Additionally, during the 2016 third quarter we recorded adjustments of $1.8 million (a 30 basis point negative impact to gross margins) to increase our warranty accrual while for our 2017 third quarter, we recorded adjustments to decrease our warranty accrual by $0.4 million (a 10 basis point positive impact to gross margins).

Our gross margin from home sales percentage for the nine months ended September 30, 2017 increased by 20 basis points year-over-year to 16.3%. The nine months ended September 30, 2017 included $9.4 million (a 50 basis point negative impact to gross margins) of inventory impairments, while the same period in 2016 included $6.3 million (a 40 basis point negative impact to gross margins) of inventory impairments and $5.1 million (a 30 basis point negative impact to gross margins) of adjustments to increase our warranty accrual.

~~Inventory Impairments~~

~~Impairments of homebuilding inventory by segment for the three months and nine months ended September 30, 2017 and 2016 are shown in the table below.~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(Dollars in thousands)

West
$ 1,885 $ - $ 5,985 $ 1,400
Mountain
370 - 370 -
East
2,285 4,700 3,035 4,900
Total inventory impairments
$ 4,540 $ 4,700 $ 9,390 $ 6,300

~~The table below provides quantitative data, for the periods presented, used in determining the fair value of the impaired inventory.~~ ~~Two communities combined for $3.0 million~~ of our ~~impairments recorded during the 2017 third quarter. The impairment in one community in our West segment was the result of~~segments on significant pricing pressures while the impairment in one community in our East segment was due to expected future negative cash flows from a limited number of lots that drove total expected future cash flows for the community negative. The remaining impairments were relatively small on a community-by-community basis and were primarily related to close-out communities.

Impairment Data

Quantitative Data

Three Months Ended

Total
Subdivisions
Tested

Inventory
Impairments

Fair Value of
Inventory After Impairments

Number of
Subdivisions
Impaired

Discount Rate

(Dollars in thousands)

March 31, 2017
33 $ 4,850 $ 19,952 2 12% to 18%
June 30, 2017
35 $ - $ - - N/A
September 30, 2017
33 $ 4,540 $ 52,190 9 10% to 15%

March 31, 2016
14 $ - $ - - N/A
June 30, 2016
17 $ 1,600 $ 6,415 2 12% to 15%
September 30, 2016
25 $ 4,700 $ 12,295 2 15% to 18%

~~- 33 -~~

~~Table of Contents~~

~~Selling, General and Administrative Expenses~~

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

Change

2017

2016

Change

(Dollars in thousands)

General and administrative expenses
$ 33,170 $ 27,758 $ 5,412 $ 97,831 $ 90,638 $ 7,193
General and administrative expenses as a percentage of home sale revenues
5.7 % 4.8 %
90 bps
5.4 % 5.9 %
(50) bps

Marketing expenses
$ 16,445 $ 15,262 $ 1,183 $ 48,545 $ 41,728 $ 6,817
Marketing expenses as a percentage of home sale revenues
2.8 % 2.7 %
10 bps
2.7 % 2.7 %
0 bps

Commissions expenses
$ 19,487 $ 18,884 $ 603 $ 59,733 $ 50,255 $ 9,478
Commissions expenses as a percentage of home sale revenues
3.3 % 3.3 %
0 bps
3.3 % 3.3 %
0 bps

Total selling, general and administrative expenses
$ 69,102 $ 61,904 $ 7,198 $ 206,109 $ 182,621 $ 23,488
Total selling, general and administrative expenses as a percentage of home sale revenues
11.8 % 10.8 %
100 bps
11.5 % 11.8 %
(30) bps

For both the three and nine months ended September 30, 2017, as we continued to plan for the future growth of our business, we increased headcount, resulting in higher compensation-related expenses, which increased our general and administrative expenses. For the nine months ended September 30, 2017, we were able to leverage our 17% year-over-year increase in home sale revenues, to produce a year-over-year improvement in our SG&A rate of 30 basis points. However, for our 2017 third quarter, we experienced a 100 basis point increase in our SG&A rate. As discussed in the ~~New Home Deliveries~~ section above, deliveries and home sale revenues in our Colorado and Florida markets during the 2017 quarter were negatively impacted by the joist issue and Hurricane Irma, respectively. Absent these issues, we estimate that our SG&A rate might have increased by only 40 basis points year-over-year.

~~Our commissions expenses are variable with home sale revenues. As such, the year-over-year increases in home sale revenues drove the~~ changes in ~~commissions expenses year-over-year for both periods presented. The increases in marketing expenses were partially attributable to the growth~~ ~~in new home deliveries. In addition, increased model costs per home delivered and higher headcount drove the year-over-year increases in marketing costs.~~

~~Interest and Other Income~~

~~Our interest and other income for the three and nine months ended September 30, 2017 was~~ $54.5 million and $59.7 million, respectively, compared to $1.9 million and $5.4 million, respectively, for the same periods in the prior year. The year-over-year increases in interest and other income were primarily driven by (1) the sale of our “Metro Bonds” and (2) the sale of marketable equity securities held by our Corporate segment. During the 2017 third quarter, we sold the Metro Bonds with a cost basis of $8.4 million for net proceeds of $44.2 million resulting in a realized gain of $35.8 million. The sale of our marketable equity securities held by our Corporate segment resulted in realized gains of $16.4 million and $17.8 million for the three and nine months ended September 30, 2017, respectively.

these two metrics is provided below.


	Three Months Ended March 31,
	2021						2020						% Change
	Homes	Dollar Value		Average Price		Monthly Absorption Rate *	Homes	Dollar Value		Average Price		Monthly Absorption Rate *	Homes		Dollar Value		Average Price		Monthly Absorption Rate

	(Dollars in thousands)
West	1,775	$	904,691	$	509.7	5.80	1,382	$	655,892	$	474.6	5.13	28	%	38	%	7	%	13	%
Mountain	1,011	562,753		556.6		5.91	693	339,132		489.4		3.54	46	%	66	%	14	%	67	%
East	423	168,021		397.2		4.62	324	97,723		301.6		3.66	31	%	72	%	32	%	26	%
Total	3,209	$	1,635,465	$	509.6	5.64	2,399	$	1,092,747	$	455.5	4.33	34	%	50	%	12	%	30	%


					Average Active Subdivisions
	Active Subdivisions				Three Months Ended
	March 31,		%		March 31,		%
	2021	2020	Change		2021	2020	Change
West	97	92	5	%	102	90	13	%
Mountain	55	64	(14)	%	57	65	(12)	%
East	34	29	17	%	31	30	3	%
Total	186	185	1	%	190	185	3	%

West Segment Commentary

For ~~both~~ the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2021, the ~~dollar value of~~increase in net new orders was ~~up year-over-year as increases~~due to an increase in the ~~average price of homes sold were partially offset by declines in the number of net new orders.~~

~~- 35 -~~

~~Table of Contents~~

~~During the 2017 third quarter, our Nevada, Colorado and Utah markets experienced the largest percentage increases in the dollar value of net new orders~~monthly sales absorption rate as ~~a result of year-over-year improvements in both the number of net new orders and average selling price of net new orders. In our Nevada and Colorado markets, the increases~~well as an increase in average selling price were the result of both price increases implemented in most existing communities and shifts in mix to higher priced communities (in Colorado, this occurred even with our more affordable Seasons™ product line becoming a more significant contributor to our net new orders).active subdivisions year-over-year. The increase in average selling price inwas due to price increases implemented over the past twelve months within nearly all of our ~~Utah market was predominantly due to~~communities. These increases were slightly offset by a shift in mix to ~~higher~~lower priced communities. ~~The increases~~

Mountain Segment Commentary

For the three months ended March 31, 2021, the increase in net new orders ~~for our Nevada and Utah markets were driven by improvements~~was due to an increase in ~~our~~the monthly sales absorption ~~paces despite year-over-year declines~~rates in each of our Colorado and Utah markets. This increase was partially offset by a decrease in average active ~~subdivisions. The 2017 third quarter absorption pace in~~subdivisions within our Colorado market was negatively impacted by a number of factors including (1) a higher cancellation rate and lower sales pace as a result of the joist issue, (2) a higher number of sales coming from inactive communities in 2016 third quarter compared to the 2017 third quarter, and (3) close-out of certain communities prior to the start of the 2017 third quarter that had robust monthly sales absorption paces in the 2016 third quarter. Despite our monthly absorption pace in our Colorado market being driven down by the above factors, we were able to achieve growth in the number of net new orders as our average active community count was up 61% year-over-year. While sales activity in our Florida market was impacted negatively by Hurricane Irma, we were still able to achieve a 26% year-over-yearmarkets. The increase in our monthly sales absorption pace as a result of strong demand. In our Maryland and Virginia markets, strong improvements in our monthly sales absorption pace, driven by improving demand for higher density products, were more than offset by the impact of substantial declines in average active subdivisions.

~~For the nine months ended September 30, 2017, the dollar value of net new orders was up slightly when compared to the same period in 2016 as slight improvements~~ in average selling price ~~and~~was due to price increases implemented over the last twelve months within nearly all of our ~~monthly sales absorption pace were modestly offset by a lower average active community count. Our Nevada, Washington, Utah and Colorado markets experienced~~communities.

East Segment Commentary

For the ~~most meaningful year-over-year improvements in~~three months ended March 31, 2021, the ~~dollar value of net new orders. The~~ increase in ~~Nevada’s dollar value of~~ net new orders was primarily the result of a substantially improved monthly sales absorption pace due to higher demand in newly opened communities. In our Washington market, the primary driver of the increase in the dollar value of net new orders wasdriven by an increase in the monthly sales absorption rates in each of our Florida and mid-Atlantic markets. The increase in average selling price was due to price increases implemented in existing communities that were prompted by high demand in this market. A 24% year-over-year increase in the number of average active subdivisions in our Colorado market was partially offset by a lower monthly sales absorption rate due mostly to the joist issue discussed above. The increase in dollar value of net new orders for our Utah market was primarily the result of an increase in the average selling price of net new orders, due to price increases implemented in most existing communities. As discussed above, in our Maryland and Virginia markets, the year-over-year declines in the dollar value of net new orders were primarily driven by decreases in average active subdivisions.

~~Active Subdivisions:~~

Average Active Subdivisions

Average Active Subdivisions

Active Subdivisions

Three Months Ended

Nine Months Ended

September 30,

%

September 30,

%

September 30,

%

2017

2016

Change

2017

2016

Change

2017

2016

Change

Arizona
27 30 (10) % 25 29 (14) % 26 30 (13) %
California
23 21 10 % 20 21 (5) % 19 20 (5) %
Nevada
19 20 (5) % 19 21 (10) % 20 21 (5) %
Washington
7 14 (50) % 8 12 (33) % 10 13 (23) %
West
�� 76 85 (11) % 72 83 (13) % 75 84 (11) %
Colorado
48 28 71 % 45 28 61 % 42 34 24 %
Utah
7 9 (22) % 7 8 (13) % 8 8 0 %
Mountain
55 37 49 % 52 36 44 % 50 42 19 %
Maryland
5 11 (55) % 7 12 (42) % 8 12 (33) %
Virginia
4 8 (50) % 4 9 (56) % 5 9 (44) %
Florida
14 18 (22) % 17 18 (6) % 18 17 6 %
East
23 37 (38) % 28 39 (28) % 31 38 (18) %
Total
154 159 (3) % 152 158 (4) % 156 164 (5) %

At September 30, 2017, we had 154 active subdivisions, up slightly from the end of our 2017 second quarter and down 3% from September 30, 2016. For Colorado, the increase was due to increased land acquisition activity over the last ~~two years. In Virginia~~ ~~and Maryland,~~twelve months within nearly all of our communities. Additionally, we ~~have tempered our land acquisition activity over the past two years as our returns~~experienced a shift in ~~these~~mix within several markets have been lower than returns we expect to realize. Active subdivisions in our Washington market were down 50% year-over-year as of September 30, 2017. While a large driver of that decline was the closeout of communities earlier than anticipated due to strong sales, our land acquisition activity was lower than anticipated due to increased competition for the acquisition of new communities. For all remaining markets, the year-over-year changes were primarily driven by the timing of opening new communities versus closing out older ones, with many communities closing earlier than anticipated due to higher monthly absorption paces during 2017 compared to 2016. Furthermore, through the nine months ended September 30, 2017, we approved the acquisition of over 7,800 lots, more than double the number during the same period a year ago.

priced communities.

Cancellation Rate:

Cancellations As a Percentage of
Homes in Beginning Backlog

Cancellations As a Percentage of Gross Sales*

Three Months
Ended
September 30,

Change in

Three Months
Ended
September 30,

Change in

Nine Months
Ended
September 30,

Change in

2017

2016

Percentage

2017

2016

Percentage

2017

2016

Percentage

Arizona
18 % 19 % (1) % 26 % 26 % 0 % 18 % 24 % (6) %
California
9 % 14 % (5) % 16 % 23 % (7) % 20 % 21 % (1) %
Nevada
9 % 15 % (6) % 19 % 26 % (7) % 11 % 18 % (7) %
Washington
8 % 6 % 2 % 27 % 17 % 10 % 17 % 17 % 0 %
West
11 % 14 % (3) % 21 % 24 % (3) % 16 % 20 % (4) %
Colorado
13 % 9 % 4 % 32 % 24 % 8 % 17 % 19 % (2) %
Utah
13 % 10 % 3 % 28 % 31 % (3) % 22 % 22 % 0 %
Mountain
13 % 9 % 4 % 32 % 24 % 8 % 18 % 20 % (2) %
Maryland
9 % 18 % (9) % 15 % 32 % (17) % 31 % 25 % 6 %
Virginia
7 % 15 % (8) % 17 % 30 % (13) % 21 % 20 % 1 %
Florida
11 % 19 % (8) % 24 % 32 % (8) % 21 % 28 % (7) %
East
10 % 17 % (7) % 21 % 31 % (10) % 23 % 25 % (2) %
Total
12 % 13 % (1) % 24 % 25 % (1) % 18 % 21 % (3) %

* Cancellations as a percentage of gross sales data has been provided for information only. No commentary is included below.

Cancellations as a Percentage of Homes in Beginning Backlog
2021 2020
Three Months Ended
March 31, March 31,
West 7 % 15 %
Mountain 8 % 22 %
East 13 % 23 %
Total 8 % 18 %

Our cancellations as a percentage of homes in beginning backlog to start the quarter (“cancellation rate”) ~~improved from 13%~~decreased year-over-year in ~~the 2016 third quarter to 12% in the 2017~~ ~~third quarter. Each~~each of our ~~California, Nevada, Maryland, Virginia and Florida markets had notable decreases in their cancellation rates as a result of process improvements around accepting sales and managing backlog.~~segments. The ~~increased~~ cancellation rate in ~~our Colorado market is~~ the ~~result~~first quarter of 2020 was negatively impacted by the ~~joist issue previously discussed.~~

pandemic.

Backlog:

At September 30,

2017

2016

% Change

Homes

Dollar
Value

Average
Price

Homes

Dollar
Value

Average
Price

Homes

Dollar
Value

Average
Price

(Dollars in thousands)

Arizona
374 $ 133,074 $ 355.8 423 $ 132,929 $ 314.3 (12) % 0 % 13 %
California
546 378,448 693.1 627 389,622 621.4 (13) % (3) % 12 %
Nevada
411 151,726 369.2 397 139,731 352.0 4 % 9 % 5 %
Washington
279 156,974 562.6 270 133,367 494.0 3 % 18 % 14 %
West
1,610 820,222 509.5 1,717 795,649 463.4 (6) % 3 % 10 %
Colorado
1,192 595,675 499.7 1,104 530,662 480.7 8 % 12 % 4 %
Utah
149 67,830 455.2 141 53,180 377.2 6 % 28 % 21 %
Mountain
1,341 663,505 494.8 1,245 583,842 468.9 8 % 14 % 6 %
Maryland
74 34,102 460.8 120 56,837 473.6 (38) % (40) % (3) %
Virginia
111 58,225 524.5 118 64,228 544.3 (6) % (9) % (4) %
Florida
327 132,238 404.4 248 111,499 449.6 32 % 19 % (10) %
East
512 224,565 438.6 486 232,564 478.5 5 % (3) % (8) %
Total
3,463 $ 1,708,292 $ 493.3 3,448 $ 1,612,055 $ 467.5 0 % 6 % 6 %

March 31,
2021 2020 % Change
Homes Dollar
Value Average
Price Homes Dollar
Value Average
Price Homes Dollar
Value Average
Price
(Dollars in thousands)
West 4,209 $ 2,157,618 $ 512.6 2,534 $ 1,227,996 $ 484.6 66 % 76 % 6 %
Mountain 2,417 1,355,201 560.7 1,469 754,155 513.4 65 % 80 % 9 %
East 1,060 414,474 391.0 650 191,972 295.3 63 % 116 % 32 %
Total 7,686 $ 3,927,293 $ 511.0 4,653 $ 2,174,123 $ 467.3 65 % 81 % 9 %

At ~~September 30, 2017,~~March 31, 2021, we had ~~3,463~~7,686 homes in backlog with a total value of ~~$1.71 billion, representing respective increases~~$3.9 billion. This represented a 65% increase in the number of 15 homes in backlog and ~~$96.2 million from September 30, 2016. The majority of our markets experienced year-over-year growth~~an 81% increase in the dollar value of homes in backlog from March 31, 2020. The increase in the number of homes in backlog is primarily as a result of the year-over-year increase in net new orders during the second half of 2020 and the first quarter of 2021. The increase in the average selling price of homes in backlog is due to price increases implemented over the ~~last~~past twelve ~~months. Backlog~~months in nearly all of our communities as well as a shift in our ~~Maryland and Virginia markets declined from September 30, 2016~~net new order mix in our East segment as discussed above. These increases were slightly offset by a ~~result of reduced sales activity over the last twelve months, mostly due~~shift in mix to lower ~~community count.~~

~~- 37 -~~

~~Table~~priced communities, most notably in our West segment, consistent with our ongoing strategy of ~~Contents~~offering more affordable home plans. Our ability to convert backlog into closings could be negatively impacted in future periods by the pandemic, the extent to which is highly uncertain and depends on future developments.

Homes Completed or Under Construction (WIP lots):

September 30,

%

2017

2016

Change

Unsold:

Completed
78 81 (4) %
Under construction
218 298 (27) %
Total unsold started homes
296 379 (22) %
Sold homes under construction or completed
2,591 2,626 (1) %
Model homes under construction or completed
319 293 9 %
Total homes completed or under construction
3,206 3,298 (3) %

~~Over the past couple of years, we have increased our focus on build-to-order homes and limited the number of unsold homes that we start~~ ~~without a sales contract, giving our customers the best opportunity to personalize their homes. As a result, our supply of unsold homes has declined by 22% year-over-year from September 30, 2016.~~
March 31, %
2021 2020 Change
Unsold:
Completed 36 160 (78) %
Under construction 64 216 (70) %
Total unsold started homes 100 376 (73) %
Sold homes under construction or completed 5,854 3,259 80 %
Model homes under construction or completed 502 502 — %
Total homes completed or under construction 6,456 4,137 56 %

The ~~decline in unsold homes was partially offset by an~~ increase in ~~model homes, while~~ sold homes under construction ~~was nearly unchanged from~~or completed is due to the ~~prior year.~~

increase in the number of homes in backlog year-over-year noted above. Total unsold started homes have decreased year-over-year due to the strong demand for new homes.

-29-

Table of Contents

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

September 30, 2017

September 30, 2016

Lots
Owned

Lots
Optioned

Total

Lots
Owned

Lots
Optioned

Total

Total %
Change

Arizona
1,971 761 2,732 1,515 269 1,784 53 %
California
1,454 679 2,133 1,753 75 1,828 17 %
Nevada
2,150 401 2,551 2,051 200 2,251 13 %
Washington
655 64 719 853 - 853 (16) %
West
6,230 1,905 8,135 6,172 544 6,716 21 %
Colorado
4,622 2,960 7,582 4,051 1,347 5,398 40 %
Utah
456 132 588 380 - 380 55 %
Mountain
5,078 3,092 8,170 4,431 1,347 5,778 41 %
Maryland
122 48 170 261 143 404 (58) %
Virginia
282 30 312 429 15 444 (30) %
Florida
941 1,231 2,172 962 455 1,417 53 %
East
1,345 1,309 2,654 1,652 613 2,265 17 %
Total
12,653 6,306 18,959 12,255 2,504 14,759 28 %

March 31, 2021 March 31, 2020
Lots
Owned Lots
Optioned Total Lots
Owned Lots
Optioned Total Total
%
Change
West 12,658 3,921 16,579 9,641 2,393 12,034 38 %
Mountain 6,790 3,418 10,208 6,540 4,007 10,547 (3) %
East 3,088 2,148 5,236 2,410 2,133 4,543 15 %
Total 22,536 9,487 32,023 18,591 8,533 27,124 18 %

Our total owned and optioned lots at ~~September 30, 2017~~March 31, 2021 were ~~18,~~959, up 28% from September 30, 2016, due to substantial growth in our optioned lots as a result of our significant land acquisition approval activity over the past nine months. The decline in lots controlled in our Maryland and Virginia markets is primarily due to reductions in land acquisition activity over the past two years as our recent returns in these markets have been lower than returns we expect to realize. Though our lots controlled count is down year-over-year in Washington, we remain committed to that market and continue to pursue all land acquisition opportunities as they arise.32,023, which was an 18% increase year-over-year. We believe that our total lot supply, ~~of approximately 3.4 years (which is based on our last twelve months deliveries and is within our stated strategic range),~~ coupled with our planned acquisition activity, can support growth in future periods. See "Forward-Looking Statements"below.

~~- 38 -~~

~~Table of Contents~~

For the three months ended ~~September 30, 2017,~~March 31, 2021, our financial ~~service~~services pretax income ~~decreased $0.9~~increased to $30.8 million ~~or 8%, from the same period~~compared to a pretax loss of $1.1 million in the ~~prior year.~~first quarter of 2020. The ~~decline~~increase was due to both mortgage operations as well as other financial services, which saw increases in pretax income of $17.8 million and $14.1 million, respectively. The increase in our mortgage operations was due to (1) a higher interest rate lock volume driven by the year-over-year increase in homes in backlog, (2) an increased Capture Rate and (3) an increased profit margin on loans originated during the quarter. The increase in other financial services was primarily the result of ~~a decline in~~$13.9 million of unrealized losses on equity securities recognized during the dollar value of loans locked, originated and sold in our mortgage operations. For the nine months ended September 30, 2017, our financial services pretax income was up $7.2 million, or 29% from the same period in 2016. The increase in pretax income for our mortgage operations segment was the result of (1) increases in the dollar value of loans locked, originated and sold; and (2) higher gains on loans locked and originated. The higher pretax income in our other financial services segment for the nine months ended September 30, 2017 was primarily the result of increased new home deliveries.

prior year quarter.

The following table sets forth information for our mortgage operations segment relating to mortgage loans originated and capture rate. ~~“Capture rate” is defined as the number of mortgage loans originated by our mortgage operations segment for our homebuyers as a percent of our total home closings.~~

Three Months Ended

% or

Nine Months Ended

% or

September 30,

Percentage

September 30,

Percentage

2017

2016

Change

2017

2016

Change

(Dollars in thousands)

Total Originations (including transfer loans):

Loans
824 862 (4) % 2,497 2,146 16 %
Principal
$ 288,326 $ 296,456 (3) % $ 872,781 $ 747,941 17 %
Capture Rate Data:

Capture rate as % of all homes delivered
62 % 66 % (4) % 62 % 61 % 1 %
Capture rate as % of all homes delivered (excludes cash sales)
66 % 69 % (3) % 66 % 64 % 2 %
Mortgage Loan Origination Product Mix:

FHA loans
20 % 21 % (1) % 19 % 20 % (1) %
Other government loans (VA & USDA)
20 % 22 % (2) % 21 % 24 % (3) %
Total government loans
40 % 43 % (3) % 40 % 44 % (4) %
Conventional loans
60 % 57 % 3 % 60 % 56 % 4 %
100 % 100 % 0 % 100 % 100 % 0 %
Loan Type:

Fixed rate
97 % 97 % 0 % 97 % 98 % (1) %
ARM
3 % 3 % 0 % 3 % 2 % 1 %
Credit Quality:

Average FICO Score
735 735 0 % 735 736 (0) %
Other Data:

Average Combined LTV ratio
83 % 83 % 0 % 83 % 84 % (1) %
Full documentation loans
100 % 100 % 0 % 100 % 100 % 0 %
Loans Sold to Third Parties:

Loans
836 840 (0) % 2,645 2,144 23 %
Principal
$ 293,375 $ 295,818 (1) % $ 921,431 $ 744,958 24 %

Three Months Ended % or
Percentage Change
March 31,
2021 2020
(Dollars in thousands)
Total Originations (including transfer loans):
Loans 1,568 1,029 52 %
Principal $ 616,004 $ 379,306 62 %
Capture Rate Data:
Capture rate as % of all homes delivered 72 % 66 % 6 %
Capture rate as % of all homes delivered (excludes cash sales) 74 % 69 % 5 %
Mortgage Loan Origination Product Mix:
FHA loans 20 % 22 % (2) %
Other government loans (VA & USDA) 17 % 22 % (5) %
Total government loans 37 % 44 % (7) %
Conventional loans 63 % 56 % 7 %
100 % 100 % — %
Loan Type:
Fixed rate 100 % 99 % 1 %
ARM — % 1 % (1) %
Credit Quality:
Average FICO Score 738 735 — %
Other Data:
Average Combined LTV ratio 85 % 85 % — %
Full documentation loans 100 % 100 % — %
Loans Sold to Third Parties:
Loans 1,586 1,199 32 %
Principal $ 610,897 $ 438,101 39 %

Income Taxes

period.

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

The preparation of financial statements in conformity with accounting ~~policies~~principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Management evaluates such estimates and judgments on an on-going basis and makes adjustments as deemed necessary. Actual results could differ from these estimates if conditions are significantly different in the future. See "Forward-Looking Statements"below.

Our critical accounting estimates and policies have not changed from those reported in ~~Management~~’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

2020.

LIQUIDITY AND CAPITAL RESOURCES

We use our liquidity and capital resources to:to: (1) support our operations, including the purchase of land, land development and construction of homes; (2) provide working capital; and (3) provide mortgage loans for our homebuyers. Our liquidity includes our cash and cash equivalents, ~~marketable securities, revolving credit facility~~Revolving Credit Facility and ~~mortgage repurchase facility.~~Mortgage Repurchase Facility (both defined below). Additionally, we have an existing effective shelf registration statement that allows us to issue equity, debt or hybrid securities up to ~~$1.5 billion ($1.35 billion after~~$2.0 billion. Following the ~~public offering~~issuance of ~~an additional $150~~$350 million ~~principal amount~~ of ~~our 6%~~2.500% senior notes ~~due 2043). See Note 20 for additional information.~~

~~We have marketable equity securities that consist primarily of holdings in corporate equities.~~

on January 11, 2021, $1.35 billion remains on our effective shelf registration statement.

Our capital structure is primarily a combination ofof: (1) permanent financing, represented by stockholders’ equity; (2) long-term financing, represented by our ~~5⅝% senior notes due 2020, 5½%~~5.500% senior notes due 2024, ~~and our 6%~~3.850% senior notes due ~~2043 (see Note 20 for additional information on the public offering of an additional $150 million principal amount of these notes);~~2030, 2.500% senior notes due 2031 and our 6.000% senior notes due 2043; (3) our Revolving Credit Facility (defined below); and (4) our Mortgage Repurchase Facility (defined below). Because of our current balance of cash, cash equivalents, ~~marketable securities,~~ ability to access the capital markets, and available capacity under both our Revolving Credit Facility and Mortgage Repurchase Facility, we believe that our capital resources are adequate to satisfy our short and long-term capital requirements, including meeting future payments on our senior notes as they become due. See "Forward-Looking Statements" below.

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

Senior Notes, Revolving Credit Facility and Mortgage Repurchase Facility

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

Revolving Credit Facility.We have an unsecured revolving credit agreement (“Revolving Credit Facility”) with a group of lenders which may be used for general corporate purposes. This agreement was amended on ~~September 29, 2017~~December 28, 2020 to (1) increase the aggregate commitment from $1.0 billion to $1.2 billion (the “Commitment”), (2) extend the Revolving Credit Facility maturity of $1.125 billion of the Commitments to December ~~16, 2022, (2) increase~~18, 2025 with the ~~aggregate commitment from $550 million~~remaining Commitment continuing to ~~$700 million (the “Commitment”)~~termination on December 18, 2023 and (3) provide that the aggregate amount of the commitments may increase to an amount not to exceed ~~$1.25~~$1.7 billion upon our request, subject to receipt of additional commitments from existing or additional lenders and, in the case of additional lenders, the consent of the co-administrative agents. As defined in the Revolving Credit Facility, interest rates on base rate borrowings are equal to the highest of (1) 0.0%, (2) a ~~specified eurocurrency~~prime rate, or (3) a federal funds effective rate ~~or prime~~plus 1.50%, and (4) a specified eurocurrency rate plus 1.00% and, in each case, plus a margin that is determined based on our credit ratings and leverage ratio. Interest rates on eurocurrency borrowings are equal to ~~the~~a specified eurocurrency ~~rate.~~rate plus a margin that is determined based on our credit ratings and leverage ratio. At any time at which our leverage ratio, as of the last day of the most recent calendar quarter, exceeds 55%, the aggregate principal amount of all consolidated senior debt borrowings outstanding may not exceed the borrowing base. There is no borrowing base requirement if our leverage ratio, as of the last day of the most recent calendar quarter, is 55% or less.

The Revolving Credit Facility is subject to acceleration upon certain specified events of default, including breach of the consolidated tangible net worth covenant, a violation of anti-corruption or sanctions laws, failure to make timely payments, breaches of certain representations or covenants, failure to pay other material indebtedness, or another person becoming beneficial owner of 50% or more of our outstanding common stock. We believe we were in compliance with the representations, warranties and covenants included in the Revolving Credit Facility as of ~~September 30, 2017.~~

AsMarch 31, 2021.

We incur costs associated with unused commitment fees pursuant to the terms of ~~September 30, 2017, we had $15.0~~the Revolving Credit Facility. At March 31, 2021 and December 31, 2020, there were $37.3 million ~~in borrowings~~ and ~~$34.0~~$25.1 million, respectively, in letters of credit outstanding, which reduced the amounts available to be borrowed under the Revolving Credit Facility. At March 31, 2021 and December 31, 2020, we had $10.0 million and $10.0 million, respectively, outstanding under the Revolving Credit Facility. As of March 31, 2021, availability under the Revolving Credit Facility ~~leaving remaining borrowing capacity of $651.0 million.~~

was approximately $1.15 billion.

Mortgage Repurchase Facility.HomeAmerican has a Master Repurchase Agreement (the “Mortgage Repurchase Facility”) with U.S. Bank National Association (“USBNA”). ~~Effective August 10, 2017, the Mortgage Repurchase Facility was amended to extend its termination date to August 9, 2018.~~ The Mortgage Repurchase Facility provides liquidity to HomeAmerican by providing for the sale of up to an aggregate of $75 million (subject to increase by up to $75 million under certain conditions) of eligible mortgage loans to USBNA with an agreement by HomeAmerican to repurchase the mortgage loans at a future date. Until such mortgage loans are transferred back to HomeAmerican, the documents relating to such loans are held by USBNA, as custodian, pursuant to the Custody Agreement (“Custody Agreement”), dated as of November 12, 2008, by and between HomeAmerican and USBNA. In the event that an eligible mortgage loan becomes ineligible, as defined under the Mortgage Repurchase Facility, HomeAmerican may be required to repurchase the ineligible mortgage loan immediately. The Mortgage Repurchase Facility terminates on May 20, 2021. The Mortgage Repurchase Facility was amended on September 24, 2020 and again on March 25, 2021 to adjust the commitments to purchase for specific time periods. As part of the amendments, the commitments to purchase were increased to $200 million for the period December 22, 2020 through February 4, 2021 and $175 million for the period March 25, 2021 through April 22, 2021.

The maximum aggregate commitment of the Mortgage Repurchase Facility was temporarily increased by $75 million on March 29, 2021 effective through April 26, 2021. The maximum aggregate commitment of the Mortgage Repurchase Facility was temporarily increased by $50 million on December ~~27, 2016 from $75 million to $125 million and was~~28, 2020 effective through January ~~25, 2017.~~27, 2021. At ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, HomeAmerican had ~~$65.1~~$217.5 million and ~~$114.5~~$202.4 million, respectively, of mortgage loans that HomeAmerican was obligated to repurchase under the Mortgage Repurchase Facility. Mortgage loans that HomeAmerican is obligated to repurchase under the Mortgage Repurchase Facility are accounted for as a debt financing arrangement and are reported as mortgage repurchase facility in the consolidated balance sheets. Advances under the Mortgage Repurchase Facility carry a price range that is ~~LIBOR-based.~~

based on a LIBOR rate or successor benchmark rate.

March 31, 2021.

During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2021 and 2020, we paid cash dividends of ~~$0.25~~$0.37 per share and ~~$0.75~~$0.31 per share, ~~respectively, compared to $0.24 per share and $0.72 per share for~~respectively. Additionally, during the ~~same periods in the prior year, respectively.~~

three months ended March 31, 2021, we distributed an 8% stock dividend.

MDC Common Stock Repurchase Program

At ~~September 30, 2017,~~March 31, 2021, we were authorized to repurchase up to 4,000,000 shares of our common stock. We did not repurchase any shares of our common stock during the three months ended ~~September 30, 2017.~~

March 31, 2021.

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021 and 2020, we ~~generated $69.2~~used $58.0 million and $37.2 million of cash from operating activities, ~~primarily due~~respectively. Cash used to ~~(1)~~increase housing completed or under construction for the three months ended March 31, 2021 and 2020 was $218.7 million and $178.9 million, respectively, as homes in inventory increased significantly during both periods. During the three months ended March 31, 2021, the most significant source of cash provided by operating activities was net income of ~~$117.3~~$110.7 million ~~(2) a $49.0~~compared to net income of $36.8 million ~~decrease in~~during the three months ended March 31, 2020. The most significant source of cash provided by operating activities for the three months ended March 31, 2020 was $63.1 million from the sale of mortgage loans ~~held-for-sale, (3) a $22.8~~compared to $1.8 million during the three months ended March 31, 2021. This year-over-year decrease is due to the high volume of loan origination activity during the first quarter of 2021 driven by the increase in ~~our deferred tax asset, and (4) a $15.3 million increase~~ home deliveries. Cash provided by the change in accounts payable and accrued ~~liabilities. The increases were partially offset by~~liabilities for the three months ended March 31, 2021 was $61.6 million compared to cash use of $1.1 million during the three months ended March 31, 2020. This year-over-year increase is due to the increased construction spend during the three months ended March 31, 2021 as a ~~net~~result of the year-over-year increase in ~~housing inventory of $82.1 million, an $11.2 million~~home deliveries during the period as well as the increase in ~~prepaid and other assets, and net gains on the sale of investments, including our Metro Bonds of $54.0 million.~~

homes in inventory at period end.

During the ~~nine~~three months ended ~~September 30, 2017, we generated $108.0 million of~~March 31, 2021 and 2020, net cash ~~for~~used in investing activities was $5.7 million and $7.0 million, respectively. This primarily ~~attributable~~relates to cash used to purchase property and equipment, which remained consistent year-over-year.

During the three months ended March 31, 2021, net cash provided by financing activities was $336.3 million compared with cash use of $5.4 million in the prior year period. The primary driver of this increase in cash provided by financing activities was the proceeds from the ~~sale and purchase~~issuance of ~~marketable equity securities~~senior notes of ~~$65.7~~$347.7 million ~~and proceeds from~~during the ~~sale of~~ ~~the Metro Bonds of $44.3 million. These amounts were slightly offset by the purchase of $1.9 million in property and equipment.~~

~~During the nine~~three months ended ~~September 30, 2017, we used $82.3 million in cash for financing activities, primarily related to pa~~yments of $49.4 million on our mortgage repurchase facility and dividend payments totaling $38.8 million. These amounts were slightly offset by proceeds of $8.5 million from the exercise of stock options.

March 31, 2021.

Off-Balance Sheet Arrangements

Lot Option Purchase Contracts. In the ordinary course of business, we enter into lot option purchase contracts in order to procure lots for the construction of homes. Lot option contracts enable us to control lot positions with a minimal capital investment, which substantially reduces the risks associated with land ownership and development. At ~~September 30, 2017,~~March 31, 2021, we had deposits of ~~$11.1~~$37.1 million in the form of cash and ~~$3.6~~$10.8 million in the form of letters of credit that secured option contracts to purchase ~~6,306~~9,487 lots for a total estimated purchase price of ~~$463.0~~$682.0 million.

Surety Bonds and Letters of Credit.At ~~September 30, 2017,~~March 31, 2021, we had outstanding surety bonds and letters of credit totaling ~~$184.9~~$306.7 million and ~~$65.5~~$145.3 million, respectively, including ~~$31.6~~$108.0 million in letters of credit issued by HomeAmerican. The estimated cost to complete obligations related to these bonds and letters of credit was approximately ~~$33.0~~$122.4 million and ~~$25.3~~$86.2 million, respectively. We expect that the obligations secured by these performance bonds and letters of credit generally will be performed in the ordinary course of business and in accordance with the applicable contractual terms. To the extent that the obligations are performed, the related performance bonds and letters of credit should be released and we should not have any continuing obligations. However, in the event any such performance bonds or letters of credit are called, our indemnity obligations could require us to reimburse the issuer of the performance bond or letter of credit.

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

IMPACT OF INFLATION, CHANGING PRICES AND ECONOMIC CONDITIONS

The impact of inflation and changing prices have not changed materially from the disclosure in our December 31, ~~2016~~2020 Annual Report on Form 10-K.

Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q, as well as statements made by us in periodic press releases, oral statements made by our officials in the course of presentations about the Company and conference calls in connection with quarterly earnings releases, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our business, financial condition, results of operations, cash flows, strategies and prospects. These forward-looking statements may be identified by terminology such as “likely,” “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained in this Report are reasonable, we cannot guarantee future results. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in subsequent reports on Forms 10-K, 10-Q and 8-K should be considered. Additionally, information about issues that could lead to material changes in performance and risk factors that have the potential to affect us is contained under the caption “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020 and Item 1A of Part II of this Quarterly Report on Form 10-Q.

I~~tem~~

Item 3.Q~~uantitative~~ Quantitative and Q~~ualitative~~ D~~isclosures~~ A~~bout~~ M~~arket~~ R~~isk~~

~~Our~~ Qualitative Disclosures About Market Risk

We have a cash and investment policy ~~and strategy is~~that enables us to achieve an appropriate investment return while preserving principal and managing risk. ~~Our~~Under this policy, cash and cash equivalents may include ~~immediately available~~U.S. government securities, commercial bank deposits, commercial paper, certificates of deposit, money market funds, ~~certificates of deposit~~ and time ~~deposits. Our marketable~~deposits, with maturities of three months or less. Marketable securities ~~consist of~~ under this policy may include holdings in ~~corporate equities, preferred stock and exchange traded funds. The market value and/or income derived from our~~U.S. government securities with a maturity of more than three months, equity securities ~~can be negatively impacted by a number of market risk factors, including changes in interest rates, general economic conditions~~ and ~~equity markets.~~ corporate debt securities.

As of September 30, 2017, we had marketable securities in unrealized loss positions totaling $0.6 million, against which we recorded impairments totaling $0.0 million during the current quarter. For the remaining marketable securities in unrealized loss positions totaling $0.6 million, there can be no assurances that the cost basis of these securities will be recovered in the future. If we elect to sell, or are otherwise were required to sell these securities, we could be required to record losses if theMarch 31, 2021, our cash and cash equivalents included commercial bank deposits and money market ~~values do not increase prior to any sales. Such losses, if any, would be recorded as a component of our results of operations.~~

funds.

We are exposed to market risks related to fluctuations in interest rates on mortgage loans held-for-sale, mortgage interest rate lock commitments and debt. Derivative instruments utilized in the normal course of business by HomeAmerican include interest rate lock commitments and forward sales of mortgage-backed securities, which are used to manage the price risk on fluctuations in interest rates on our mortgage loans in inventory and interest rate lock commitments to originate mortgage loans. Such contracts are the only significant financial derivative instruments utilized by MDC. ~~HomeAmerican~~’sHomeAmerican’s mortgage loans in process for which a rate and price commitment had been made to a borrower that had not closed at ~~September 30, 2017~~March 31, 2021 had an aggregate principal balance of ~~$101.2~~$490.0 million, all of which were under interest rate lock commitments at an average interest rate of ~~3.99%~~3.18%. In addition, HomeAmerican had mortgage loans held-for-sale with an aggregate principal balance of ~~$87.1~~$226.8 million at ~~September 30, 2017,~~March 31, 2021, of which ~~$14.0~~$65.1 million had not yet been committed to a mortgage purchaser and had an average interest rate of ~~4.04%~~2.93%. In order to hedge the changes in fair value of interest rate lock commitments and mortgage loans held-for-sale ~~that~~which had not yet been committed to a mortgage purchaser, HomeAmerican had forward sales of securities totaling ~~$85.0~~$320.5 million and $203.0 million at ~~September 30, 2017.~~

March 31, 2021 and December 31, 2020, respectively.

HomeAmerican provides mortgage loans that generally are sold forward and subsequently delivered to a third-party purchaser between 155 and 4035 days. Forward commitments are used for non-trading purposes to sell mortgage loans and hedge price risk due to fluctuations in interest rates on rate-locked mortgage loans in process that have not closed. Due to this economic hedging philosophy, the market risk associated with these mortgages is limited. For forward sales commitments, as well as commitments to originate mortgage loans that are still outstanding at the end of a reporting period, we record the fair value of the derivatives in the consolidated statements of operations and comprehensive income with an offset to either derivative assets or liabilities, depending on the nature of the change.

Item 4.C~~ontrols~~ Controls and P~~rocedures~~

Procedures

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

(b)Changes in internal control over financial reporting - There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~September 30, 2017~~March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

I~~tem~~

Item 1. Legal Proceedings

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

Item 1A.Risk Factors

~~There have been no significant changes~~

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

	~~Page~~ ~~No.~~
			Page No.
Part I. Financial Information:

	Item 1.	Unaudited Consolidated Financial Statements:

			Consolidated Balance Sheets at ~~September 30, 2017~~March 31 , 202 1 and December 31, ~~2016~~20 20	1

			Consolidated Statements of Operations and Comprehensive Income for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~ 2020	2

			Consolidated S~~tatements~~Statements of Changes in Stockholders’ Equity for the three months ended March 3 1 , 202 1 and 20 20	3

	Consolidated Statements of Cash Flows for the ~~nine~~ three months ended ~~September 30, 2017~~March 3 1 , 2 021 and ~~2016~~ 2020		3 4

			Notes to Unaudited Consolidated Financial Statements	4 5

	Item 2.	~~Management~~’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations		27 23

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		44 36

	Item 4.	Controls and Procedures		45 37

Part II. Other Information:

	Item 1.	Legal Proceedings		46 38

	Item 1A.	Risk Factors		46 38

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		47 38

	Item 6.	Exhibits		48 39

Signature			~~Signature~~39		48


	Three Months Ended						Nine Months Ended							Three Months Ended March 31,
	September 30,						September 30,								2021		2020
	2017			2016			2017			2016
	(Dollars in thousands, except per share amounts)														(Dollars in thousands, except per share amounts)
Numerator													Numerator
Net income	$	61,163		$	26,359		$	117,283		$	62,835		Net income		$	110,690	$	36,760
Less: distributed earnings allocated to participating securities		(68	)		(45	)		(196	)		(124	)	Less: distributed earnings allocated to participating securities		(158)		(135)
Less: undistributed earnings allocated to participating securities		(244	)		(49	)		(375	)		(83	)	Less: undistributed earnings allocated to participating securities		(463)		(96)
Net income attributable to common stockholders (numerator for basic earnings per share)		60,851			26,265			116,712			62,628		Net income attributable to common stockholders (numerator for basic earnings per share)		110,069		36,529
Add back: undistributed earnings allocated to participating securities		244			49			375			83		Add back: undistributed earnings allocated to participating securities		463		96
Less: undistributed earnings reallocated to participating securities		(240	)		(49	)		(369	)		(83	)	Less: undistributed earnings reallocated to participating securities		(447)		(93)
Numerator for diluted earnings per share under two class method	$	60,855		$	26,265		$	116,718		$	62,628		Numerator for diluted earnings per share under two class method		$	110,085	$	36,532

Denominator													Denominator
Weighted-average common shares outstanding		51,650,360			51,297,132			51,502,986			51,286,844		Weighted-average common shares outstanding		69,790,927		67,490,537
Add: dilutive effect of stock options		950,758			163,314			745,391			10,921		Add: dilutive effect of stock options		2,367,394		2,011,629
Add: dilutive effect of performance share units													Add: dilutive effect of performance share units		629,856		623,557
Denominator for diluted earnings per share under two class method		52,601,118			51,460,446			52,248,377			51,297,765		Denominator for diluted earnings per share under two class method		72,788,177		70,125,723

Basic Earnings Per Common Share	$	1.18		$	0.51		$	2.27		$	1.22		Basic Earnings Per Common Share		$	1.58	$	0.54
Diluted Earnings Per Common Share	$	1.16		$	0.51		$	2.23		$	1.22		Diluted Earnings Per Common Share		$	1.51	$	0.52


	September 30,		December 31,			March 31, 2021		December 31, 2020
	2017		2016
	(Dollars in thousands)					(Dollars in thousands)
Customer and escrow deposits	$	37,578	$	27,183	Customer and escrow deposits	$	82,824	$	67,022
Income taxes payable					Income taxes payable	43,057		8,285
Accrued compensation and related expenses					Accrued compensation and related expenses	41,541		56,682
Warranty accrual		20,725		20,678	Warranty accrual	33,873		33,664
Accrued compensation and related expenses		27,624		27,830
Lease liability (Note 8)					Lease liability (Note 8)	29,734		30,221
Accrued interest		11,031		23,234	Accrued interest	16,110		27,650
Land development and home construction accruals					Land development and home construction accruals	12,258		10,824
Construction defect claim reserves		7,480		8,750	Construction defect claim reserves	8,744		8,479
Land development and home construction accruals		6,212		8,695
Other accrued liabilities		41,011		28,196	Other accrued liabilities	65,739		57,908
Total accrued liabilities	$	151,661	$	144,566
Total accrued and other liabilities					Total accrued and other liabilities	$	333,880	$	300,735

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


						March 31, 2021		December 31, 2020
	September 30,		December 31,
	2017		2016			(Dollars in thousands)
Homebuilding assets	(Dollars in thousands)				Homebuilding assets
West	$	1,052,795	$	1,035,033	West	$	1,968,336	$	1,855,567
Mountain		677,721		571,139	Mountain	983,488		905,007
East		217,238		256,816	East	309,571		274,937
Corporate		450,969		454,507	Corporate	738,705		470,909
Total homebuilding assets	$	2,398,723	$	2,317,495	Total homebuilding assets	$	4,000,100	$	3,506,420

Financial services assets					Financial services assets
Mortgage operations	$	102,704	$	153,182	Mortgage operations	$	297,801	$	279,649
Other		64,875		57,912	Other	85,029		78,851
Total financial services assets	$	167,579	$	211,094	Total financial services assets	$	382,830	$	358,500

Total assets	$	2,566,302	$	2,528,589	Total assets	$	4,382,930	$	3,864,920

	September 30, 2017
	Cost Basis		OTTI			Net Cost Basis		Fair Value
	(Dollars in thousands)
Homebuilding equity securities	$	-	$	-		$	-	$	-
Financial services equity securities		36,304		(366	)		35,938		40,221
Total marketable equity securities	$	36,304	$	(366	)	$	35,938	$	40,221

	Impairment Data								Quantitative Data
Three Months Ended	Total Subdivisions Tested		Inventory Impairments		Fair Value of Inventory After Impairments		Number of Subdivisions Impaired		Discount Rate
	(Dollars in thousands)
March 31, 2017		33	$	4,850	$	19,952		2		12%	to	18%
June 30, 2017		35	$	-	$	-		-			N/A
September 30, 2017		33	$	4,540	$	52,190		9		10%	to	15%

March 31, 2016		14	$	-	$	-		-			N/A
June 30, 2016		17	$	1,600	$	6,415		2		12%	to	15%
September 30, 2016		25	$	4,700	$	12,295		2		15%	to	18%

	September 30, 2017
					Non-
			Guarantor		Guarantor		Eliminating			Consolidated
	MDC		Subsidiaries		Subsidiaries		Entries			MDC
	(Dollars in thousands)
ASSETS
Homebuilding:
Cash and cash equivalents	$	347,217	$	4,182	$	-	$	-		$	351,399
Marketable securities		-		-		-		-			-
Restricted cash		-		8,723		-		-			8,723
Trade and other receivables		5,517		39,577		-		(2,190	)		42,904
Inventories:
Housing completed or under construction		-		969,419		-		-			969,419
Land and land under development		-		863,002		-		-			863,002
Total inventories		-		1,832,421		-		-			1,832,421

Intercompany receivables		1,603,012		2,803		5,254		(1,611,069	)		-
Investment in subsidiaries		278,885		-		-		(278,885	)		-
Property and equipment, net		24,408		1,896		-		-			26,304
Deferred tax asset, net		65,284		-		-		(1,120	)		64,164
Metropolitan district bond securities (related party)		-		-		-		-			-
Prepaid and other assets		8,155		64,653		-		-			72,808
Total homebuilding assets		2,332,478		1,954,255		5,254		(1,893,264	)		2,398,723

Financial Services:
Cash and cash equivalents		-		-		26,419		-			26,419
Marketable securities		-		-		40,221		-			40,221
Intercompany receivables		-		-		35,765		(35,765	)		-
Mortgage loans held-for-sale, net		-		-		89,804		-			89,804
Other assets		-		-		10,015		1,120			11,135
Total financial services assets		-		-		202,224		(34,645	)		167,579
Total Assets	$	2,332,478	$	1,954,255	$	207,478	$	(1,927,909	)	$	2,566,302

LIABILITIES AND EQUITY

Homebuilding:
Accounts payable	$	-	$	49,390	$	-	$	-		$	49,390
Accrued liabilities		40,205		112,986		98		(1,628	)		151,661
Advances and notes payable to parent and subsidiaries		43,822		1,572,098		26,802		(1,642,722	)		-
Revolving credit facility		15,000		-		-		-			15,000
Senior notes, net		842,532		-		-		-			842,532
Total homebuilding liabilities		941,559		1,734,474		26,900		(1,644,350	)		1,058,583

Financial Services:
Accounts payable and other liabilities		-		-		52,259		(562	)		51,697
Advances and notes payable to parent and subsidiaries		-		-		4,112		(4,112	)		-
Mortgage repurchase facility		-		-		65,103		-			65,103
Total financial services liabilities		-		-		121,474		(4,674	)		116,800
Total Liabilities		941,559		1,734,474		148,374		(1,649,024	)		1,175,383

Equity:
Total Stockholders' Equity		1,390,919		219,781		59,104		(278,885	)		1,390,919
Total Liabilities and Stockholders' Equity	$	2,332,478	$	1,954,255	$	207,478	$	(1,927,909	)	$	2,566,302

	Three Months Ended September 30, 2017
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Homebuilding:
Revenues	$	-		$	586,287		$	-		$	-		$	586,287
Cost of sales		-			(486,406	)		-			-			(486,406	)
Inventory impairments		-			(4,540	)		-			-			(4,540	)
Gross margin		-			95,341			-			-			95,341
Selling, general, and administrative expenses		(11,911	)		(56,983	)		-			(208	)		(69,102	)
Equity income of subsidiaries		33,329			-			-			(33,329	)		-
Interest and other income		53,740			941			1			(134	)		54,548
Other expense		7			(625	)		-			-			(618	)
Other-than-temporary impairment of marketable securities		-			-			-			-			-
Homebuilding pretax income (loss)		75,165			38,674			1			(33,671	)		80,169
Financial Services:
Financial services pretax income		-			-			9,169			342			9,511
Income before income taxes		75,165			38,674			9,170			(33,329	)		89,680
(Provision) benefit for income taxes		(14,002	)		(11,168	)		(3,347	)		-			(28,517	)
Net income	$	61,163		$	27,506		$	5,823		$	(33,329	)	$	61,163
Other comprehensive income related to available-for-sale securities, net of tax		(23,175	)		-			927			(927	)		(23,175	)
Comprehensive income	$	37,988		$	27,506		$	6,750		$	(34,256	)	$	37,988

	Nine Months Ended September 30, 2017
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Homebuilding:
Revenues	$	-		$	1,798,984		$	-		$	-		$	1,798,984
Home and land cost of sales		-			(1,495,838	)		-			-			(1,495,838	)
Inventory impairments		-			(9,390	)		-			-			(9,390	)
Gross margin		-			293,756			-			-			293,756
Selling, general, and administrative expenses		(36,539	)		(168,988	)		-			(582	)		(206,109	)
Equity income of subsidiaries		102,469			-			-			(102,469	)		-
Interest and other income		57,748			2,281			5			(312	)		59,722
Other expense		23			(1,658	)		-			-			(1,635	)
Other-than-temporary impairment of marketable securities		(51	)		-			-			-			(51	)
Homebuilding pretax income (loss)		123,650			125,391			5			(103,363	)		145,683
Financial Services:
Financial services pretax income		-			-			31,357			894			32,251
Income before income taxes		123,650			125,391			31,362			(102,469	)		177,934
(Provision) benefit for income taxes		(6,367	)		(42,742	)		(11,542	)		-			(60,651	)
Net income	$	117,283		$	82,649		$	19,820		$	(102,469	)	$	117,283
Other comprehensive income related to available for sale securities, net of tax		(19,245	)		-			2,217			(2,217	)		(19,245	)
Comprehensive income	$	98,038		$	82,649		$	22,037		$	(104,686	)	$	98,038

	Nine Months Ended September 30, 2016
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
Homebuilding:	(Dollars in thousands)
Revenues	$	-		$	1,546,267		$	-		$	-		$	1,546,267
Home and land cost of sales		-			(1,291,270	)		(300	)		-			(1,291,570	)
Inventory impairments		-			(6,300	)		-			-			(6,300	)
Gross margin		-			248,697			(300	)		-			248,397
Selling, general, and administrative expenses		(31,598	)		(150,492	)		-			(531	)		(182,621	)
Equity income of subsidiaries		80,990			-			-			(80,990	)		-
Interest and other income		3,970			1,652			4			(268	)		5,358
Interest expense		-			-			-			-			-
Other expense		(2	)		(2,461	)		-			-			(2,463	)
Other-than-temporary impairment of marketable securities		(934	)		-			-			-			(934	)
Homebuilding pretax income (loss)		52,426			97,396			(296	)		(81,789	)		67,737
Financial Services:
Financial services pretax income		-			-			24,247			799			25,046
Income before income taxes		52,426			97,396			23,951			(80,990	)		92,783
(Provision) benefit for income taxes		10,409			(31,438	)		(8,919	)		-			(29,948	)
Net income	$	62,835		$	65,958		$	15,032		$	(80,990	)	$	62,835
Other comprehensive income related to available for sale securities, net of tax		3,871			-			680			(680	)		3,871
Comprehensive income	$	66,706		$	65,958		$	15,712		$	(81,670	)	$	66,706

	Three Months Ended September 30,
	2017						2016						% Change
	Homes		Dollar Value		Average Price		Homes		Dollar Value		Average Price		Homes			Dollar Value			Average Price
	(Dollars in thousands)
Arizona		186	$	58,640	$	315.3		221	$	64,314	$	291.0		(16)	%		(9)	%		8	%
California		223		135,745		608.7		195		125,602		644.1		14	%		8	%		(5)	%
Nevada		240		81,483		339.5		177		59,601		336.7		36	%		37	%		1	%
Washington		98		50,936		519.8		75		35,072		467.6		31	%		45	%		11	%
West		747		326,804		437.5		668		284,589		426.0		12	%		15	%		3	%
Colorado		314		146,883		467.8		343		169,858		495.2		(8)	%		(14)	%		(6)	%
Utah		45		18,843		418.7		55		20,728		376.9		(18)	%		(9)	%		11	%
Mountain		359		165,726		461.6		398		190,586		478.9		(10)	%		(13)	%		(4)	%
Maryland		41		21,506		524.5		61		27,297		447.5		(33)	%		(21)	%		17	%
Virginia		68		33,537		493.2		78		39,795		510.2		(13)	%		(16)	%		(3)	%
Florida		102		37,374		366.4		88		33,455		380.2		16	%		12	%		(4)	%
East		211		92,417		438.0		227		100,547		442.9		(7)	%		(8)	%		(1)	%
Total		1,317	$	584,947	$	444.2		1,293	$	575,722	$	445.3		2	%		2	%		(0)	%

	Nine Months Ended September 30,
	2017						2016						% Change
	Homes		Dollar Value		Average Price		Homes		Dollar Value		Average Price		Homes			Dollar Value			Average Price
	(Dollars in thousands)
Arizona		586	$	183,258	$	312.7		582	$	170,352	$	292.7		1	%		8	%		7	%
California		662		403,974		610.2		512		319,116		623.3		29	%		27	%		(2)	%
Nevada		642		223,303		347.8		432		149,861		346.9		49	%		49	%		0	%
Washington		290		149,106		514.2		234		106,665		455.8		24	%		40	%		13	%
West		2,180		959,641		440.2		1,760		745,994		423.9		24	%		29	%		4	%
Colorado		1,064		510,211		479.5		945		463,534		490.5		13	%		10	%		(2)	%
Utah		126		51,409		408.0		145		53,238		367.2		(13)	%		(3)	%		11	%
Mountain		1,190		561,620		471.9		1,090		516,772		474.1		9	%		9	%		(0)	%
Maryland		140		65,870		470.5		178		84,742		476.1		(21)	%		(22)	%		(1)	%
Virginia		171		92,432		540.5		193		98,572		510.7		(11)	%		(6)	%		6	%
Florida		304		116,483		383.2		251		95,257		379.5		21	%		22	%		1	%
East		615		274,785		446.8		622		278,571		447.9		(1)	%		(1)	%		(0)	%
Total		3,985	$	1,796,046	$	450.7		3,472	$	1,541,337	$	443.9		15	%		17	%		2	%

	Cancellations As a Percentage of Homes in Beginning Backlog									Cancellations As a Percentage of Gross Sales*
	Three Months Ended September 30,						Change in			Three Months Ended September 30,						Change in			Nine Months Ended September 30,						Change in
	2017			2016			Percentage			2017			2016			Percentage			2017			2016			Percentage
Arizona		18	%		19	%		(1)	%		26	%		26	%		0	%		18	%		24	%		(6)	%
California		9	%		14	%		(5)	%		16	%		23	%		(7)	%		20	%		21	%		(1)	%
Nevada		9	%		15	%		(6)	%		19	%		26	%		(7)	%		11	%		18	%		(7)	%
Washington		8	%		6	%		2	%		27	%		17	%		10	%		17	%		17	%		0	%
West		11	%		14	%		(3)	%		21	%		24	%		(3)	%		16	%		20	%		(4)	%
Colorado		13	%		9	%		4	%		32	%		24	%		8	%		17	%		19	%		(2)	%
Utah		13	%		10	%		3	%		28	%		31	%		(3)	%		22	%		22	%		0	%
Mountain		13	%		9	%		4	%		32	%		24	%		8	%		18	%		20	%		(2)	%
Maryland		9	%		18	%		(9)	%		15	%		32	%		(17)	%		31	%		25	%		6	%
Virginia		7	%		15	%		(8)	%		17	%		30	%		(13)	%		21	%		20	%		1	%
Florida		11	%		19	%		(8)	%		24	%		32	%		(8)	%		21	%		28	%		(7)	%
East		10	%		17	%		(7)	%		21	%		31	%		(10)	%		23	%		25	%		(2)	%
Total		12	%		13	%		(1)	%		24	%		25	%		(1)	%		18	%		21	%		(3)	%

	At September 30,
	2017						2016						% Change
	Homes		Dollar Value		Average Price		Homes		Dollar Value		Average Price		Homes			Dollar Value			Average Price
	(Dollars in thousands)
Arizona		374	$	133,074	$	355.8		423	$	132,929	$	314.3		(12)	%		0	%		13	%
California		546		378,448		693.1		627		389,622		621.4		(13)	%		(3)	%		12	%
Nevada		411		151,726		369.2		397		139,731		352.0		4	%		9	%		5	%
Washington		279		156,974		562.6		270		133,367		494.0		3	%		18	%		14	%
West		1,610		820,222		509.5		1,717		795,649		463.4		(6)	%		3	%		10	%
Colorado		1,192		595,675		499.7		1,104		530,662		480.7		8	%		12	%		4	%
Utah		149		67,830		455.2		141		53,180		377.2		6	%		28	%		21	%
Mountain		1,341		663,505		494.8		1,245		583,842		468.9		8	%		14	%		6	%
Maryland		74		34,102		460.8		120		56,837		473.6		(38)	%		(40)	%		(3)	%
Virginia		111		58,225		524.5		118		64,228		544.3		(6)	%		(9)	%		(4)	%
Florida		327		132,238		404.4		248		111,499		449.6		32	%		19	%		(10)	%
East		512		224,565		438.6		486		232,564		478.5		5	%		(3)	%		(8)	%
Total		3,463	$	1,708,292	$	493.3		3,448	$	1,612,055	$	467.5		0	%		6	%		6	%

	September 30, 2017						September 30, 2016
	Lots Owned		Lots Optioned		Total		Lots Owned		Lots Optioned		Total		Total % Change
Arizona		1,971		761		2,732		1,515		269		1,784		53	%
California		1,454		679		2,133		1,753		75		1,828		17	%
Nevada		2,150		401		2,551		2,051		200		2,251		13	%
Washington		655		64		719		853		-		853		(16)	%
West		6,230		1,905		8,135		6,172		544		6,716		21	%
Colorado		4,622		2,960		7,582		4,051		1,347		5,398		40	%
Utah		456		132		588		380		-		380		55	%
Mountain		5,078		3,092		8,170		4,431		1,347		5,778		41	%
Maryland		122		48		170		261		143		404		(58)	%
Virginia		282		30		312		429		15		444		(30)	%
Florida		941		1,231		2,172		962		455		1,417		53	%
East		1,345		1,309		2,654		1,652		613		2,265		17	%
Total		12,653		6,306		18,959		12,255		2,504		14,759		28	%


	March 31, 2021			March 31, 2020
	Lots Owned	Lots Optioned	Total	Lots Owned	Lots Optioned	Total	Total % Change
West	12,658	3,921	16,579	9,641	2,393	12,034	38	%
Mountain	6,790	3,418	10,208	6,540	4,007	10,547	(3)	%
East	3,088	2,148	5,236	2,410	2,133	4,543	15	%
Total	22,536	9,487	32,023	18,591	8,533	27,124	18	%

	Three Months Ended						% or			Nine Months Ended						% or
	September 30,						Percentage			September 30,						Percentage
	2017			2016			Change			2017			2016			Change
	(Dollars in thousands)
Total Originations (including transfer loans):
Loans		824			862			(4)	%		2,497			2,146			16	%
Principal	$	288,326		$	296,456			(3)	%	$	872,781		$	747,941			17	%
Capture Rate Data:
Capture rate as % of all homes delivered		62	%		66	%		(4)	%		62	%		61	%		1	%
Capture rate as % of all homes delivered (excludes cash sales)		66	%		69	%		(3)	%		66	%		64	%		2	%
Mortgage Loan Origination Product Mix:
FHA loans		20	%		21	%		(1)	%		19	%		20	%		(1)	%
Other government loans (VA & USDA)		20	%		22	%		(2)	%		21	%		24	%		(3)	%
Total government loans		40	%		43	%		(3)	%		40	%		44	%		(4)	%
Conventional loans		60	%		57	%		3	%		60	%		56	%		4	%
		100	%		100	%		0	%		100	%		100	%		0	%
Loan Type:
Fixed rate		97	%		97	%		0	%		97	%		98	%		(1)	%
ARM		3	%		3	%		0	%		3	%		2	%		1	%
Credit Quality:
Average FICO Score		735			735			0	%		735			736			(0)	%
Other Data:
Average Combined LTV ratio		83	%		83	%		0	%		83	%		84	%		(1)	%
Full documentation loans		100	%		100	%		0	%		100	%		100	%		0	%
Loans Sold to Third Parties:
Loans		836			840			(0)	%		2,645			2,144			23	%
Principal	$	293,375		$	295,818			(1)	%	$	921,431		$	744,958			24	%


		Three Months Ended				% or Percentage Change
	March 31,
			2021						2020

			(Dollars in thousands)
Total Originations (including transfer loans):
Loans			1,568			1,029				52	%
Principal			$	616,004		$	379,306			62	%
Capture Rate Data:
Capture rate as % of all homes delivered			72		%	66		%		6	%
Capture rate as % of all homes delivered (excludes cash sales)			74		%	69		%		5	%
Mortgage Loan Origination Product Mix:
FHA loans			20		%	22		%		(2)	%
Other government loans (VA & USDA)			17		%	22		%		(5)	%
Total government loans			37		%	44		%		(7)	%
Conventional loans			63		%	56		%		7	%
			100		%	100		%		—	%
Loan Type:
Fixed rate			100		%	99		%		1	%
ARM			—		%	1		%		(1)	%
Credit Quality:
Average FICO Score			738			735				—	%
Other Data:
Average Combined LTV ratio			85		%	85		%		—	%
Full documentation loans			100		%	100		%		—	%
Loans Sold to Third Parties:
Loans			1,586			1,199				32	%
Principal			$	610,897		$	438,101			39	%


Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan or Program (2)	Maximum Number of Shares that may yet be Purchased under the Plan or Program (2)
January 1 to January 31, 2021	215	$	46.17	—	4,000,000
February 1 to February 28, 2021	27,624	$	54.85	—	4,000,000
March 1 to March 31, 2021	—	N/A		—	4,000,000

~~Item~~ 6.	~~Exhibits~~
4.1			Supplemental Indenture (2.500% Senior Notes due 2031), dated as of January 11, 2021, among the Company, the guarantors named therein and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.2 of the Company's Current Report on Form 8-K filed January 11, 2021). *
10.1			~~First~~ Sixth Amendment to Amended and Restated Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of ~~August 10, 2017~~March 25, 2021 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed ~~August 11, 2017)~~March 26, 2021). *
22			Subsidiary Guarantors .
~~10.2~~ 31.1			Third Amendment to Credit Agreement, dated as of September 29, 2017 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed October 4, 2017). *

~~31.1~~	Certification of ~~Chief Executive Officer~~principal executive officer required by 17 CFR 240.13a-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
~~31.2~~	Certification of ~~Chief Financial Officer~~principal financial officer required by 17 CFR 240.13a-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
~~32.1~~	Certification of ~~Chief Executive Officer~~principal executive officer required by 17 CFR 240.13a-14(b), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
~~32.2~~	Certification of ~~Chief Financial Officer~~principal financial officer required by 17 CFR 240.13a-14(b), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101
~~101~~	The following financial statements, formatted in ~~XBRL:~~Inline Extensible Business Reporting Language (iXBRL): (i) Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, (ii) Consolidated Statements of Operations for the three and ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, (iii) Consolidated Statements of Changes in Stockholders’ Equity for the three and three months ended March 31, 2021 and 2020, (iv) Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016;~~2020; and ~~(iv)~~(v) Notes to the Unaudited Consolidated Financial Statements, tagged as blocks of text.
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

~~Date:~~ ~~November 2, 2017~~
Date: April 29, 2021			M.D.C. HOLDINGS, INC.
			(Registrant)


	By:	~~/s/~~ /s/ Robert N. Martin
				Robert N. Martin
		Senior Vice ~~Preside~~~~nt,~~President, Chief Financial Officer ~~and~~ ~~Principal Accounting Officer~~ (~~principal~~(principal financial officer andduly authorized o~~fficer)~~

~~Exhibit~~ ~~Number~~	~~Description~~

~~10.1~~Date: April 29, 2021		First Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of August 10, 2017 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed August 11, 2017). *By: /s/ Staci M. Woolsey

~~10.2~~	Third Amendment to Credit Agreement, dated as of September 29, 2017 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed October 4, 2017). *

~~31.1~~	~~Certification of~~ Staci M. Woolsey Vice President, Controller and Chief ~~Executive~~Accounting Officer ~~required by 17 CFR 240.13a-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~31.2~~	~~Certification of Chief Financial Officer required by 17 CFR 240.13a-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

~~32.1~~	~~Certification of Chief Executive Officer required by 17 CFR 240.13a-14(b), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~32.2~~	~~Certification of Chief Financial Officer required by 17 CFR 240.13a-14(b), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~101~~	~~The following financial statements, formatted in XBRL: (i) Consolidated Balance Sheets as of September 30, 2017~~(principal accounting officer and December 31, 2016, (ii) Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016, (iii) Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016; and (iv) Notes to the Unaudited Consolidated Financial Statements, tagged as blocks of text.duly authorized officer)