20City

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. ~~2054~~920549

FORM 10-Q

(Mark One)

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

For the quarterly period endedSeptember 30,,~~2017~~

2023

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

Commission File No. 1-8951

M.D.C. HOLDINGS, INC.

(Exact name of Registrant as specified in its charter)

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

4350 South Monaco Street, Suite 500

80237

Denver, Colorado

(Zip code)

(Address of principal executive offices)

(303) 773-1100

(~~Registrant~~'sRegistrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $.01 par value MDC New York Stock Exchange
6% Senior Notes due January 2043 MDC 43 New York Stock Exchange

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

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

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

~~Large~~ ~~Accelerated Filer~~

☒

~~Accelerated~~ ~~Filer~~

☐

~~Non-Accelerated~~

Large Accelerated Filer

☒

☐ ~~(Do not check if a smaller reporting company)~~

Accelerated Filer

~~Smaller~~ ~~Reporting Company~~

☐

Non-Accelerated Filer

☐

Smaller Reporting Company

☐

Emerging growth company

☐

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

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

As of ~~November 1~~, ~~2017~~, ~~51,943,156~~October 23, 2023, 74,661,479 shares of M.D.C. Holdings, Inc. common stock were outstanding.

Table of Contents

M.D.C. HOLDINGS, INC.

FORM 10-Q

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

2023

INDEX

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

	Item 1.	Unaudited Consolidated Financial Statements:

			Consolidated Balance Sheets at September 30, ~~2017~~2023 and December 31, ~~2016~~2022	1

			Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, ~~2017~~2023 and ~~2016~~2022	2

			Consolidated S~~tatements~~Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022	3

	Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2017~~2023 and ~~2016~~2022		3 5

			Notes to Unaudited Consolidated Financial Statements	4 6

	Item 2.	~~Management~~’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations		27 26

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		44 41

	Item 4.	Controls and Procedures		45 42

Part II. Other Information:

	Item 1.	Legal Proceedings		46 43

	Item 1A.	Risk Factors		46 43

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		47 43

Item 5.	~~Item 6.~~ Other Information		~~Exhibits~~44		48

Item 6.	~~Signature~~Exhibits		48 44

Signatures			44

(i)

Table of Contents

PART I. FINANCIAL INFORMATION

~~PART I~~

~~ITEM~~

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

Statements

M.D.C. HOLDINGS, INC.

Consolidated Balance Sheets.


	September 30, 2023		December 31, 2022
	(unaudited)
	(Dollars in thousands, except share and per share amounts)
ASSETS
Homebuilding:
Cash and cash equivalents	$	1,207,532	$	696,075
Restricted cash	4,300		3,143
Marketable securities	346,351		443,712
Trade and other receivables	81,305		116,364
Inventories:
Housing completed or under construction	1,921,134		1,722,061
Land and land under development	1,315,196		1,793,718
Total inventories	3,236,330		3,515,779
Property and equipment, net	62,403		63,730
Deferred tax asset, net	46,615		49,252
Prepaids and other assets	70,791		70,007
Total homebuilding assets	5,055,627		4,958,062
Financial Services:
Cash and cash equivalents	150,457		17,877
Marketable securities	79,166		117,388
Mortgage loans held-for-sale, net	164,254		229,513
Other assets	38,499		40,432
Total financial services assets	432,376		405,210
Total Assets	$	5,488,003	$	5,363,272
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable	$	135,265	$	109,218
Accrued and other liabilities	312,882		383,406
Revolving credit facility	10,000		10,000
Senior notes, net	1,483,193		1,482,576
Total homebuilding liabilities	1,941,340		1,985,200
Financial Services:
Accounts payable and accrued liabilities	108,650		110,536
Mortgage repurchase facility	145,470		175,752
Total financial services liabilities	254,120		286,288
Total Liabilities	2,195,460		2,271,488
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; 74,662,468 and 72,585,596 issued and outstanding at September 30, 2023 and December 31, 2022, respectively	747		726
Additional paid-in-capital	1,817,494		1,784,173
Retained earnings	1,474,211		1,306,885
Accumulated other comprehensive income	91		—
Total Stockholders' Equity	3,292,543		3,091,784
Total Liabilities and Stockholders' Equity	$	5,488,003	$	5,363,272

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

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

~~- 1 -~~

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Table of Contents

M.D.C. HOLDINGS, INC.

Consolidated Statements of Operations and Comprehensive Income


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(Dollars in thousands, except share and per share amounts)
Homebuilding:
Home sale revenues	$	1,087,050	$	1,407,642	$	3,210,536	$	4,098,985
Home cost of sales	(872,624)		(1,059,996)		(2,622,362)		(3,043,390)
Inventory impairments	(6,200)		(28,415)		(27,500)		(29,075)
Total cost of sales	(878,824)		(1,088,411)		(2,649,862)		(3,072,465)
Gross profit	208,226		319,231		560,674		1,026,520
Selling, general and administrative expenses	(101,311)		(141,435)		(303,032)		(404,598)

Interest and other income	20,414		2,220		51,812		3,797
Other income (expense)	55		(11,800)		987		(28,733)
Homebuilding pretax income	127,384		168,216		310,441		596,986

Financial Services:
Revenues	23,769		34,101		85,874		99,461
Expenses	(15,494)		(18,704)		(46,231)		(54,440)
Other income, net	4,148		2,176		11,742		4,627
Financial services pretax income	12,423		17,573		51,385		49,648

Income before income taxes	139,807		185,789		361,826		646,634
Provision for income taxes	(32,502)		(41,389)		(80,328)		(164,271)
Net income	$	107,305	$	144,400	$	281,498	$	482,363

Other comprehensive income net of tax:
Unrealized gain related to available-for-sale debt securities	$	1	$	—	$	91	$	—
Other comprehensive income	1		—		91		—
Comprehensive income	$	107,306	$	144,400	$	281,589	$	482,363

Earnings per share:
Basic	$	1.44	$	2.03	$	3.82	$	6.78
Diluted	$	1.40	$	1.98	$	3.73	$	6.59

Weighted average common shares outstanding:
Basic	74,198,016		70,880,405		73,265,878		70,829,761
Diluted	76,253,178		72,729,453		75,106,356		72,892,635

Dividends declared per share	$	0.55	$	0.50	$	1.55	$	1.50

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

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

~~- 2 -~~

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Table of Contents

M.D.C. HOLDINGS, INC.

Consolidated Statements of ~~Cash Flows~~Changes in Stockholders’ Equity

(Dollars in thousands, except share amounts)
Nine Months Ended September 30, 2023
Common Stock Additional
Paid-in
Capital Retained
Earnings Accumulated Other Comprehensive Income Total
Shares Amount
Balance at December 31, 2022 72,585,596 $ 726 $ 1,784,173 $ 1,306,885 $ — $ 3,091,784
Net income — — — 80,700 — 80,700
Other comprehensive income (loss) — — — — 323 323
Shares issued under stock-based compensation programs, net 503,022 5 (11,745) — — (11,740)
Cash dividends declared — — — (36,543) — (36,543)
Stock-based compensation expense — — 5,597 — — 5,597
Forfeiture of restricted stock (1,283) — — — — —
Balance at March 31, 2023 73,087,335 $ 731 $ 1,778,025 $ 1,351,042 $ 323 $ 3,130,121
Net Income — — — 93,493 — 93,493
Other comprehensive income (loss) — — — — (233) (233)
Shares issued under stock-based compensation programs, net 1,459,256 14 31,318 — — 31,332
Cash dividends declared — — — (36,566) — (36,566)
Stock-based compensation expense — — 2,956 — — 2,956
Forfeiture of restricted stock (2,370) — — — — —
Balance at June 30, 2023 74,544,221 $ 745 $ 1,812,299 $ 1,407,969 $ 90 $ 3,221,103
Net Income — — — 107,305 — 107,305
Other comprehensive income (loss) — — — — 1 1
Shares issued under stock-based compensation programs, net 118,247 2 1,218 — 1,220
Cash dividends declared — — — (41,063) — (41,063)
Stock-based compensation expense — — 3,977 — — 3,977
Balance at September 30, 2023 74,662,468 $ 747 $ 1,817,494 $ 1,474,211 $ 91 $ 3,292,543

Nine Months Ended September 30, 2022
Common Stock Additional
Paid-in
Capital Retained
Earnings Accumulated Other Comprehensive Income Total
Shares Amount
Balance at December 31, 2021 70,668,093 $ 707 $ 1,709,276 $ 887,163 $ — $ 2,597,146
Net income — — — 148,421 — 148,421
Shares issued under stock-based compensation programs, net 498,921 5 (12,633) — — (12,628)
Cash dividends declared — — — (35,583) — (35,583)
Stock-based compensation expense — — 13,726 — — 13,726
Forfeiture of restricted stock (4,769) — — — — —
Balance at March 31, 2022 71,162,245 $ 712 $ 1,710,369 $ 1,000,001 $ — $ 2,711,082
Net Income — — — 189,542 — 189,542
Shares issued under stock-based compensation programs, net (1,573) — (58) — — (58)
Cash dividends declared — — — (35,580) — (35,580)
Stock-based compensation expense — — 9,331 — — 9,331
Forfeiture of restricted stock (2,797) — — — — —
Balance at June 30, 2022 71,157,875 $ 712 $ 1,719,642 $ 1,153,963 $ — $ 2,874,317

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Table of Contents

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


Net Income	—	—		—		144,400		—		144,400
Shares issued under stock-based compensation programs, net	101,269	1		1,140				—		1,141
Cash dividends declared	—	—		—		(35,622)		—		(35,622)
Stock-based compensation expense	—	—		24,968		—		—		24,968
Forfeiture of restricted stock	(5,001)	—		—		—		—		—
Balance at September 30, 2022	71,254,143	$	713	$	1,745,750	$	1,262,741	$	—	$	3,009,204

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

~~- 3 -~~

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Table of Contents

M.D.C. HOLDINGS, INC.

Consolidated Statements of Cash Flows
Nine Months Ended
September 30,
2023 2022
(Dollars in thousands)
Operating Activities:
Net income $ 281,498 $ 482,363
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation expense 14,358 50,348
Depreciation and amortization 17,870 20,663
Inventory impairments 27,500 29,075
Project abandonment costs (963) 28,758
Amortization of discount of marketable debt securities (24,864) (1,082)
Deferred income tax benefit (expense) 2,608 (4,180)
Net changes in assets and liabilities:
Trade and other receivables 44,979 (19,321)
Mortgage loans held-for-sale, net 65,259 91,696
Housing completed or under construction (202,912) (319,083)
Land and land under development 456,441 (19,740)
Prepaids and other assets (3,097) (8,050)
Accounts payable and accrued and other liabilities (55,528) 12,506
Net cash provided by operating activities 623,149 343,953
Investing Activities:
Purchases of marketable securities (1,088,433) (291,126)
Maturities of marketable securities 1,249,000 —
Purchases of property and equipment (14,880) (21,429)
Net cash provided by (used in) investing activities 145,687 (312,555)
Financing Activities:
Payments on mortgage repurchase facility, net (30,282) (60,086)
Dividend payments (114,172) (106,785)
Issuance of shares under stock-based compensation programs, net 20,812 (11,545)
Net cash used in financing activities (123,642) (178,416)
Net increase (decrease) in cash, cash equivalents and restricted cash 645,194 (147,018)
Cash, cash equivalents and restricted cash:
Beginning of period 717,095 603,459
End of period $ 1,362,289 $ 456,441
Reconciliation of cash, cash equivalents and restricted cash:
Homebuilding:
Cash and cash equivalents $ 1,207,532 $ 417,298
Restricted cash 4,300 4,657
Financial Services:
Cash and cash equivalents 150,457 34,486
Total cash, cash equivalents and restricted cash $ 1,362,289 $ 456,441

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

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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~~refer to M.D.C. Holdings, Inc. and its subsidiaries) have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Accordingly, they do not include all information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. These statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows of MDC at September 30, ~~2017~~ 2023 and for all periods presented. These statements should be read in conjunction with MDC’s Consolidated Financial Statements and Notes thereto included in MDC’s Annual Report on Form 10-K10-K for the year ended December 31, ~~2016.~~

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

2022.

Included in these footnotes are certain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our business, financial condition, results of operations, cash flows, strategies and prospects. These forward-looking statements may be identified by terminology such as “likely,” ~~“may,~~“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.	~~Recently Issued Accounting Standards~~

2. Recently Issued Accounting Standards

Adopted New Accounting Standards

In ~~May 2014,~~ March 2020, the Financial Accounting Standards Board ~~(“FASB”~~("FASB") issued Accounting ~~Standards~~Standard Update ~~(“ASU”~~("ASU") ~~2014~~-~~09,~~~~Revenue from Contracts with Customers~~ ("2020-04, “Reference Rate Reform (Topic 848),” as amended by ASU ~~2014~~-~~09"~~)2021-01 in January 2021 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~~2022-06 in ~~an amount that reflects~~December 2022, directly addressing 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~~effects of reference rate reform on financial 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~~cessation of ~~recognition and classification~~the publication of certain ~~marketing costs will change from~~LIBOR rates beginning December 31, 2021, with complete elimination of the ~~current accounting treatment. We are continuing~~publication of the LIBOR rates by June 30, 2023. The guidance provides optional expedients and exceptions for applying GAAP to ~~evaluate the exact dollar impact ASU~~ ~~2014~~-09 ~~will have on recording revenue~~contracts, hedging relationships and ~~our marketing costs in our consolidated financial statements and related disclosures.~~

~~- 4 -~~

~~Table~~other transactions affected by reference rate reform by virtue of ~~Contents~~

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

~~Notes to Unaudited Consolidated Financial Statements~~

In ~~January 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~~referencing LIBOR or another reference rate expected to be ~~classified as available-for-sale (changes in fair value reported through other comprehensive income)~~discontinued. This guidance became effective on March 12, 2020 and ~~instead, all changes in fair value will~~can 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~~adopted no later than December 31, 2024, with early adoption permitted. We adopted this amendment in the ~~future. If we do have a material amount~~second quarter of ~~investments in equity securities after the date of~~2023. The 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~~2020-04, as amended by ASU 2021-01 and ASU 2022-06, 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,~~~~Financial Instruments—Credit Losses (Topic~~ ~~326~~):~~Measurement of Credit Losses on Financial Instruments~~~~(“ASU~~ ~~2016~~-~~13”~~~~), which requires measurement and recognition of expected credit losses for financial assets held. The amendments in ASU~~ ~~2016~~-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~~ ~~January 1, 2021,~~ ~~and is to be applied using a modified retrospective transition method. Earlier adoption is permitted.~~ ~~We do~~ ~~not~~ ~~plan to early adopt ASU~~ ~~2016~~-13 ~~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.~~

~~- 5 -~~

~~Table of Contents~~

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

~~Notes to Unaudited Consolidated Financial Statements~~

In ~~August 2016,~~ ~~the FASB issued ASU~~ ~~2016~~-~~15,~~ S~~tatement of Cash Flows (Topic~~ ~~230~~~~): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)~~ ~~(“ASU~~ ~~2016~~-~~15”~~~~), which amends ASC Topic~~ ~~230~~~~, Statement of Cash Flows~~~~, to clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The amendments in ASU~~ ~~2016~~-15 ~~are intended to reduce diversity~~ ~~in practice in how certain transactions are classified in the statement of cash flows. ASU~~ ~~2016~~-15 ~~is effective for our interim and annual reporting periods beginning~~ ~~January 1, 2018,~~ ~~and is to be applied using a retrospective transition method. Earlier adoption is permitted.~~ ~~We do~~ ~~not~~ ~~plan to early adopt ASU~~ ~~2016~~-15 ~~and do~~ ~~not~~ ~~believe the guidance will~~ have a material impact on our consolidated balance sheet or consolidated statement of ~~cash flows upon adoption.~~

In ~~November 2016,~~ ~~the FASB issued ASU~~ ~~2016~~-~~18,~~~~Statement~~operations and comprehensive income.

-6-

Table of ~~Cash Flows (Topic~~ ~~230~~~~): Restricted Cash~~ (a ~~consensus of the FASB Emerging Issues Task Force~~ ~~(“ASU~~ ~~2016~~-~~18”~~~~), which requires restricted cash to be included with cash and cash equivalents when reconciling the beginning and ending amounts on the statement of cash flows. ASU~~ ~~2016~~-18 ~~is effective for our interim and annual reporting periods beginning~~ ~~January 1, 2018,~~ ~~and is to be applied using a retrospective transition method. Earlier adoption is permitted.~~ ~~We do~~ ~~not~~ ~~plan to early adopt ASU~~ ~~2016~~-18 ~~and do~~ ~~not~~ ~~believe the guidance will have a material impact on our statement of cash flows upon adoption.~~

Contents

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)~~

conducted ongoing operations in the following states:

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

•Mountain (Colorado, Idaho and Utah)

•East (Alabama, Florida, Maryland, Pennsylvania, Tennessee and Virginia)

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 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.

~~- 6 -~~

~~Table of Contents~~

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

~~Notes to Unaudited Consolidated Financial Statements~~

The following table summarizes ~~home and land sale~~ revenues for our homebuilding ~~operations~~ and ~~revenues for our~~ financial services ~~operations.~~

operations:


	Three Months Ended				Nine Months Ended					Three Months Ended September 30,				Nine Months Ended September 30,
	September 30,				September 30,					2023		2022		2023		2022
	2017		2016		2017		2016
	(Dollars in thousands)									(Dollars in thousands)
Homebuilding									Homebuilding
West	$	326,804	$	284,589	$	959,641	$	745,995	West	$	651,472	$	772,356	$	1,845,964	$	2,267,946
Mountain		167,066		192,876		564,558		521,034	Mountain	284,142		424,397		931,367		1,196,526
East		92,417		100,547		274,785		279,238	East	151,436		210,889		433,205		634,513
Total homebuilding revenues	$	586,287	$	578,012	$	1,798,984	$	1,546,267	Total homebuilding revenues	$	1,087,050	$	1,407,642	$	3,210,536	$	4,098,985

Financial Services									Financial Services
Mortgage operations	$	11,176	$	11,294	$	36,056	$	28,866	Mortgage operations	$	12,098	$	16,933	$	53,275	$	56,611
Other		6,288		6,114		18,460		15,382	Other	11,671		17,168		32,599		42,850
Total financial services revenues	$	17,464	$	17,408	$	54,516	$	44,248	Total financial services revenues	$	23,769	$	34,101	$	85,874	$	99,461

-7-

Table of Contents

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


	Three Months Ended					Nine Months Ended						Three Months Ended September 30,				Nine Months Ended September 30,
	September 30,					September 30,						2023		2022		2023		2022
	2017		2016			2017		2016
	(Dollars in thousands)											(Dollars in thousands)
Homebuilding											Homebuilding
West	$	17,746	$	18,392		$	54,335	$	43,830		West	$	60,792	$	105,680	$	133,631	$	384,714
Mountain		18,326		18,856			61,097		49,688		Mountain	38,211		68,106		107,923		197,747
East		2,613		(2,267	)		9,989		3,600		East	15,891		28,245		45,349		94,046
Corporate		41,484		(7,306	)		20,262		(29,381	)	Corporate	12,490		(33,815)		23,538		(79,521)
Total homebuilding pretax income	$	80,169	$	27,675		$	145,683	$	67,737		Total homebuilding pretax income	$	127,384	$	168,216	$	310,441	$	596,986

Financial Services											Financial Services
Mortgage operations	$	5,857	$	6,723		$	21,093	$	16,491		Mortgage operations	$	3,098	$	5,676	$	26,676	$	23,782
Other		3,654		3,654			11,158		8,555		Other	9,325		11,897		24,709		25,866
Total financial services pretax income	$	9,511	$	10,377		$	32,251	$	25,046		Total financial services pretax income	$	12,423	$	17,573	$	51,385	$	49,648

Total pretax income	$	89,680	$	38,052		$	177,934	$	92,783		Total pretax income	$	139,807	$	185,789	$	361,826	$	646,634

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.


						September 30, 2023		December 31, 2022
	September 30,		December 31,
	2017		2016			(Dollars in thousands)
Homebuilding assets	(Dollars in thousands)				Homebuilding assets
West	$	1,052,795	$	1,035,033	West	$	2,083,054	$	2,275,144
Mountain		677,721		571,139	Mountain	854,877		1,005,622
East		217,238		256,816	East	460,413		427,926
Corporate		450,969		454,507	Corporate	1,657,283		1,249,370
Total homebuilding assets	$	2,398,723	$	2,317,495	Total homebuilding assets	$	5,055,627	$	4,958,062

Financial services assets					Financial services assets
Mortgage operations	$	102,704	$	153,182	Mortgage operations	$	203,872	$	267,309
Other		64,875		57,912	Other	228,504		137,901
Total financial services assets	$	167,579	$	211,094	Total financial services assets	$	432,376	$	405,210

Total assets	$	2,566,302	$	2,528,589	Total assets	$	5,488,003	$	5,363,272

~~- 7 -~~

-8-

Table of Contents

~~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.~~outstanding and contingently issuable equity awards. The table below shows our basic and diluted EPS calculations.


	Three Months Ended						Nine Months Ended							Three Months Ended September 30,				Nine Months Ended September 30,
	September 30,						September 30,							2023		2022		2023		2022
	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	$	107,305	$	144,400	$	281,498	$	482,363
Less: distributed earnings allocated to participating securities		(68	)		(45	)		(196	)		(124	)	Less: distributed earnings allocated to participating securities	(248)		(180)		(651)		(535)
Less: undistributed earnings allocated to participating securities		(244	)		(49	)		(375	)		(83	)	Less: undistributed earnings allocated to participating securities	(378)		(522)		(895)		(1,784)
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)	106,679		143,698		279,952		480,044
Add back: undistributed earnings allocated to participating securities		244			49			375			83		Add back: undistributed earnings allocated to participating securities	378		522		895		1,784
Less: undistributed earnings reallocated to participating securities		(240	)		(49	)		(369	)		(83	)	Less: undistributed earnings reallocated to participating securities	(372)		(513)		(878)		(1,745)
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													Numerator for diluted earnings per share under two-class method	$	106,685	$	143,707	$	279,969	$	480,083

Denominator													Denominator
Weighted-average common shares outstanding		51,650,360			51,297,132			51,502,986			51,286,844		Weighted-average common shares outstanding	74,198,016		70,880,405		73,265,878		70,829,761
Add: dilutive effect of stock options		950,758			163,314			745,391			10,921		Add: dilutive effect of stock options	1,249,797		1,189,243		1,426,970		1,573,814
Denominator for diluted earnings per share under two class method		52,601,118			51,460,446			52,248,377			51,297,765
Add: dilutive effect of contingently issuable equity awards													Add: dilutive effect of contingently issuable equity awards	805,365		659,805		413,508		489,060
Denominator for diluted earnings per share under two-class method													Denominator for diluted earnings per share under two-class method	76,253,178		72,729,453		75,106,356		72,892,635

Basic Earnings Per Common Share	$	1.18		$	0.51		$	2.27		$	1.22		Basic Earnings Per Common Share	$	1.44	$	2.03	$	3.82	$	6.78
Diluted Earnings Per Common Share	$	1.16		$	0.51		$	2.23		$	1.22		Diluted Earnings Per Common Share	$	1.40	$	1.98	$	3.73	$	6.59

Diluted EPS for both the three and nine months ended September 30, ~~2017~~ 2023 excluded options to purchase ~~approximately~~ ~~0.7~~ ~~million and~~ ~~1.1~~ ~~million~~15,000 shares of common stock, ~~respectively,~~ because the effect of their inclusion would be anti-dilutive. ~~For the same periods in~~ ~~2016,~~ ~~diluted EPS~~There were excluded options to purchase ~~approximately~~ ~~5.3~~ ~~million~~1,861,534 shares of common stock because the effect of their inclusion would be anti-dilutive for both the three 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.~~

2022.

~~- 8 -~~

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Table of Contents

~~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.

~~- 9 -~~

~~Table of Contents~~

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

~~Notes to Unaudited Consolidated Financial Statements~~

The following table sets forth the fair values and methods used for measuring the fair values of financial instruments on a recurring ~~basis:~~

basis, except those for which the carrying values approximate fair values:


		Fair Value
Financial Instrument	Hierarchy	September 30, 2023		December 31, 2022

		(Dollars in thousands)
Marketable securities
Debt securities (available-for-sale)	Level 1	$	425,517	$	561,100

Mortgage loans held-for-sale, net	Level 2	$	164,254	$	229,513

Derivative and financial instruments, net (Note 17)
Interest rate lock commitments	Level 2	$	(1,265)	$	(1,678)
Forward sales of mortgage-backed securities	Level 2	$	5,452	$	(5,269)
Mandatory delivery forward loan sale commitments	Level 2	$	(61)	$	791
Best-effort delivery forward loan sale commitments	Level 2	$	48	$	1,976

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

The following methods and assumptions were used to estimate the fair value of each class of financial instruments as of September 30, ~~2017~~ 2023 and December 31, ~~2016.~~

~~Cash and cash equivalents, restricted cash, trade and other receivables, prepaid and other assets, accounts payable, accrued liabilities and borrowings on our revolving credit facility.~~ ~~Fair value approximates carrying value.~~

~~Marketable s~~~~ecurities~~~~. As of~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016,~~ ~~we held marketable equity~~2022.

Debt securities. Our debt securities ~~which~~ consist of ~~holdings in corporate equities, preferred stock~~U.S. government treasury securities with original maturities upon acquisition of less than six months and ~~exchange traded funds. As of~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016,~~ ~~all of our equity securities were~~are 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~~other comprehensive income. Debt securities ~~in an unrealized loss position~~are reviewed on a regular basis for ~~a potential other-than-temporary impairment (“OTTI”). If~~impairment. There were no impairments recorded during both the unrealized loss is determined to be other-than-temporary, an OTTI is recorded in other-than-temporary impairment of marketable securities in the homebuilding or financial services sections of our consolidated statements of operationsthree and ~~comprehensive income.~~ ~~During the~~ ~~three~~ ~~and~~ nine months ended September 30, ~~2017,~~ ~~we recorded pretax OTTI’s of~~ ~~$0.0~~ ~~million~~2023 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.~~

2022.

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~~ gross unrealized holding gains, gross unrealized holding losses and ~~December 31, 2016,~~ ~~our marketable equity~~amortized cost for debt 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~~by major classification are 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.~~

follows:


	September 30, 2023								December 31, 2022
	(Dollars in thousands)
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. Government	$	425,397	$	120	$	—	$	425,517	$	561,100	$	—	$	—	$	561,100
Total Debt Securities	$	425,397	$	120	$	—	$	425,517	$	561,100	$	—	$	—	$	561,100

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~~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

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~~ 2023 and December 31, ~~2016,~~ 2022, we had ~~$75.3~~$54.7 million and ~~$96.2~~$142.9 million, respectively, of mortgage loans held-for-sale at fair value under commitments to sell. The fair value for those loans was based on quoted market prices for those mortgage loans, which are Level 2 fair value inputs. At September 30, ~~2017~~ 2023 and December 31, ~~2016,~~ 2022, we had ~~$14.5~~$109.5 million and ~~$42.6~~$86.6 million, respectively, of mortgage loans held-for-sale that were not under commitments to sell. The fair value for those loans was primarily based upon the estimated market price received from an outside party, which is a Level 2 fair value input.

Gains (losses) on ~~sales of~~ mortgage loans, net, are included as a component of revenues in the financial services section of our consolidated statements of operations and comprehensive income. For the three and nine months ended September 30, ~~2017,~~ 2023, we

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recorded ~~net gains~~losses on ~~the sales of~~ mortgage loans held-for-sale, net of ~~$9.8~~$2.3 million and ~~$28.5~~$7.9 million, respectively, compared to ~~$10.0~~losses of $4.3 million and ~~$22.5~~$13.6 million for the same periods in the prior ~~year, respectively.~~

~~Metropolitan district bond~~year.

Derivative and financial instruments, net. Our derivatives and financial instruments, which include (1) interest rate lock commitments, (2) forward sales of mortgage-backed securities, ~~(related party).~~ ~~The metropolitan district bond~~(3) mandatory delivery forward loan sale commitments and (4) best-effort delivery forward loan sale commitments, are measured at fair value on a recurring basis based on market prices for similar instruments.

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

Cash and cash equivalents(excluding debt securities ~~(the “Metro Bonds”) are included in the homebuilding section~~with an original maturity of ~~our consolidated balance sheets. We acquired the Metro Bonds from a quasi-municipal corporation in the state of Colorado (the “Metro District”)~~three months or less), ~~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~~restricted cash, trade and other ~~income in the homebuilding section of~~receivables, prepaids and other assets, accounts payable, accrued and other liabilities and borrowings on our ~~consolidated statement of operations and comprehensive income.~~

revolving credit facility. Fair value approximates carrying value.

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

~~- 11 -~~

~~Table of Contents~~

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

~~Notes to Unaudited Consolidated Financial Statements~~

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


	September 30, 2023				December 31, 2022
	Carrying Amount		Fair Value		Carrying Amount		Fair Value

	(Dollars in thousands)
$300 million 3.850% Senior Notes due January 2030, net	$	298,141	$	250,922	$	297,949	$	246,236
$350 million 2.500% Senior Notes due January 2031, net	347,633		261,309		347,413		255,374
$500 million 6.000% Senior Notes due January 2043, net	491,292		415,994		491,120		414,017
$350 million 3.966% Senior Notes due August 2061, net	346,127		193,774		346,094		204,014
Total	$	1,483,193	$	1,121,999	$	1,482,576	$	1,119,641

7.	~~Inventories~~

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6. Inventories

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

September 30,

December 31,

September 30,
2023

December 31,
2022

2017

2016

(Dollars in thousands)

Housing completed or under construction:

West

489,753

470,503

West

1,191,600

1,026,880

Mountain

343,394

277,922

Mountain

464,534

511,092

East

136,272

125,774

East

265,000

184,089

Subtotal

969,419

874,199

Subtotal

1,921,134

1,722,061

Land and land under development:

West

489,758

499,186

West

793,379

1,145,119

Mountain

305,953

271,252

Mountain

356,655

433,893

East

67,291

114,177

East

165,162

214,706

Subtotal

863,002

884,615

Subtotal

1,315,196

1,793,718

Total inventories

1,832,421

1,758,814

Total inventories

3,236,330

3,515,779

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.~~

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

~~- 12 -~~

~~Table of Contents~~

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

~~Notes to Unaudited Consolidated Financial Statements~~

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

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If land is classified as held for sale, we measure it in accordance with ASC 360 ~~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~~

Inventory impairments recognized by segment for the three and nine months ended September 30, ~~2017~~ 2023 and ~~2016~~2022 are shown in the table below.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(Dollars in thousands)				(Dollars in thousands)
Housing Completed or Under Construction:
West	$	1,106	$	2,538	$	2,893	$	3,198
Mountain	700		—		1,364		—
East	—		—		—		—
Subtotal	1,806		2,538		4,257		3,198
Land and Land Under Development:
West	2,994		23,362		14,707		23,362
Mountain	1,400		2,515		8,536		2,515
East	—		—		—		—
Subtotal	4,394		25,877		23,243		25,877
Total Inventory Impairments	$	6,200	$	28,415	$	27,500	$	29,075

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

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

Impairment Data

Quantitative Data

Three Months Ended

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%


	Impairment Data					Quantitative Data
Three Months Ended	Number of Subdivisions Impaired	Inventory Impairments		Fair Value of Inventory After Impairments		Discount Rate
	(Dollars in thousands)
September 30, 2023	2	$	6,200	$	17,116	15%	—	18%
June 30, 2023	1	13,500		17,886		18%
March 31, 2023	1	7,800		13,016		18%
Total		$	27,500

September 30, 2022	9	$	28,415	$	44,615	15%	—	18%
March 31, 2022	1	660		1,728			N/A
Total		$	29,075

~~- 13 -~~

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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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(Dollars in thousands)
Homebuilding interest incurred	$	17,482	$	17,391	$	52,386	$	52,031
Less: Interest capitalized	(17,482)		(17,391)		(52,386)		(52,031)
Homebuilding interest expensed	$	—	$	—	$	—	$	—

Interest capitalized, beginning of period	$	61,953	$	62,169	$	59,921	$	58,054
Plus: Interest capitalized during period	17,482		17,391		52,386		52,031
Less: Previously capitalized interest included in home cost of sales	(14,007)		(15,977)		(46,879)		(46,502)
Interest capitalized, end of period	$	65,428	$	63,583	$	65,428	$	63,583

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8.Leases

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

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

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

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(Dollars in thousands)
Operating lease cost 1	$	2,011	$	2,180	$	6,387	$	6,418
Less: Sublease income	(148)		(141)		(440)		(366)
Net lease cost	$	1,863	$	2,039	$	5,947	$	6,052

1Includes variable lease costs, which are immaterial.

Supplemental cash flow information related to leases was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(Dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,955	$	2,038	$	6,251	$	6,059
Leased assets obtained in exchange for new operating lease liabilities	$	1,344	$	1,689	$	3,238	$	5,984

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


	September 30, 2023		September 30, 2022
Weighted-average remaining lease term (in years)	3.5		4.3
Weighted-average discount rate	5.5	%	5.5	%

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Maturities of operating lease liabilities were as follows:


	Year Ended December 31,
	(Dollars in thousands)
2023 (excluding the nine months ended September 30, 2023)	$	1,358
2024	8,240
2025	8,168
2026	6,923
2027	1,722
Thereafter	938
Total operating lease payments	$	27,349
Less: Effects of discounting	2,514
Present value of operating lease liabilities 1	$	24,835

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

1Homebuilding and financial services operating lease liabilities of $24.6 million and $0.2 million, respectively, are included as a component of accrued and other liabilities and accounts payable and accrued liabilities, respectively, in the homebuilding and financial services sections of our consolidated balance sheet at September 30, 2023.

9.	~~Homebuilding~~ ~~Prepaid~~ ~~and~~ ~~Other Assets~~

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


	September 30, 2023		December 31, 2022

	(Dollars in thousands)
Land option deposits	$	23,831	$	19,539
Operating lease right-of-use asset (Note 8)	23,453		25,636
Prepaids	13,128		13,333
Goodwill	6,008		6,008
Deferred debt issuance costs on revolving credit facility, net	3,816		5,241
Other	555		250
Total prepaids and other assets	$	70,791	$	70,007

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

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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

September 30,
2023

December 31, 2022

(Dollars in thousands)

Accrued compensation and related expenses

76,219

100,653

Customer and escrow deposits

37,578

27,183

Customer and escrow deposits

51,181

42,296

Warranty accrual

20,725

20,678

Accrued compensation and related expenses

27,624

27,830

Warranty accrual (Note 11)

45,592

46,857

Lease liability (Note 8)

24,625

26,574

Land development and home construction accruals

18,192

20,028

Accrued interest

11,031

23,234

Accrued interest

14,889

30,934

Construction defect claim reserves

7,480

8,750

Land development and home construction accruals

6,212

8,695

Income taxes payable

—

23,880

Construction defect claim reserves (Note 12)

10,387

10,466

Retentions payable

16,730

21,519

Other accrued liabilities

41,011

28,196

Other accrued liabilities

55,067

60,199

Total accrued liabilities

151,661

144,566

Total accrued and other liabilities

312,882

383,406

~~- 14 -~~

~~Table of Contents~~

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

~~Notes~~A reclassification was made to ~~Unaudited Consolidated Financial Statements~~

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

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

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


	September 30, 2023		December 31, 2022

	(Dollars in thousands)
Insurance reserves (Note 12)	$	86,072	$	84,108
Accounts payable and other accrued liabilities	22,578		26,428
Total accounts payable and accrued liabilities	$	108,650	$	110,536

11.	~~Warranty Accrual~~

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

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

The table set forth below summarizes accrual, adjustment and payment activity related to our warranty accrual for the three and nine months ended September 30, ~~2017~~ 2023 and ~~2016.~~ ~~For both~~2022. The warranty accrual during the three and nine months ended September 30, ~~2017,~~ ~~we recorded adjustments~~2023 decreased due to a decrease in home closings year-over-year. The warranty accrual during the nine months ended September 30, 2022 included a $3.0 million adjustment to increase our warranty ~~accrual by~~ ~~$0.4~~ ~~million. The decreases were driven by an~~accrual. This 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~~was due to higher ~~than expected recent~~general 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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(Dollars in thousands)
Balance at beginning of period	$	47,209	$	42,711	$	46,857	$	37,491
Expense provisions	5,629		6,856		17,566		19,475
Cash payments	(7,246)		(4,929)		(18,831)		(14,768)
Adjustments	—		523		—		2,963
Balance at end of period	$	45,592	$	45,161	$	45,592	$	45,161

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

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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 third party 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.

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~~Table of Contents~~

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

~~Notes to Unaudited Consolidated Financial Statements~~

The table set forth below summarizes our insurance and construction defect claim reserves activity for the three and nine months ended September 30, ~~2017~~ 2023 and ~~2016.~~2022. These reserves are included as a component of accounts payable and accrued liabilities and accrued and other liabilities in ~~either~~ the financial services orand homebuilding sections, respectively, of the consolidated balance sheets.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(Dollars in thousands)
Balance at beginning of period	$	95,125	$	87,924	$	94,574	$	82,187
Expense provisions	4,024		4,879		11,913		14,331
Cash payments, net of recoveries	(2,690)		(1,363)		(10,028)		(5,078)
Balance at end of period	$	96,459	$	91,440	$	96,459	$	91,440

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

In the ordinary course of business, we make payments from our insurance and construction defect claim reserves to settle litigation claims arising from our homebuilding activities. These payments are irregular in both their timing and their magnitude. As a result, the cash payments, net of recoveries shown for the three and nine months ended September 30, ~~2017~~ 2023 and ~~2016~~2022 are not necessarily indicative of what future cash payments will be for subsequent periods.

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.

13. Income Taxes

Our overall effective income tax rates were ~~31.8%~~23.2% and ~~34.1%~~22.2% for the three and nine months ended September 30, ~~2017, respectively, compared to 30.7%~~2023 and ~~32.3%~~22.3% and 25.4% for the three and nine months ended September 30, ~~2016, respectively.~~2022. The rates for the three and nine months ended September 30, ~~2017~~2023 resulted in income tax expense of ~~$28.5~~$32.5 million and ~~$60.7~~$80.3 million, respectively, compared to the income tax expense of ~~$11.7~~$41.4 million and ~~$29.9~~$164.3 million for the ~~same periods in 2016.~~three and nine months ended September 30, 2022, respectively. The year-over-year increase in ~~our~~the effective tax rate for the three months ended September 30, ~~2017~~2023, was ~~primarily~~due to a decrease in energy tax credits in 2023. During the ~~result of our estimate of~~three months ended September 30, 2022, the ~~full year effective~~Inflation Reduction Act retroactively extended the energy tax ~~rate for 2016 including an estimate for energy credits whereas our estimate~~credit for the ~~2017 full year includes no such energy credit as~~period January 1, 2022 through December 31, 2022 during the ~~credit has not been approved by~~quarter. The year-over-year decrease in 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 substantially 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. Foreffective rate for the nine months ended September 30, ~~2017, the year-over-year increase in our effective tax rate~~2023, was due to the foregoing energy credits matter coupled with the establishment of a valuation allowance in the 2017 first quarter against certain state net operating loss carryforwards where realization was more uncertain at the time. These items were somewhat offset by the release 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~~a decrease in non-deductible executive compensation and an increase in the ~~limited carryforward periods that exist in certain states.~~

windfall on non-qualifying stock options exercised and lapsed restricted stock during the period.

14.	~~Senior Notes~~

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14. Senior Notes

The carrying ~~value~~values of our senior notes as of September 30, ~~2017~~ 2023 and December 31, ~~2016,~~ 2022, 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


	September 30, 2023		December 31, 2022

	(Dollars in thousands)
3.850% Senior Notes due January 2030, net	$	298,141	$	297,949
2.500% Senior Notes due January 2031, net	347,633		347,413
6.000% Senior Notes due January 2043, net	491,292		491,120
3.966% Senior Notes due August 2061, net	346,127		346,094
Total	$	1,483,193	$	1,482,576

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

~~- 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~~

~~We account for share-based awards in accordance with 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.~~

15. Stock-Based Compensation

The following table sets forth share-based award expense activity for the three and nine months ended September 30, ~~2017~~ 2023 and ~~2016:~~

2022, which is included as a component of selling, general and administrative expenses and expenses in the homebuilding and financial services sections, respectively, of our consolidated statements of operations and comprehensive income:


	Three Months Ended				Nine Months Ended					Three Months Ended September 30,				Nine Months Ended September 30,
	September 30,				September 30,					2023		2022		2023		2022
	2017		2016		2017		2016
	(Dollars in thousands)									(Dollars in thousands)
Stock option grants expense	$	391	$	328	$	747	$	5,621	Stock option grants expense	$	—	$	16,914	$	202	$	18,094
Restricted stock awards expense		445		145		1,224		1,015	Restricted stock awards expense	2,293		1,364		8,818		5,992
Performance share units expense		226		-		1,129		-	Performance share units expense	1,780		7,277		5,338		26,262
Total stock based compensation	$	1,062	$	473	$	3,100	$	6,636
Total stock-based compensation									Total stock-based compensation	$	4,073	$	25,555	$	14,358	$	50,348

On ~~May 18, 2015,~~

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

2020 PSU Grants. The 2020 PSU awards vested on February 3, 2023. For the three and nine months ended September 30, 2022, the Company ~~granted a non-qualified stock option to each~~recorded share-based award expense of ~~the Chief Executive Officer~~$2.5 million 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, and~~ ~~fifth~~ anniversary dates of the grant of the option; provided that all unvested option shares will vest immediately in the event the closing price of the Company’s stock, as reported by the New York Stock Exchange, in any 20 ~~out 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~~ ~~and the expiration date of each option is~~ ~~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 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~~$7.4 million, ~~of stock option grant expense~~respectively, 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 unit awards (“PSUs”) to each of the CEO, the COO, and the Chief Financial Officer (“CFO”) under the Company’s~~ ~~2011~~ ~~Equity Incentive Plan. The PSUs will be earned based upon the Company’s performance, over a~~ ~~three~~ year period (the “Performance Period”), measured by increasing home sale revenues over a “Base 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%~~~~) 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. 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,~~ 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 been provided in the table below.

awards.

~~- 17 -~~

~~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

~~In accordance with ASC~~ ~~718,~~ ~~the PSUs were valued on the date of grant at their fair value.~~ ~~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 stock awards until achievement of the performance targets are probable of occurring.~~2021 PSU Grants. As of September 30, ~~2017,~~ 2023, the Company ~~determined that achievement of the Threshold Goals was probable for the PSUs granted in~~ ~~2016~~ ~~and, as such,~~ recorded share-based award expense related to the awards of ~~$0.2~~$1.8 million and ~~$1.1~~$5.3 million ~~respectively,~~ for the three and nine months ended September 30, ~~2017.~~ ~~For~~2023, respectively, based on its assessment of the ~~PSUs granted in~~ ~~2017,~~ ~~the Company concluded that~~probability for achievement ~~of any~~ of the performance ~~metrics had~~ ~~not~~ ~~met~~targets. For the ~~level~~three and nine months ended September 30, 2022, the Company recorded share-based award expense of ~~probability required to record compensation expense at that time~~$4.8 million and ~~as such,~~ no ~~expense~~$18.9 million, respectively, related to ~~the grant~~these awards.

-20-

Table of ~~these awards has been recognized as 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,~~ 2023, we had outstanding surety bonds and letters of credit totaling ~~$184.9~~$331.7 million and ~~$65.5~~$109.1 million, respectively, including ~~$31.6~~$62.1 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~~$156.7 million and ~~$25.3~~$47.1 million, respectively. All letters of credit as of September 30, ~~2017,~~ 2023, excluding those issued by HomeAmerican, were issued under our unsecured revolving credit facility (see Note 18 for further discussion of the revolving credit facility). We expect that the obligations secured by these performance bonds and letters of credit generally will be performed in the ordinary course of 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,~~ 2023, we had cash deposits, capitalized costs and letters of credit totaling ~~$11.4~~$22.6 million, $3.9 million and ~~$3.6~~$7.2 million, respectively, at risk associated with ~~the option~~options to purchase ~~6,306~~4,587 lots.

~~- 18 -~~

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Table of Contents

17. Derivative and Financial Instruments

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

~~Notes to Unaudited Consolidated Financial Statements~~

17.	~~Derivative Financial Instruments~~

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

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

Forward sales of mortgage-backed securities are ~~utilized~~the predominant derivative and financial instruments we use to ~~hedge changes in fair value of our~~minimize market risk during the period from the time we extend an interest rate lock ~~commitments as well as mortgage loans held-for-sale~~ ~~not~~to a loan applicant until the time the loan is committed under ~~commitments to sell. For~~a best-effort or mandatory delivery forward ~~sales of mortgage-backed securities, as well as interest rate lock commitments that are still outstanding at~~loan sale commitment.

The following table sets forth the ~~end of a reporting period, we record the changes in~~notional amounts and fair value measurement of our derivative and financial instruments at September 30, 2023 and December 31, 2022:


	September 30, 2023								December 31, 2022

	Notional Value		Derivative Assets		Derivative Liabilities		Derivatives, Net		Notional Value		Derivative Assets		Derivative Liabilities		Derivatives, Net
	(Dollars in thousands)								(Dollars in thousands)
Interest rate lock commitments	$	274,211	$	1,485	$	2,750	$	(1,265)	$	394,004	$	1,566	$	3,244	$	(1,678)
Forward sales of mortgage-backed securities	366,000		5,452		—		5,452		323,000		580		5,849		(5,269)
Mandatory delivery forward loan sale commitments	50,597		229		290		(61)		105,060		794		3		791
Best-effort delivery forward loan sale commitments	5,870		49		1		48		139,972		2,161		185		1,976

For the ~~derivatives~~three and nine months ended September 30, 2023, we recorded net gains on these derivative and financial instruments measured on a recurring basis of $4.1 million and $5.6 million, respectively, 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,~~ ~~we had interest rate lock commitments with an aggregate principal balance of~~ ~~$101.2~~~~million. Additionally, we had~~ ~~$14.0~~ ~~million of mortgage loans held-for-sale at~~ ~~September 30, 2017~~ ~~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~~ ~~million at~~ ~~September 30, 2017.~~

~~For the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017,~~ ~~we recorded net losses of~~ ~~$0.5~~ ~~million and~~ ~~$0.5~~ ~~million, respectively, on our derivatives,~~ compared to net gains of ~~$0.1~~$7.3 million and ~~$1.1~~$44.6 million for the same periods in ~~2016.~~

2022. There are no credit-risk-related contingent features within our derivative agreements, and counterparty risk is considered minimal.

18.	~~Lines of Credit~~

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Table of Contents
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 terminate 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.

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

The Revolving Credit Facility 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.~~

2023.

We incur costs associated with unused commitment fees pursuant to the terms of the Revolving Credit Facility. At September 30, ~~2017~~ 2023 and December 31, ~~2016,~~ 2022, there were ~~$34.0~~$47.0 million and ~~$23.0~~$48.3 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~~ 2023 and December 31, ~~2016,~~ 2022, we had ~~$15.0~~$10.0 million and $10.0 million, respectively, outstanding under the Revolving Credit Facility. As of September 30, ~~2017,~~ 2023, availability under the Revolving Credit Facility was approximately ~~$651.0~~ ~~million.~~

$1.14 billion.

~~- 19 -~~

~~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 ~~maximum aggregate commitment of the~~ Mortgage Repurchase Facility was ~~temporarily increased~~amended on May 20, 2021, December ~~27, 2016~~ ~~from~~ ~~$75~~ ~~million~~21, 2021, May 19, 2022 and May 18, 2023 to ~~$125~~adjust the commitments to purchase for specific time periods. The total capacity of the facility at September 30, 2023 was $150 million. The May 18, 2023 amendment extended the termination date of the Repurchase Agreement to May 16, 2024.

At September 30, 2023 and December 31, 2022, HomeAmerican had $145.5 million and ~~was effective through~~ ~~January 25, 2017.~~ At ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016,~~ ~~HomeAmerican had~~ ~~$65.1~~ ~~million and~~ ~~$114.5~~$175.8 million, respectively, of mortgage loans that HomeAmerican was obligated to repurchase under the Mortgage Repurchase Facility. Mortgage loans that HomeAmerican is obligated to repurchase under the Mortgage Repurchase Facility are accounted for as a debt financing arrangement and are reported as mortgage repurchase facility in the consolidated balance sheets. ~~Advances~~Pricing under the Mortgage Repurchase Facility ~~carry a price range that~~ is ~~LIBOR-based.~~

based on SOFR.

-23-

Table of Contents

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.~~

2023.

~~19.~~

~~Related Party Transactions~~

~~We contributed~~ ~~$1.5~~ ~~million and~~ ~~$1.0~~ ~~million in cash to~~

19. Related Party Transactions

The Company has a sublease agreement with CVentures, Inc. Larry A. Mizel, the ~~MDC/Richmond American Homes Foundation (the “Foundation”) during the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016,~~ ~~respectively. The Foundation is a Delaware non-profit corporation that was incorporated on~~ ~~September~~ ~~30,~~~~1999.~~

~~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~~) of the Internal Revenue Code. The following Directors and/or officers~~Executive Chairman of the Company, ~~served~~is the President of CVentures, Inc. The sublease is for office space that CVentures, Inc. has continuously leased from the Company as ~~directors~~disclosed in the Form 8-K filed July 27, 2005 and the Form 8-K filed March 28, 2006. The current sublease term commenced November 1, 2016 and will continue through October 31, 2026. The sublease agreement is for approximately 5,437 rentable square feet at a base rent that increases over the term from $26.50 to $31.67 per rentable square foot per year. The sublease rent is an allocation of the ~~Foundation at~~ ~~September 30, 2017,~~ ~~all of whom serve without compensation:~~

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

~~Three other individuals, who are independent of~~rent under the ~~Company, also serve as directors of~~master lease agreement based on the ~~Foundation. All directors of the Foundation serve without compensation.~~

sublease square footage.

~~20.~~

Su~~bsequent Events~~

On ~~October 16, 2017,~~ ~~we completed a public offering of an additional~~ ~~$150~~ ~~million principal amount of our~~ 6% ~~senior notes due~~ ~~2043~~~~, which are of the same series and have the same terms as our senior notes issued on~~ ~~January~~ ~~10,~~~~2013~~ ~~and~~ ~~May 13, 2013 (~~~~collectively the~~ ~~“6%~~ ~~Notes”).~~ ~~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 of the offering for general corporate purposes, which~~ ~~may~~ ~~include repayment of debt~~.

~~- 20 -~~-24-

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 Construction NM, Inc.

•Richmond American Homes of Arizona, Inc.

•Richmond American Homes of Colorado, Inc.

•Richmond American Homes of Florida, LP

•Richmond American Homes of Idaho, Inc.

•Richmond American Homes of Maryland, Inc.

•Richmond American Homes of Nevada, Inc.

•Richmond American Homes of New Mexico, Inc.

•Richmond American Homes of Oregon, Inc.

•Richmond American Homes of Pennsylvania, Inc.

•Richmond American Homes of Tennessee, Inc.

•Richmond American Homes of Texas, Inc.

•Richmond American Homes of Utah, Inc.

•Richmond American Homes of Virginia, Inc.

•Richmond American Homes of Washington, Inc.

The senior note indentures do not provide for a suspension of the ~~guarantees, but do~~guarantees. Other than for the senior notes due 2061, the senior note indentures, provide that any Guarantor may be released from its guarantee so long as (1) (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). The indenture for the senior notes due 2061 provides that, if a Guarantor is released under its guarantees of our credit facilities or other publicly traded debt securities, the Guarantor will also be released under its guarantee of the senior notes due 2061. Upon delivery of an officers’ certificate and an opinion of counsel stating that all conditions precedent provided for in the indenture relating to such transactions have been complied with and the release is authorized, the guarantee will be automatically and unconditionally released. “Specified Indebtedness” means indebtedness under the senior notes, the Company’s Indenture dated as of December 3, 2002, the Revolving Credit Facility, and any refinancing, extension, renewal or replacement of any of the foregoing.

~~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 September 30, 2023 and ~~Non-Guarantor Subsidiaries is presented below.~~

December 31, 2022, amounts due to (due from) non-guarantor subsidiaries from the Obligor Group totaled $(20.6) million and $29.7 million, respectively.

~~- 21 -~~

-25-

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~~2022and 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 September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022

	(Dollars in thousands, except per share amounts)
Homebuilding:
Home sale revenues	$	1,087,050		$	1,407,642		$	3,210,536		$	4,098,985
Home cost of sales	(872,624)			(1,059,996)			(2,622,362)			(3,043,390)
Inventory impairments	(6,200)			(28,415)			(27,500)			(29,075)
Total cost of sales	(878,824)			(1,088,411)			(2,649,862)			(3,072,465)
Gross profit	208,226			319,231			560,674			1,026,520
Gross margin	19.2		%	22.7		%	17.5		%	25.0		%
Selling, general and administrative expenses	(101,311)			(141,435)			(303,032)			(404,598)

Interest and other income	20,414			2,220			51,812			3,797
Other income (expense)	55			(11,800)			987			(28,733)
Homebuilding pretax income	127,384			168,216			310,441			596,986

Financial Services:
Revenues	23,769			34,101			85,874			99,461
Expenses	(15,494)			(18,704)			(46,231)			(54,440)
Other income, net	4,148			2,176			11,742			4,627
Financial services pretax income	12,423			17,573			51,385			49,648

Income before income taxes	139,807			185,789			361,826			646,634
Provision for income taxes	(32,502)			(41,389)			(80,328)			(164,271)
Net income	$	107,305		$	144,400		$	281,498		$	482,363

Earnings per share:
Basic	$	1.44		$	2.03		$	3.82		$	6.78
Diluted	$	1.40		$	1.98		$	3.73		$	6.59

Weighted average common shares outstanding:
Basic	74,198,016			70,880,405			73,265,878			70,829,761
Diluted	76,253,178			72,729,453			75,106,356			72,892,635

Dividends declared per share	$	0.55		$	0.50		$	1.55		$	1.50

Cash provided by (used in):
Operating Activities	$	(28,780)		$	172,893		$	623,149		$	343,953
Investing Activities	$	252,727		$	(298,857)		$	145,687		$	(312,555)
Financing Activities	$	(17,524)		$	(13,832)		$	(123,642)		$	(178,416)

~~- 27 -~~

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Table of Contents

Overview

Industry Conditions and Outlook for MDC*

Although 30-year mortgage interest rates reached their highest level since 2000 during the third quarter of 2023, housing market conditions remained relatively stable compared to the rapidly deteriorating housing market conditions that were present during much of 2022. The improvement for 2023 relative to 2022 is due in large part to a much more modest pace of interest rate increases during 2023, which has allowed consumers to adjust somewhat to higher interest rates. Concurrently, the housing market continues to see inventory levels that remain undersupplied relative to demand due to (1) the underproduction of new homes over the past decade, and (2) near record low levels of existing home resale inventory as the majority of homeowners with a mortgage have an interest rate below 4%. The stabilization of the market in 2023 has led to an increase in gross orders and decreased cancellation levels compared to the second half of 2022. As a result, our net orders increased 467% in the third quarter of 2023 as compared to the prior year quarter. However, the use of incentives such as interest rate buy-downs continued to be prominent for new orders during the quarter as interest rates moved higher.

We ended the quarter with 11.4 unsold homes under construction, excluding model homes, ("speculative homes" or "spec homes") per active community and just 1.0 completed spec home per active community. The demand for our quick move-in homes remained strong during the third quarter of 2023, with spec homes representing 78% of our gross orders. Our timely pivot to building more spec homes has helped drive order volume, minimize cancellation activity and cater to the needs of first-time homebuyers.

We remain confident in the long-term growth prospects for the industry given the underproduction of new homes over the past decade and the constrained supply of existing home inventory. Further, the Federal Reserve has made more measured adjustments to combat inflation versus the aggressive measures taken in 2022. With that said, the current demand for new homes is subject to continued uncertainty due to many factors, including ongoing inflation concerns, the Federal Reserve's efforts to reduce capital in the market and the resulting impact on mortgage interest rates, consumer confidence, the current geopolitical environment and other factors. The potential effect of these factors is highly uncertain and could adversely and materially impact our operations and financial results in future periods.

We believe that we are uniquely equipped to navigate these uncertainties and any continued market volatility given our seasoned leadership team, strong financial position and distinct operating strategy. We remain focused on maximizing risk-adjusted returns while minimizing the risks of excess leverage and land ownership. We ended the quarter with total cash and cash equivalents and marketable securities of $1.78 billion, total liquidity of $2.93 billion, a debt-to-capital ratio of 31.2% and no senior note maturities until 2030.

Three Months Ended September 30, ~~2017~~

2023

For the three months ended September 30, ~~2017,~~2023, our net income was $~~61.2~~$107.3 million, or ~~$1.16~~$1.40 per diluted share, a ~~132% increase~~26% decrease compared to net income of ~~$26.4~~$144.4 million, or ~~$0.51~~$1.98 per diluted share, for the same period in the prior year. Our homebuilding business was the primary driver of the decrease, as pretax income decreased $40.8 million, or 24% year-over-year. This decrease was also due to our financial services business, as its pretax income decreased $5.2 million, or 29%, compared to the same period in the prior year. The ~~increase~~decrease in homebuilding pretax income was primarily ~~the result of~~due to a ~~$52.5 million improvement in our pretax income from homebuilding operations, which benefited from a 2% increase~~23% decrease in home sale revenues ~~an 80~~and a 350 basis point ~~improvement~~decrease in ~~our~~ gross margin from home ~~sale revenues percentage, and a $52.7 million~~sales. The decrease in gross margin from home sales was driven largely by an increase in incentives year-over-year, changes in base pricing and to a lesser extent higher construction costs year-over-year. These decreases in gross margin were partially offset by inventory impairments of $28.4 million during the prior year quarter compared to $6.2 million in the current quarter. The decrease in homebuilding pretax income was partially offset by project abandonment expense of $11.8 million during the prior year quarter. The decrease in financial services pretax income was due to our ~~interest~~mortgage operations and other financial services operations. The decrease in pretax income for our mortgage operations was due to a decrease in mortgage servicing related income due to lower additions to the servicing portfolio during the quarter, as ~~a result of~~well as special financing programs offered during the ~~sale of investments held by our Corporate segment. These items were slightly~~quarter. This was partially offset by a ~~100 basis point~~decrease in salary related expenses driven by lower headcount, and an increase in capture rate. The decrease in other financial services was driven by our ~~selling, general~~insurance operations which saw a decrease in revenue due to a decrease in homes closed. Our other financial services operations 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%~~homebuilding business each saw an increase in ~~the number of homes delivered, as~~interest income due to increases in both interest rates and our ~~backlog to start the quarter was up 2%~~cash and short-term investments 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~~

2023

For the nine months ended September 30, ~~2017,~~2023, our net income was $1~~17.3~~$281.5 million, or ~~$2.23~~$3.73 per diluted share, ~~an 87% increase~~a 42% decrease compared to net income of ~~$62.8~~$482.4 million, or ~~$1.22~~$6.59 per diluted share, for the same period in the prior year. ~~The increase~~Our homebuilding business was ~~primarily~~ the ~~result~~driver of ~~a $77.9 million improvement in our~~the decrease, as pretax income from our homebuilding operations ~~which benefited from a 17% increase in home sale revenues and a $54.4~~decreased $286.5 million, ~~increase in our interest and other income as a result~~or 48%. The main drivers of the ~~sale 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~~decrease in homebuilding ~~industry, driving robust demand for new homes, especially in the first-time homebuyer segment. To meet the growing demand, we have taken a number of steps to grow community count.~~

First, we have substantially 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 from the same period 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 in the greater Portland area, giving us additional exposure 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~~pretax income are consistent with 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, absorption rate and cancellation rate in our Colorado market during the quarter, and may continue to impact these metrics in the next two quarters, we do not believe the resolution of this issue will be material to our results of operations, liquidity, or our financial condition.

commentary discussed above.

~~- 28 -~~

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Table of Contents

~~Hurricane Irma~~

Both sales and deliveries 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 -~~Homebuilding

~~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~~ (Loss):


	Three Months Ended								Nine Months Ended
	September 30,				Change				September 30,				Change
	2023		2022		Amount		%		2023		2022		Amount		%

	(Dollars in thousands)
West	$	60,792	$	105,680	$	(44,888)	(42)	%	$	133,631	$	384,714	$	(251,083)	(65)	%
Mountain	38,211		68,106		(29,895)		(44)	%	107,923		197,747		(89,824)		(45)	%
East	15,891		28,245		(12,354)		(44)	%	45,349		94,046		(48,697)		(52)	%
Corporate	12,490		(33,815)		46,305		137	%	23,538		(79,521)		103,059		130	%
Total Homebuilding pretax income	$	127,384	$	168,216	$	(40,832)	(24)	%	$	310,441	$	596,986	$	(286,545)	(48)	%

For the three months ended September 30, 2023, we recorded homebuilding pretax income ~~for the 2017 third quarter was $80.2~~of $127.4 million, ~~an increase~~a decrease of ~~$52.5 million~~24% from ~~$27.7~~$168.2 million for the same period in the prior year. The ~~increase~~decrease was ~~primarily attributable~~due to a ~~2% increase~~23% decline in home sale revenues ~~an 80~~and a 350 basis point decrease in gross margin from home sales. These decreases were partially offset by a decrease in project abandonment expense, a 70 basis point improvement in our ~~gross margin from~~selling, general and administrative expenses as a percentage of home sale revenues ~~percentage,~~ and ~~a $52.7 million~~an increase in ~~our~~ interest ~~and other~~ income ~~as a result of the sale of investments held by our Corporate segment.~~

~~For our~~year-over-year.

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%~~$44.9 million year-over-year ~~decline~~decrease in ~~home sale revenues, we were able~~pretax income, due to ~~mostly offset the impact of the~~a decrease ~~with an improvement~~ in ~~our~~ gross margin from home sales ~~percentage.~~and a 16% decrease in home sale revenues. Our Mountain segment experienced a $29.9 million decrease in pretax income from the prior year, as a result of a 33% decrease in home sale revenues and a decrease in gross margin from home sales. Our East segment experienced a ~~$4.9~~$12.4 million ~~year-over-year improvement~~decrease in pretax income from the prior year, due primarily ~~due~~ to a ~~$2.4 million reduction~~28% decrease in ~~inventory impairments coupled with an improved~~home sale revenues and a decrease in gross margin from home ~~sales percentage. The pretax gain for our Corporate segment~~sales. In addition, the West, Mountain and East homebuilding segments each experienced an increase in selling, general and administrative expenses as a percentage of home sale revenues. This was ~~driven by the higher interest and other income discussed above,~~ partially offset by ana decrease of project abandonment costs year-over-year in each of our homebuilding segments. Our Corporate segment experienced a $46.3 million increase in ~~compensation-related~~pretax income due to increased interest income, decreased stock-based and deferred compensation expenses ~~that was driven by an increase in headcount as we plan for future growth.~~

and decreased bonus expense.

For the nine months ended September 30, ~~2017,~~2023, we recorded homebuilding pretax income of ~~$145.7~~$310.4 million, ~~compared to $67.7~~a decrease of 48% from $597.0 million for the same period in the prior ~~year, an increase of $77.9 million or 115%.~~year. The ~~increase~~decrease was ~~primarily attributable~~due to a ~~17%~~ ~~increase~~22% decline in home sale revenues, ~~and~~ a ~~$54.4 million increase~~750 basis point decrease in our interest and other income as a result of the sale of investments held by our Corporate segment, slightly offset by a $3.1 million increase in inventory impairments and higher compensation-related expenses due to increased headcount. The year-over-year increases in pretax income for our West and Mountain segments were driven 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.~~slightly offset by a 50 basis point improvement in our selling, general and administrative expenses as a percentage of home sale revenues. Commentary on the drivers of the decrease in pretax income in our West, Mountain and East homebuilding segments and the increase in our Corporate segment is consistent with the 2023 third quarter discussion above.

Assets:


	September 30, 2023		December 31, 2022		Change
					Amount		%

	(Dollars in thousands)
West	$	2,083,054	$	2,275,144	$	(192,090)	(8)	%
Mountain	854,877		1,005,622		(150,745)		(15)	%
East	460,413		427,926		32,487		8	%
Corporate	1,657,283		1,249,370		407,913		33	%
Total homebuilding assets	$	5,055,627	$	4,958,062	$	97,565	2	%

Total homebuilding assets increased from December 31, 2022 to September 30, 2023. The ~~pretax gain for our~~increase in the Corporate segment was driven by ~~the higher interest and other income discussed above, partially offset by~~ an increase in ~~compensation-related expenses~~cash and cash equivalents offset partially by a decrease in marketable securities. Changes in assets within our homebuilding segments were primarily due to changes in land and land under development and housing completed or under construction. Land and land under development decreased within each of our homebuilding segments due to lower levels of land acquisition during the current year. Housing completed or under construction increased in the West and East

-28-

Table of Contents

segments 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 %

Total homebuilding assets increased 4% from December 31, 2016 to September 30, 2017, mostly driven by our Mountain segment, which had (1) higher land and land under development balances due to strong land acquisition activity during the ~~nine months ended~~ ~~September 30, 2017, and (2) a higher~~ number of homes ~~completed or~~under construction, while it decreased in the Mountain segment due a slight decrease in the number of homes under construction as well as a ~~result~~decrease in the number of ~~an increase~~completed homes in ~~backlog under construction. The funds for the land acquisition activity came from our Corporate segment, driving a decline~~inventory.

New Home Deliveries& Home Sale Revenues:

Changes in ~~our Corporate segment’s assets that was mostly offset by our positive operating results and gains on the sale 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.

~~- 30 -~~

~~Table of Contents~~

~~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,~~ 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~~each of our segments on significant changes in these two metrics is provided below.
Three Months Ended September 30,
2023 2022 % Change
Homes Home Sale
Revenues Average
Price Homes Home Sale
Revenues Average
Price Homes Home
Sale
Revenues Average Price
(Dollars in thousands)
West 1,198 $ 651,472 $ 543.8 1,312 $ 772,356 $ 588.7 (9) % (16) % (8) %
Mountain 441 284,142 644.3 647 424,397 655.9 (32) % (33) % (2) %
East 329 151,436 460.3 428 210,889 492.7 (23) % (28) % (7) %
Total 1,968 $ 1,087,050 $ 552.4 2,387 $ 1,407,642 $ 589.7 (18) % (23) % (6) %


	Nine Months Ended September 30,
	2023					2022					% Change
	Homes	Home Sale Revenues		Average Price		Homes	Home Sale Revenues		Average Price		Homes		Home Sale Revenues		Average Price

	(Dollars in thousands)
West	3,424	$	1,845,964	$	539.1	3,926	$	2,267,946	$	577.7	(13)	%	(19)	%	(7)	%
Mountain	1,467	931,367		634.9		1,860	1,196,526		643.3		(21)	%	(22)	%	(1)	%
East	937	433,205		462.3		1,370	634,513		463.1		(32)	%	(32)	%	—	%
Total	5,828	$	3,210,536	$	550.9	7,156	$	4,098,985	$	572.8	(19)	%	(22)	%	(4)	%

For the three and nine months ended September 30, ~~2017 compared to~~2023, the ~~same periods 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) %

~~- 31 -~~

~~Table of Contents~~

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 %

~~For the three months ended September 30, 2017, we realized a 2% increase~~decrease in the number of new homes delivered ~~primarily due to~~in each of our segments was the result of a ~~2% year-over-year increase~~decrease in the number of homes in backlog to ~~start~~begin the ~~quarter. For all our markets, excluding California and~~ ~~Colorado, the year-over-year change~~periods. This decrease was partially offset within each segment by an increase in ~~the number of homes delivered was mostly the result of the change in the number of homes in beginning backlog. In our California market, we started off the quarter with~~ backlog ~~down 8% but were able~~conversion rates due to ~~achieve a 14%~~an increase in the number of homes ~~delivered primarily due to~~both sold and closed during the periods. Backlog conversion rates also benefited during the three months ended September 30, 2023 from a ~~shift~~decrease 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 quarters as a result of this issue. Furthermore, we anticipate that closings over the next two quarters will continue to be impacted by this issue*. In our Florida market, despite beginning backlog being up 31% year-over-year, we only realized a 16%times year-over-year. The increase in the number of homes ~~delivered as~~both sold and closed during the periods was a result of ~~Hurricane Irma. Delivery of approximately 25 homes that were previously scheduled~~our recent pivot 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 price increases implemented over the past year coupled with a shift in mix to higher priced communities. ~~Our Colorado market had the largest decrease in the average selling price of homes delivered, due to a significant increase in the share of its closings coming from our~~build more affordable plans designed for the first-time homebuyer. In our California market, price increases implemented in the past year were more than offset by a shift in the mix of deliveries to non-coastal communities, which have a lower average selling price. For most of our remaining markets, the average selling price benefited from price increases that have been implemented over the past twelve months. Any remaining differences were due to a shift in mix to differently priced communities.

spec homes. For the nine months ended September 30, ~~2017,~~2023, the ~~year-over-year changes in homes delivered in most of our markets was primarily the result of the year-over-year change~~increase in the number of ~~units in backlog to begin the year. In our Maryland~~homes both sold 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~~closed was also due ~~to year-over-year declines~~an increase in the number of ~~net new orders~~unsold started homes to begin the period due to the above average cancellation rates experienced in the ~~first part~~second half of ~~2017~~2022. The average selling price of homes delivered was negatively impacted by increased incentives during the three and nine months ended September 30, 2023.

West Segment Commentary

For the three and nine months ended September 30, 2023, the decrease in new home deliveries was driven by the factors discussed above. The average selling price of homes delivered decreased as a result of ~~community count decreases.~~a shift in mix to our Arizona divisions as well as a change in mix to more affordable product and the increased incentives discussed above.

Mountain Segment Commentary ~~around~~

For the three and nine months ended September 30, 2023, the decrease in new home deliveries was driven by the factors discussed above. The average selling price ~~for~~of homes delivered decreased as a result of a change in mix to more affordable product as well as the ~~nine-months~~increased incentives discussed above.

East Segment Commentary

For the three and nine months ended September 30, ~~2017 is consistent with~~2023, the ~~commentary above for~~decrease in new home deliveries was driven by the ~~three-months~~factors discussed above. In addition, backlog conversion rates during the nine months ended September 30, ~~2017.~~

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

2023 also benefited from a decrease in construction cycle times year-over-year. The average selling price of homes delivered decreased during the three months ended September 30, 2023 as a result of a change in mix to more affordable product as well as the increased incentives discussed above.

~~- 32 -~~

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Table of Contents

GrossMargin

fromHome Sales:

Our gross margin from home sales ~~percentage~~ for the three months ended September 30, ~~2017 increased~~2023 decreased 350 basis points year-over-year from 22.7% to ~~16.3%~~19.2%. The decrease in gross margin from ~~15.5%~~home sales was driven largely by increases in incentives year-over-year, changes in base pricing and to a lesser extent higher construction costs year-over-year. This was partially offset by $6.2 million of inventory impairments recognized during the current year period compared to $28.4 million 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 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).

prior year period.

Our gross margin from home sales ~~percentage~~ for the nine months ended September 30, ~~2017 increased by 20~~2023 decreased 750 basis points year-over-year from 25.0% to ~~16.3%~~17.5%. The ~~nine months ended September 30, 2017 included $9.4 million (a 50 basis point negative impact to~~decrease in gross margin~~s) of inventory~~ from home sales was driven largely by increases in both incentives and construction costs year-over-year.

Inventory Impairments:

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~~recognized by segment for the three ~~months~~ and nine months ended September 30, ~~2017~~2023 and ~~2016~~2022 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

Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
(Dollars in thousands) (Dollars in thousands)
Housing Completed or Under Construction:
West $ 1,106 $ 2,538 $ 2,893 $ 3,198
Mountain 700 — 1,364 —
East — — — —
Subtotal 1,806 2,538 4,257 3,198
Land and Land Under Development:
West 2,994 23,362 14,707 23,362
Mountain 1,400 2,515 8,536 2,515
East — — — —
Subtotal 4,394 25,877 23,243 25,877
Total Inventory Impairments $ 6,200 $ 28,415 $ 27,500 $ 29,075

The table below provides quantitative data, for the periods presented, where applicable, 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 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%


	Impairment Data					Quantitative Data
Three Months Ended	Number of Subdivisions Impaired	Inventory Impairments		Fair Value of Inventory After Impairments		Discount Rate
	(Dollars in thousands)
September 30, 2023	2	$	6,200	$	17,116	15%	—	18%
June 30, 2023	1	13,500		17,886			18%
March 31, 2023	1	7,800		13,016		18%
Total		$	27,500

September 30, 2022	9	$	28,415	$	44,615	15%	—	18%
March 31, 2022	1	660		1,728			N/A
Total		$	29,075

~~- 33 -~~

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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 generalExpenses:
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 Change 2023 2022 Change
(Dollars in thousands)
General and administrative expenses $ 46,232 $ 80,858 $ (34,626) $ 141,213 $ 225,735 $ (84,522)
General and administrative expenses as a percentage of home sale revenues
4.3 % 5.7 % -140 bps 4.4 % 5.5 % -110 bps
Marketing expenses $ 24,875 $ 26,355 $ (1,480) $ 70,608 $ 78,022 $ (7,414)
Marketing expenses as a percentage of home sale revenues
2.3 % 1.9 % 40 bps 2.2 % 1.9 % 30 bps
Commissions expenses $ 30,204 $ 34,222 $ (4,018) $ 91,211 $ 100,841 $ (9,630)
Commissions expenses as a percentage of home sale revenues
2.8 % 2.4 % 40 bps 2.8 % 2.5 % 30 bps
Total selling, general and administrative expenses $ 101,311 $ 141,435 $ (40,124) $ 303,032 $ 404,598 $ (101,566)
Total selling, general and administrative expenses as a percentage of home sale revenues
9.3 % 10.0 % -70 bps 9.4 % 9.9 % -50 bps

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~~decreased for the three and nine months ended September 30, ~~2017 was~~ ~~$54.5 million~~2023 due to lower stock-based 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 Bondsdeferred compensation expenses, as well as decreased compensation related costs associated with a ~~cost basis of $8.4 million for net proceeds of $44.2 million resulting~~decline 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~~headcount.

Marketing expenses decreased for the three and nine months ended September 30, ~~2017, respectively.~~

2023 compared to the previous period due to decreased master marketing fees, amortization of deferred selling cost, and model home expenses.

Commissions expenses decreased for the three and nine months ended September 30, 2023 due to decreases in home sale revenues, partially offset by changes in our commission structure.

~~- 34 -~~

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Table of Contents

Other Homebuilding Operating Data

Net New ~~Orders:~~

Three Months Ended September 30,

2017

2016

% 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)

Arizona
192 $ 64,765 $ 337.3 2.53 225 $ 67,424 $ 299.7 2.56 (15) % (4) % 13 % (1) %
California
250 164,265 657.1 4.17 260 152,901 588.1 4.08 (4) % 7 % 12 % 2 %
Nevada
184 70,130 381.1 3.23 175 58,443 334.0 2.75 5 % 20 % 14 % 17 %
Washington
66 37,570 569.2 2.84 83 38,061 458.6 2.26 (20) % (1) % 24 % 26 %
West
692 336,730 486.6 3.20 743 316,829 426.4 2.95 (7) % 6 % 14 % 8 %
Colorado
333 162,725 488.7 2.45 321 146,911 457.7 3.82 4 % 11 % 7 % (36) %
Utah
48 23,041 480.0 2.29 35 14,718 420.5 1.41 37 % 57 % 14 % 62 %
Mountain
381 185,766 487.6 2.43 356 161,629 454.0 3.27 7 % 15 % 7 % (26) %
Maryland
39 17,006 436.1 2.00 50 22,612 452.2 1.42 (22) % (25) % (4) % 41 %
Virginia
44 20,984 476.9 3.45 52 26,869 516.7 2.04 (15) % (22) % (8) % 69 %
Florida
114 36,229 317.8 2.20 95 35,938 378.3 1.74 20 % 1 % (16) % 26 %
East
197 74,219 376.7 2.35 197 85,419 433.6 1.71 0 % (13) % (13) % 37 %
Total
1,270 $ 596,715 $ 469.9 2.78 1,296 $ 563,877 $ 435.1 2.72 (2) % 6 % 8 % 2 %

Nine Months Ended September 30,

2017

2016

% 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)

Arizona
638 $ 209,547 $ 328.4 2.76 684 $ 207,456 $ 303.3 2.52 (7) % 1 % 8 % 10 %
California
727 465,164 639.8 4.21 797 476,341 597.7 4.36 (9) % (2) % 7 % (3) %
Nevada
746 265,691 356.2 4.17 634 220,799 348.3 3.31 18 % 20 % 2 % 26 %
Washington
332 184,112 554.6 3.80 325 156,546 481.7 2.82 2 % 18 % 15 % 35 %
West
2,443 1,124,514 460.3 3.64 2,440 1,061,142 434.9 3.20 0 % 6 % 6 % 14 %
Colorado
1,292 627,845 485.9 3.40 1,227 583,309 475.4 4.00 5 % 8 % 2 % (15) %
Utah
171 77,114 451.0 2.41 178 67,394 378.6 2.47 (4) % 14 % 19 % (2) %
Mountain
1,463 704,959 481.9 3.24 1,405 650,703 463.1 3.71 4 % 8 % 4 % (13) %
Maryland
122 54,468 446.5 1.65 208 96,590 464.4 1.89 (41) % (44) % (4) % (13) %
Virginia
171 88,600 518.1 3.58 210 108,779 518.0 2.75 (19) % (19) % 0 % 30 %
Florida
365 128,091 350.9 2.22 325 133,533 410.9 2.19 12 % (4) % (15) % 1 %
East
658 271,159 412.1 2.30 743 338,902 456.1 2.22 (11) % (20) % (10) % 4 %
Total
4,564 $ 2,100,632 $ 460.3 3.24 4,588 $ 2,050,747 $ 447.0 3.11 (1) % 2 % 3 % 4 %

Ordersand Active Subdivisions:

Changes in the dollar value of net new orders are impacted by changes in the number of net new orders and the average selling price of those homes. Commentary for each of our segments on significant changes in these two metrics is provided below.


	Three Months Ended September 30,
	2023						2022						% Change
	Homes	Dollar Value		Average Price		Monthly Absorption Rate *	Homes	Dollar Value		Average Price		Monthly Absorption Rate *	Homes		Dollar Value		Average Price		Monthly Absorption Rate

	(Dollars in thousands)
West	1,022	$	590,558	$	577.8	2.38	193	$	93,481	$	484.4	0.51	430	%	532	%	19	%	371	%
Mountain	401	250,285		624.2		2.39	(3)	2,838		N/A		(0.02)	N/A		N/A		N/A		N/A
East	272	124,655		458.3		2.45	109	56,514		518.5		1.01	150	%	121	%	(12)	%	143	%
Total	1,695	$	965,498	$	569.6	2.39	299	$	152,833	$	511.1	0.46	467	%	532	%	11	%	416	%


	Nine Months Ended September 30,
	2023						2022						% Change
	Homes	Dollar Value		Average Price		Monthly Absorption Rate *	Homes	Dollar Value		Average Price		Monthly Absorption Rate *	Homes		Dollar Value		Average Price		Monthly Absorption Rate

	(Dollars in thousands)
West	3,375	$	1,939,875	$	574.8	2.68	2,754	$	1,677,039	$	608.9	2.66	23	%	16	%	(6)	%	1	%
Mountain	1,285	781,530		608.2		2.55	1,194	811,860		679.9		2.52	8	%	(4)	%	(11)	%	1	%
East	969	439,187		453.2		2.91	906	457,919		505.4		2.80	7	%	(4)	%	(10)	%	4	%
Total	5,629	$	3,160,592	$	561.5	2.68	4,854	$	2,946,818	$	607.1	2.64	16	%	7	%	(8)	%	2	%

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

period.


					Average Active Subdivisions				Average Active Subdivisions
	Active Subdivisions				Three Months Ended				Nine Months Ended
	September 30,		%		September 30,		%		September 30,		%
	2023	2022	Change		2023	2022	Change		2023	2022	Change
West	141	132	7	%	143	127	13	%	140	115	22	%
Mountain	55	51	8	%	56	52	8	%	56	53	6	%
East	39	37	5	%	37	36	3	%	37	36	3	%
Total	235	220	7	%	236	215	10	%	233	204	14	%

For ~~both~~ the three and nine months ended September 30, ~~2017,~~2023, the ~~dollar value of net new orders~~ ~~was up year-over-year as increases 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 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 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). The increase in average selling price in our Utah market was predominantly due to a shift in mix to higher priced communities. The increases in net new orders for our Nevada and Utah markets were driven by improvements in our monthly sales absorption paces despite year-over-year declines in average active subdivisions. The 2017 third quarter absorption pace in 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 asin each of 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-year 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 our monthly sales absorption pace were modestly offset by a lower average active community count. Our Nevada, Washington, Utah and Colorado markets experienced the most meaningful year-over-year improvements in 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 was an increase in the average selling price 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 marketsegments 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 decreasesmonthly sales absorption pace as well as an increase 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 increase in the ~~end of our 2017 second quarter and down 3% from September 30, 2016. For Colorado, the increase~~monthly sales absorption pace was ~~due to increased land acquisition activity over the last two years. In Virginia~~ and Maryland, we have tempered our land acquisition activity over the past two years as our returns in these 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~~a higher pace 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 periodgross orders (before cancellations) as well as a ~~year ago.~~

~~- 36 -~~

~~Table of Contents~~

~~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) %

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

~~Our~~during the respective periods. For the three and nine months ended September 30, 2022, the number of net new orders in each of our segments was negatively impacted by a decrease in the monthly sales absorption pace. This was driven by a lower pace of gross orders (before cancellations) as well as an increase in cancellations as a percentage of homes in beginning backlog to start the ~~quarter (“cancellation rate”) improved from 13%~~quarter. The lower pace of gross orders and increased cancellations experienced during the three and nine months ended September 30, 2022 was the result of the sharp rise in mortgage interest rates and homebuyer concerns about purchasing in an uncertain housing market.

For the nine months ended September 30, 2023, the decrease in the ~~2016 third quarter to 12%~~average selling price in ~~the 2017~~ ~~third quarter. Each~~each of our ~~California, Nevada, Maryland, Virginia and Florida markets had notable~~segments was due to decreases in ~~their~~base pricing and increased incentives.

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The increased cancellation ~~rates~~rate during the three months ended September 30, 2022 affected the dollar value of net new orders and as a result the average selling price of those net orders. For the three months ended September 30, 2023, the average selling price of our gross orders decreased approximately 4% as compared to the three months ended September 30, 2022. The decrease in average selling price from the three months ended September 30, 2022 was due to increased incentives and decreases in base pricing during the three months ended December 31, 2022 and the three months ended March 31, 2023.

Cancellation Rate:


	Cancellations as a Percentage of Homes in Beginning Backlog
	Three Months Ended
	2023						2022
	September 30,		June 30,		March 31,			September 30,		June 30,		March 31,
West	16	%	19	%	26	%		17	%	10	%	8	%
Mountain	22	%	21	%	25	%		17	%	9	%	8	%
East	21	%	16	%	24	%		17	%	11	%	9	%
Total	17	%	19	%	25	%		17	%	10	%	8	%


	Cancellations as a Percentage of Gross Sales
	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
West	24	%	79	%	25	%	36	%
Mountain	24	%	103	%	26	%	39	%
East	26	%	63	%	21	%	33	%
Total	24	%	81	%	25	%	36	%

In light of our recent pivot to build more spec homes, we believe it is appropriate to view our cancellations as a product of both our beginning backlog as well as our gross sales during the period. Our cancellation rate as a percentage of homes in beginning backlog was flat year-over-year for the three months ended September 30 2023 and 2022, due to a decrease in beginning backlog to start the period offset by an increase in cancellations during the three months ended September 30, 2022. However, our cancellation rate as a percentage of gross sales decreased year-over-year during the three months ended September 30, 2023 as a result of ~~process improvements around accepting sales and managing backlog. The increased cancellation~~improved demand as well as the impact the sharp increase in mortgage interest rates in the prior year period had on our homebuyers in backlog who where unable to lock their interest rate ~~in our Colorado market is the result~~prior to these increases.

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Table of ~~the joist issue previously discussed.~~

Contents

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 %

September 30,
2023 2022 % Change
Homes Dollar
Value Average
Price Homes Dollar
Value Average
Price Homes Dollar
Value Average
Price
(Dollars in thousands)
West 1,842 $ 1,113,867 $ 604.7 3,044 $ 1,762,858 $ 579.1 (39) % (37) % 4 %
Mountain 533 355,759 667.5 1,508 1,038,037 688.4 (65) % (66) % (3) %
East 400 188,972 472.4 786 396,406 504.3 (49) % (52) % (6) %
Total 2,775 $ 1,658,598 $ 597.7 5,338 $ 3,197,301 $ 599.0 (48) % (48) % — %

At September 30, ~~2017,~~2023, we had ~~3,463~~2,775 homes in backlog with a total value of ~~$1.71 billion, representing respective increases~~$1.66 billion. This represented a 48% decrease 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 in~~ the dollar value of those homes in backlog from September 30, 2022. The decrease in the number of homes in backlog was primarily as a result of ~~year-over-year~~a decrease in the level of net new orders during the second half of 2022, which continued to a lesser degree into the first quarter of 2023, as well as a shift in consumer preference to quick move-in homes and our associated pivot to build more spec homes. The decrease in average selling price ~~increases over the last twelve months. Backlog~~ in our ~~Maryland~~Mountain and ~~Virginia markets declined~~East segments was driven by decreases in base pricing during the second half of 2022 in most communities and to a lesser extent increased incentives. The increase in average selling price in the West segment was driven by a change in mix from ~~September 30, 2016 as~~our Arizona communities to our California communities, partially offset by a ~~result~~decrease in base pricing during the second half of ~~reduced sales activity over~~2022 and to a lesser extent increased incentives. Our ability to convert backlog into closings could be negatively impacted in future periods by ongoing inflation concerns, the ~~last twelve months, mostly due~~Federal Reserve's quantitative tightening and the resulting impact on mortgage interest rates, consumer confidence, the current geopolitical environment and other factors, the extent to ~~lower community count.~~

which is highly uncertain and depends on future developments.

~~- 37 -~~

~~Table of Contents~~

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~~
September 30, %
2023 2022 Change
Unsold:
Completed 236 187 26 %
Under construction 2,445 895 173 %
Total unsold started homes 2,681 1,082 148 %
Sold homes under construction or completed 2,585 5,094 (49) %
Model homes under construction or completed 552 532 4 %
Total homes completed or under construction 5,818 6,708 (13) %

The increase in total unsold started 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. The declinedecrease in ~~unsold homes was partially offset by an increase in model homes, while~~ sold homes under construction ~~was nearly unchanged from the prior year.~~

or completed is due to our recent pivot to build more spec homes.

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 %

September 30, 2023 September 30, 2022
Lots
Owned Lots
Optioned Total Lots
Owned Lots
Optioned Total Total
%
Change
West 10,128 1,092 11,220 13,893 914 14,807 (24) %
Mountain 4,420 1,793 6,213 6,151 2,458 8,609 (28) %
East 3,218 1,702 4,920 3,848 1,992 5,840 (16) %
Total 17,766 4,587 22,353 23,892 5,364 29,256 (24) %

Our total owned and optioned lots at September 30, ~~2017~~2023 were ~~18,959, up 28% from September 30, 2016, due to substantial growth in our optioned lots as~~22,353, which represented a 24% decrease year-over-year. This decrease is 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~~intentional slowdown in land acquisition and approval activity ~~over~~in the ~~past two years as our recent returns in these markets have been lower than returns we expect~~second half of 2022 into the first quarter of 2023 due to ~~realize. Though our lots controlled count is down year-over-year in Washington, we remain committed to that~~the market ~~and continue to pursue all land acquisition opportunities as they arise.~~uncertainty during those periods. We believe that our total lot supply ~~of approximately 3.4 years (which~~ is ~~based on~~sufficient to meet our ~~last twelve months deliveries and is within our stated strategic range), coupled~~operating needs, consistent with our ~~planned acquisition activity, can support growth in future periods.~~philosophy of maintaining a two to three year supply of land. See "Forward-Looking Statements"below.

~~- 38 -~~

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Financial Services

Three Months Ended

Nine Months Ended

September 30,

Change

September 30,

Change

2017

2016

Amount

%

2017

2016

Amount

%

(Dollars in thousands)

Financial services revenues

Mortgage operations
$ 11,176 $ 11,294 $ (118 ) (1) % $ 36,056 $ 28,866 $ 7,190 25 %
Other
6,288 6,114 174 3 % 18,460 15,382 3,078 20 %
Total financial services revenues
$ 17,464 $ 17,408 $ 56 0 % $ 54,516 $ 44,248 $ 10,268 23 %

Financial services pretax income

Mortgage operations
$ 5,857 $ 6,723 $ (866 ) (13) % $ 21,093 $ 16,491 $ 4,602 28 %
Other
3,654 3,654 - 0 % 11,158 8,555 2,603 30 %
Total financial services pretax income
$ 9,511 $ 10,377 $ (866 ) (8) % $ 32,251 $ 25,046 $ 7,205 29 %

Three Months Ended Nine Months Ended
September 30, Change September 30, Change
2023 2022 Amount % 2023 2022 Amount %
(Dollars in thousands)
Financial services revenues
Mortgage operations $ 12,098 $ 16,933 $ (4,835) (29) % $ 53,275 $ 56,611 $ (3,337) (6) %
Other 11,671 17,168 (5,497) (32) % 32,599 42,850 (10,250) (24) %
Total financial services revenues $ 23,769 $ 34,101 $ (10,332) (30) % $ 85,874 $ 99,461 $ (13,587) (14) %
Financial services pretax income

Mortgage operations $ 3,098 $ 5,676 $ (2,578) (45) % $ 26,676 $ 23,782 $ 2,894 12 %
Other 9,325 11,897 (2,571) (22) % 24,709 25,866 $ (1,156) (4) %
Total financial services pretax income $ 12,423 $ 17,573 $ (5,150) (29) % $ 51,385 $ 49,648 $ 1,737 3 %

For the three months ended September 30, ~~2017,~~2023, our financial ~~service~~services pretax income decreased ~~$0.9~~to $12.4 million ~~or 8%, from the same period~~compared to $17.6 million in the ~~prior year.~~third quarter of 2022. The ~~decline~~decrease in financial services pretax income was ~~primarily the result of a decline in the dollar value of loans locked, originated and sold in~~driven by both our mortgage ~~operations.~~ operations and other financial services segments. The decrease in mortgage operations pretax income was due to a decrease in mortgage servicing related income due to lower additions to the servicing portfolio during the quarter, as well as special financing programs offered during the quarter. This was partially offset by a decrease in salary related expenses driven by lower headcount and an increase in capture rate. The decrease in other financial services was driven by our insurance operations which saw a decrease in revenue due to a decrease in homes closed, partially offset by an increase in interest income due to increases in both interest rates and our cash and short-term investments year-over-year.

For the nine months ended September 30, ~~2017,~~2023, our financial services pretax income ~~was up $7.2~~increased to $51.4 million ~~or 29% from~~compared to $49.6 million in the ~~same period in 2016.~~prior year period. The increase in financial services pretax income ~~for~~was due to our mortgage operations, ~~segment was~~partially offset by a decrease in other financial services. The main drivers of the ~~result~~increase in mortgage operations is due to a decrease in salary related expenses driven by lower headcount, an increase in capture rate. The main drivers of ~~(1) increases~~the decrease 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~~is consistent with the ~~nine months ended September 30, 2017 was primarily the result of increased new home deliveries.~~

third quarter commentary discussed above.

~~- 39 -~~

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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 Nine Months Ended % or
Percentage Change
September 30, September 30,
2023 2022 Change 2023 2022
(Dollars in thousands)
Total Originations (including transfer loans):
Loans 1,225 1,447 (15) % 3,766 4,278 (12) %
Principal $ 544,428 $ 688,983 (21) % $ 1,696,923 $ 1,998,086 (15) %
Capture Rate Data:
Capture rate as % of all homes delivered 62 % 61 % 1 % 65 % 60 % 5 %
Capture rate as % of all homes delivered (excludes cash sales) 69 % 64 % 5 % 71 % 63 % 8 %
Mortgage Loan Origination Product Mix:
FHA loans 28 % 12 % 16 % 23 % 13 % 10 %
Other government loans (VA & USDA) 18 % 23 % (5) % 19 % 21 % (2) %
Total government loans 46 % 35 % 11 % 42 % 34 % 8 %
Conventional loans 54 % 65 % (11) % 58 % 66 % (8) %
100 % 100 % — % 100 % 100 % — %
Loan Type:
Fixed rate 100 % 98 % 2 % 100 % 98 % 2 %
ARM — % 2 % (2) % — % 2 % (2) %
Credit Quality:
Average FICO Score 744 744 — % 741 744 — %
Other Data: ` `
Average Combined LTV ratio 82 % 81 % 1 % 82 % 82 % — %
Full documentation loans 100 % 100 % — % 100 % 100 % — %
Loans Sold to Third Parties:
Loans 1,201 1,435 (16) % 3,890 4,465 (13) %
Principal $ 532,315 $ 676,451 (21) % $ 1,758,383 $ 2,068,243 (15) %

Income Taxes

Our overall effective income tax rates were ~~31.8%~~23.2% and ~~34.1%~~22.2% for the three and nine months ended September 30, ~~2017, respectively, compared to 30.7%~~2023 and ~~32.3%~~22.3% and 25.4% for the three and nine months ended September 30, ~~2016, respectively.~~2022. The rates for the three and nine months ended September 30, ~~2017~~2023 resulted in income tax expense of ~~$28.5~~$32.5 million and ~~$60.7~~$80.3 million, respectively, compared to the income tax expense of ~~$11.7~~$41.4 million and ~~$29.9~~$164.3 million for the ~~same periods in 2016.~~three and nine months ended September 30, 2022, respectively. The year-over-year increase in ~~our~~the effective tax rate for the three months ended September 30, ~~2017~~2023, was ~~primarily~~due to a decrease in energy tax credits in 2023. During the ~~result of our estimate of~~three months ended September 30, 2022, the ~~full year effective~~Inflation Reduction Act retroactively extended the energy tax ~~rate for 2016 including an estimate for energy credits whereas our estimate~~credit for the ~~2017 full year includes no such energy credit as~~period January 1, 2022 through December 31, 2022 during the ~~credit has not been approved by~~quarter. The year-over-year decrease in 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 substantially 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. Foreffective rate for the nine months ended September 30, ~~2017, the year-over-year~~2023, was primarily related to a decrease in non-deductible executive compensation and an increase in ~~our effective tax rate was due to~~ the ~~foregoing energy credits matter coupled with~~windfall on non-qualifying stock options exercised and lapsed restricted stock during the establishment of a valuation allowance in the 2017 first quarter against certain state net operating loss carryforwards where realization was more uncertain at the time. These items were somewhat offset by the release of the Metro Bonds valuation allowance discussed above.

period.

~~- 40 -~~

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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.~~

2022.

LIQUIDITY AND CAPITAL RESOURCES

We use our liquidity and capital resources to: (1) support our operations, including the purchase of land, land development and construction of homes; (2) provide working capital; and (3) provide mortgage loans for our homebuyers. Our liquidity includes our cash and cash equivalents, marketable securities, ~~revolving credit facility~~Revolving Credit Facility (as defined below) and ~~mortgage repurchase facility.~~Mortgage Repurchase Facility (as defined below). Additionally, we have an existing effective shelf registration statement that allows us to issue equity, debt or hybrid securities up to ~~$1.5~~$5.0 billion, ~~($1.35~~of which $5.0 billion ~~after~~remains.

Material Cash Requirements

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

At September 30, 2023, we had outstanding senior notes with varying maturities totaling an ~~additional $150 million~~aggregate principal amount of $1.50 billion, with none payable within 12 months. Future interest payments associated with the notes total $1.25 billion, with $64.2 million payable within 12 months. As of September 30, 2023, we had $27.3 million of required operating lease future minimum payments.

At September 30, 2023, we had deposits of $23.8 million in the form of cash and $7.9 million in the form of letters of credit that secured option contracts to purchase 4,587 lots for a total estimated purchase price of $479.8 million.

At September 30, 2023, we had outstanding surety bonds and letters of credit totaling $331.7 million and $109.1 million, respectively, including $62.1 million in letters of credit issued by HomeAmerican. The estimated cost to complete obligations related to these bonds and letters of credit was approximately $156.7 million and $47.1 million, respectively. We expect that the obligations secured by these performance bonds and letters of credit generally will be performed in the ordinary course of business and in accordance with the applicable contractual terms. To the extent that the obligations are performed, the related performance bonds and letters of credit should be released and we should not have any continuing obligations. However, in the event any such performance bonds or letters of credit are called, our ~~6% senior notes due 2043). See Note 20 for additional information.~~

indemnity obligations could require us to reimburse the issuer of the performance bond or letter of credit. We have ~~marketable equity securities that consist primarily of holdings in corporate equities.~~

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

Capital Resources

Our capital structure is primarily a combination of (1) permanent financing, represented by stockholders’ equity; (2) long-term financing, represented by our ~~5⅝%~~3.850% senior notes due ~~2020, 5½%~~2030, 2.500% senior notes due ~~2024 and our 6%~~2031, 6.000% senior notes due 2043, ~~(see Note 20 for additional information on the public offering of an additional $150 million principal amount of these notes);~~and 3.966% senior notes due 2061; (3) our Revolving Credit Facility and (4) our Mortgage Repurchase ~~Facility (defined below).~~Facility. Because of our current balance of cash, cash equivalents, marketable securities, ability to access the capital markets, and available capacity under both our Revolving Credit Facility and Mortgage Repurchase Facility, we believe that our capital resources are

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Table of Contents

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~~"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”)~~terminate 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.

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

~~- 41 -~~

~~Table of Contents~~

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.~~

As2023.

We incur costs associated with unused commitment fees pursuant to the terms of the Revolving Credit Facility. At September 30, ~~2017, we had $15.0~~2023 and December 31, 2022, there were $47.0 million ~~in borrowings~~ and ~~$34.0~~$48.3 million, respectively, in letters of credit outstanding, which reduced the amounts available to be borrowed under the Revolving Credit Facility. At September 30, 2023 and December 31, 2022, we had $10.0 million and $10.0 million, respectively, outstanding under the Revolving Credit Facility. As of September 30, 2023, availability under the Revolving Credit Facility ~~leaving remaining borrowing capacity~~was approximately $1.14 billion.

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Table of ~~$651.0 million.~~

Contents

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 ~~maximum aggregate commitment of the~~ Mortgage Repurchase Facility was ~~temporarily increased~~amended on May 20, 2021, December ~~27, 2016 from $75 million~~21, 2021, May 19, 2022 and May 18, 2023 to ~~$125 million and~~adjust the commitments to purchase for specific time periods. The total capacity of the facility at September 30, 2023 was ~~effective through January 25, 2017.~~ $150 million. The May 18, 2023 amendment extended the termination date of the Repurchase Agreement to May 16, 2024.

At September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, HomeAmerican had ~~$65.1~~$145.5 million and ~~$114.5~~$175.8 million, respectively, of mortgage loans that HomeAmerican was obligated to repurchase under the Mortgage Repurchase Facility. Mortgage loans that HomeAmerican is obligated to repurchase under the Mortgage Repurchase Facility are accounted for as a debt financing arrangement and are reported as mortgage repurchase facility in the consolidated balance sheets. ~~Advances~~Pricing under the Mortgage Repurchase Facility ~~carry a price range that~~ is ~~LIBOR-based.~~

based on SOFR.

2023.

Dividends

During the three months ended September 30, 2023 and 2022, we paid cash dividends of $0.55 per share and $0.50 per share, respectively. During the nine months ended September 30, ~~2017,~~2023 we paid cash dividends of ~~$0.25~~$1.55 per share, ~~and $0.75 per share, respectively,~~ compared to ~~$0.24 per share and $0.72 per share for~~$1.50 in the same ~~periods in the prior year, respectively.~~

period of 2022.

MDC Common Stock Repurchase Program

At September 30, ~~2017,~~2023, we were authorized to repurchase up to ~~4,000,000~~4.0 million shares of our common stock. We did not repurchase any shares of our common stock during the three months ended September 30, ~~2017.~~

2023.

~~- 42 -~~

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Consolidated Cash Flow

During the nine months ended September 30, ~~2017, we generated $69.2 million of~~2023, net cash ~~from~~provided by operating activities ~~primarily due to (1)~~was $623.1 million compared with net ~~income~~cash provided by operating activities of ~~$117.3~~$344.0 million ~~(2) a $49.0 million decrease~~ in ~~mortgage loans held-for-sale, (3) a $22.8 million decrease in~~ our deferred tax asset, and (4) a $15.3 million increase in accounts payable and accrued liabilities. The increases were partially offset by a net increase in housing inventory of $82.1 million, an $11.2 million increase in prepaid and other assets, and net gains on the ~~sale of investments, including our Metro Bonds of $54.0 million.~~

prior year period. During the nine months ended September 30, ~~2017, we generated $108.0 million~~2023 and 2022, one of the most significant sources of cash ~~for investing~~provided by operating activities ~~primarily attributable to~~was net ~~proceeds from the sale and purchase~~income of ~~marketable equity securities of $65.7~~$281.5 million and ~~proceeds from~~$482.4 million, respectively. Another significant source of cash provided by operating activities during the ~~sale of~~ ~~the Metro Bonds of $44.3 million. These amounts were slightly offset~~nine months ended September 30, 2023 was cash provided by the ~~purchase~~decrease in land and land under development of ~~$1.9~~$456.4 million, compared to cash used of $19.7 million by the increase in ~~property~~land and ~~equipment.~~

land under development in the same period in the prior year. This decrease in 2023 was the result of home starts outnumbering lot acquisitions during the period. During the nine months ended September 30, ~~2017, we~~2023 and 2022, cash used ~~$82.3~~by housing completed or under construction was $202.9 million and $319.1 million, respectively. Cash used in the nine months ended September 30, 2022 was impacted by an increase in land and land under development balance per home under construction as a result of increased construction costs and the construction status of those homes under construction at the beginning and end of the period. Cash used in the nine months ended September 30, 2023 was impacted by an increase in the number of homes under construction during the period. Cash provided by the decrease in trade and other receivables for the nine months ended September 30, 2023 was $45.0 million compared to cash used to increase trade and other receivables for the nine months ended September 30, 2022 of $19.3 million. This change was due to a year-over-year decrease in home deliveries during the nine months ended September 30, 2023. Cash used by the change in accounts payable and accrued liabilities for the nine months ended September 30, 2023 was $55.5 million compared to cash provided of $12.5 million for the nine months ended September 30, 2022. The change in accounts payable and accrued liabilities was due to decreased construction spend during the nine months ended September 30, 2023.

During the nine months ended September 30, 2023, net cash provided in investing activities was $145.7 million compared to cash used of $312.6 million in the same period in the prior year. The increase in net cash ~~for~~provided in investing activities was driven by $1.25 billion of cash provided by the maturities of marketable securities during the nine months ended September 30, 2023. This was partially offset by cash used in the purchase of marketable securities of $1.09 billion during the nine months ended September 30, 2023.

During the nine months ended September 30, 2023 and 2022, net cash used in financing activities ~~primarily related~~was $123.6 million and $178.4 million respectively. The primary driver of this decrease in net cash used in financing activities was the increase in cash provided on the issuance of shares under stock based compensation programs. The nine months ended September 30, 2023 saw cash provided of $20.8 million compared to pa~~yments~~cash used of ~~$49.4~~$11.5 million ~~on our mortgage repurchase facility and dividend payments totaling $38.8 million. These amounts were slightly offset by proceeds of $8.5 million~~for the nine months ended September 30, 2023 resulting from an increase in cash received from the exercise of stock ~~options.~~

~~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, we had deposits of $11.1 millionoptions driven by an increase in the ~~form~~number of ~~cash and $3.6 million in the form of letters of credit that secured option contracts to purchase 6,306 lots for a total estimated purchase price of $463.0 million.~~

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

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

stock options exercised year-over-year.

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~~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 Annual Report on Form 10-K.~~

OTHER

Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q, as well as statements made by us in periodic press releases, oral statements made by our officials in the course of presentations about the Company and conference calls in connection with quarterly earnings releases, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our business, financial condition, results of operations, cash flows, strategies and prospects. These forward-looking statements may be identified by terminology such as “likely,” “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained in this Report are reasonable, we cannot guarantee future results. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in subsequent reports on Forms 10-K, 10-Q and 8-K should be considered. Additionally, information about issues that could lead to material changes in performance and risk factors that have the potential to affect us isare contained under the caption “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2022 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~~2023, our cash and cash equivalents included commercial bank deposits, money market funds and time deposits and our 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~~included U.S. government treasury securities ~~in unrealized loss positions totaling $0.6 million, there can be no assurances that the cost basis~~with original maturities upon acquisition 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 the market values do not increase prior to any sales. Such losses, if any, would be recorded as a component of our results of operations.

less than six months.

We are exposed to market risks related to fluctuations in interest rates on mortgage loans held-for-sale, mortgage interest rate lock commitments, marketable securities and debt. ~~Derivative~~Financial 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~~commitments to ~~manage~~sell a specified financial instrument at a specified future date for a specified price, mandatory delivery forward loan sale commitments, which are obligations of an investor to buy loans at a specified price within a specified time period, and best-effort delivery forward loan sale commitments, which are obligations of an investor to buy loans at a specified price subject to the ~~price risk on fluctuations in interest rates on our~~underlying mortgage loans ~~in inventory~~being funded and ~~interest rate lock commitments to originate mortgage loans.~~closed. Such contracts are the only significant financial and derivative instruments utilized by MDC. ~~HomeAmerican~~’sHomeAmerican’s mortgage loans in process for which aan interest rate ~~and price~~lock commitment had been made to a borrower that had not closed at September 30, ~~2017~~2023 had an aggregate principal balance of ~~$101.2~~$274.2 million, ~~all~~ of which ~~were under interest rate lock commitments at an average interest rate of 3.99%.~~$273.7 million had not yet been committed to a mortgage purchaser. In addition, HomeAmerican had mortgage loans held-for-sale with an aggregate principal balance of ~~$87.1~~$166.9 million at September 30, ~~2017,~~2023, of which ~~$14.0~~$111.0 million had not yet been committed to a mortgage ~~purchaser and had an average interest rate of 4.04%.~~purchaser. In order to hedge the changes in fair value of interest rate lock commitments and mortgage loans held-for-sale that had not yet been committed to a mortgage purchaser, HomeAmerican had forward sales of securities totaling ~~$85.0~~$366.0 million and $323.0 million at September 30, ~~2017.~~

2023 and December 31, 2022, respectively.

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HomeAmerican provides mortgage loans that generally are sold forward on a best-efforts or mandatory commitment basis and subsequently delivered to a third-party purchaser between 155 and ~~40 days.~~35 days after closing. Forward sale commitments and forward sales of mortgage-backed securities are used for non-trading purposes to sell mortgage loans and economically hedge price risk due to fluctuations in interest rates on rate-locked mortgage loans in process that have not ~~closed.~~closed and mortgage loans held-for-sale. Due to this economic hedging philosophy, the market risk associated with these mortgages is limited. For forward sales commitments, ~~as well as~~forward sales of mortgage-backed securities and commitments to originate mortgage loans that are still outstanding at the end of a reporting period, we record the changes in fair value of these financial instruments in revenues in the ~~derivatives in~~financial services section of the consolidated statements of operations and comprehensive income with an offset to either ~~derivative~~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.

~~- 44 -~~

~~Table of Contents~~

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

I~~tem~~

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~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~- 45 -~~

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M.D.C. HOLDINGS, INC.

FORM 10-Q

10-Q

PART II

I~~tem~~II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A.Risk Factors

~~There have been no significant changes~~

In addition to the other information set forth in this Form 10-Q, you should carefully consider the risk factors ~~previously identified as being attendant to our business~~that appeared under Item 1A. Risk Factors in ~~our~~the Company’s 2022 Annual Report on Form ~~10-K for~~10-K. Except as set forth below, there have been no material changes from the ~~year ended December 31,~~ ~~2016. For a more complete discussion~~risk factors included within the Company’s 2022 Annual Report on Form 10-K.

Financial industry turmoil could materially and adversely affect our liquidity and consolidated financial statements.

The banking industry has experienced certain bank failures and other turmoil in 2023. The failure of other banks or financial institutions, if it occurs, could have a material adverse effect on our liquidity or consolidated financial statements if we have placed cash or other deposits at such banks or financial institutions, or if such banks or financial institutions, or any substitute or additional banks or financial institutions, participate in our Revolving Credit Facility. Under our Revolving Credit Facility, non-defaulting lenders are not obligated to cover or acquire a defaulting lender’s respective commitment to fund loans or to issue letters of credit and may be unwilling to issue additional letters of credit if we do not enter into arrangements to address the risk ~~factors that affect~~with respect to the defaulting lender (which may include cash collateral). If the non-defaulting lenders are unable or unwilling to cover or acquire a defaulting lender’s respective commitment, we may not be able to access the Revolving Credit Facility’s full borrowing or letter of credit capacity to support our business ~~see “Risk Factors”~~needs. In addition, if a buyer under our Mortgage Repurchase Facility, which is used to fund mortgage originations, fails or is unable or unwilling to fulfill its obligations, HomeAmerican may be limited in its ability to provide mortgage loans to our ~~Form 10-K for~~homebuyers, which may prevent them from closing on their homes at the ~~year ended December 31, 2016, which include the following:~~

●

~~Changes in general economic, real estate and other business conditions may have an adverse effect on the homebuilding and mortgage industries, which could have a negative impact on our business.~~

●

~~Increased competition levels in the homebuilding and mortgage lending industries could have a negative impact on our homebuilding and mortgage operations.~~

●

~~If land is not available at reasonable prices or terms, we could be required to scale back our operations in a given market and/or we may operate at lower levels of profitability.~~

●

~~Supply shortages and other risks related to the demand for skilled labor and building materials could increase costs and delay deliveries.~~

●

If mortgage interest rates rise, if down payment requirements are increased, if loan limits are decreased, or if mortgage financing otherwise becomes less available, it could adversely affect our business.

●

~~Expirations, amendments or changes to tax laws, incentives or credits currently available to our customers may negatively impact our business.~~

●

~~A decline in the market value of our homes or carrying value of our land would have a negative impact on our business.~~

●

~~Natural disasters could cause an increase in home construction costs, as well as delays, and could negatively impact our business.~~

●

~~Changes in energy prices may have an adverse effect on the economies in certain markets we operate in and our cost of building homes.~~

●

We have financial needs that we meet through the capital markets, including the debt and secondary mortgage markets, and disruptions in these markets could have an adverse impact on the results of our business.

●

Our business is subject to numerous federal, state and local laws and regulations concerning land development, construction of homes, sales, mortgage lending, environmental and other aspects of our business. These laws and regulations could give rise to additional liabilities or expenditures, or restrictions on our business.

●

~~In the ordinary course of business, we are required to obtain surety bonds, the unavailability of which could adversely affect our business.~~

●

~~Decreases in the market value of our investments in marketable securities could have an adverse impact on our business.~~

●

~~Product liability litigation and warranty claims that arise in the ordinary course of business may be costly.~~

●

~~Repurchase requirements associated with HomeAmerican’s sale of mortgage loans, could negatively impact our business.~~

●

~~Because of the seasonal nature of our business, our quarterly operating results can fluctuate.~~

●

~~We are dependent on the services of key employees, and the loss of their services could hurt our business.~~

time expected or at all.

~~- 46 -~~

~~Table of Contents~~

●

~~The interests of certain controlling shareholders may be adverse to investors~~

●

~~Information technology failures and data security breaches could harm our business.~~

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

The ~~Company did not~~following table provides information about our repurchase ~~any shares~~of common stock during the three ~~or nine~~ months ended September 30, ~~2017. Additionally, there~~2023:


Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plan or Program (2)	Maximum Number of Shares that may yet be Purchased under the Plan or Program (2)
July 1 to July 31, 2023	—	N/A	—	4,000,000
August 1 to August 31, 2023	—	N/A	—	4,000,000
September 1 to September 30, 2023	—	N/A	—	4,000,000

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

(2) We are authorized to repurchase up to 4,000,000 shares of our common stock. There were no ~~sales~~shares of ~~unregistered equity securities~~MDC common stock repurchased under this repurchase program during the ~~period.~~

three month period ended September 30, 2023. This repurchase authorization was announced on October 25, 2005 and has no expiration.

~~- 47 -~~

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Table of Contents

Item 5. Other Information

On July 31, 2023, the Company's Chief Accounting Officer, Derek R. Kimmerle, entered into an irrevocable tax withholding election intended to satisfy the affirmative defense conditions of SEC Rule 10b5-1(c). The elections provides that shares of stock subject to restricted stock awards that vest in calendar year 2024 will be withheld by the Company in an amount to satisfy minimum statutory tax withholding obligations.

Item 6. Exhibits

~~Item~~ 6.	~~Exhibits~~
10.1
~~10.1~~	~~First Amendment to Master Repurchase~~ Form of 2023 Senior Executive Officer Performance Share Unit Grant Agreement ~~between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of August 10, 2017~~(2021 Equity Incentive Plan) (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed August 25, 2023). *
10.2		Form of 2023 Executive Officer Performance Share Unit Grant Agreement (2021 Equity Incentive Plan) (incorporated by reference to Exhibit 10.2 of the ~~Company's~~Company’s Current Report on Form 8-K filed August ~~11, 2017)~~25, 2023).*
22
~~10.2~~	~~Third Amendment to Credit Agreement, dated as of September 29, 2017~~ Subsidiary Guarantors (incorporated by reference to Exhibit ~~10.1 of~~22 to the Company's ~~Current Report on~~ Form ~~8-K filed October 4, 2017)~~10-Q for the quarter ended June 30, 2021). *
31.1
~~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~~2023 and December 31, ~~2016,~~2022, (ii) Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, ~~2017~~2023 and ~~2016,~~2022, (iii) Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022, (iv) Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2017~~2023 and ~~2016;~~2022; 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).

____________________

*Incorporated by ~~reference~~

~~SIGNATURE~~

reference.

SIGNATURES

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

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

Date: October 26, 2023
	By:	~~/s/~~ /s/ Robert N. Martin
				Robert N. Martin
		Senior Vice ~~Preside~~~~nt,~~President and Chief Financial Officer ~~and~~ ~~Principal Accounting Officer~~ (~~principal~~(principal financial officer and duly authorized o~~fficer)~~

~~- 48 -~~officer)

~~Table of Contents~~

~~INDEX TO EXHIBITS~~

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

~~10.1~~		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). *
Date: October 26, 2023		By: /s/ Derek R. Kimmerle
~~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). *Derek R. Kimmerle

~~31.1~~	~~Certification of~~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~~(chief 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)

~~____________________~~

* Incorporated by reference

~~- 49 -~~

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	Nine Months Ended September 30, 2023
	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total
	Shares	Amount
Balance at December 31, 2022	72,585,596	$	726	$	1,784,173	$	1,306,885	$	—	$	3,091,784
Net income	—	—		—		80,700		—		80,700
Other comprehensive income (loss)	—	—		—		—		323		323
Shares issued under stock-based compensation programs, net	503,022	5		(11,745)		—		—		(11,740)
Cash dividends declared	—	—		—		(36,543)		—		(36,543)
Stock-based compensation expense	—	—		5,597		—		—		5,597
Forfeiture of restricted stock	(1,283)	—		—		—		—		—
Balance at March 31, 2023	73,087,335	$	731	$	1,778,025	$	1,351,042	$	323	$	3,130,121
Net Income	—	—		—		93,493		—		93,493
Other comprehensive income (loss)	—	—		—		—		(233)		(233)
Shares issued under stock-based compensation programs, net	1,459,256	14		31,318		—		—		31,332
Cash dividends declared	—	—		—		(36,566)		—		(36,566)
Stock-based compensation expense	—	—		2,956		—		—		2,956
Forfeiture of restricted stock	(2,370)	—		—		—		—		—
Balance at June 30, 2023	74,544,221	$	745	$	1,812,299	$	1,407,969	$	90	$	3,221,103
Net Income	—	—		—		107,305		—		107,305
Other comprehensive income (loss)	—	—		—		—		1		1
Shares issued under stock-based compensation programs, net	118,247	2		1,218				—		1,220
Cash dividends declared	—	—		—		(41,063)		—		(41,063)
Stock-based compensation expense	—	—		3,977		—		—		3,977
Balance at September 30, 2023	74,662,468	$	747	$	1,817,494	$	1,474,211	$	91	$	3,292,543


	Nine Months Ended September 30, 2022
	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total
	Shares	Amount
Balance at December 31, 2021	70,668,093	$	707	$	1,709,276	$	887,163	$	—	$	2,597,146
Net income	—	—		—		148,421		—		148,421
Shares issued under stock-based compensation programs, net	498,921	5		(12,633)		—		—		(12,628)
Cash dividends declared	—	—		—		(35,583)		—		(35,583)
Stock-based compensation expense	—	—		13,726		—		—		13,726
Forfeiture of restricted stock	(4,769)	—		—		—		—		—
Balance at March 31, 2022	71,162,245	$	712	$	1,710,369	$	1,000,001	$	—	$	2,711,082
Net Income	—	—		—		189,542		—		189,542
Shares issued under stock-based compensation programs, net	(1,573)	—		(58)		—		—		(58)
Cash dividends declared	—	—		—		(35,580)		—		(35,580)
Stock-based compensation expense	—	—		9,331		—		—		9,331
Forfeiture of restricted stock	(2,797)	—		—		—		—		—
Balance at June 30, 2022	71,157,875	$	712	$	1,719,642	$	1,153,963	$	—	$	2,874,317

	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

	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

	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	%

	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		Nine Months Ended						% or Percentage Change
	September 30,								September 30,
	2023			2022			Change		2023			2022
	(Dollars in thousands)
Total Originations (including transfer loans):
Loans	1,225			1,447			(15)	%	3,766			4,278			(12)	%
Principal	$	544,428		$	688,983		(21)	%	$	1,696,923		$	1,998,086		(15)	%
Capture Rate Data:
Capture rate as % of all homes delivered	62		%	61		%	1	%	65		%	60		%	5	%
Capture rate as % of all homes delivered (excludes cash sales)	69		%	64		%	5	%	71		%	63		%	8	%
Mortgage Loan Origination Product Mix:
FHA loans	28		%	12		%	16	%	23		%	13		%	10	%
Other government loans (VA & USDA)	18		%	23		%	(5)	%	19		%	21		%	(2)	%
Total government loans	46		%	35		%	11	%	42		%	34		%	8	%
Conventional loans	54		%	65		%	(11)	%	58		%	66		%	(8)	%
	100		%	100		%	—	%	100		%	100		%	—	%
Loan Type:
Fixed rate	100		%	98		%	2	%	100		%	98		%	2	%
ARM	—		%	2		%	(2)	%	—		%	2		%	(2)	%
Credit Quality:
Average FICO Score	744			744			—	%	741			744			—	%
Other Data:	`			`
Average Combined LTV ratio	82		%	81		%	1	%	82		%	82		%	—	%
Full documentation loans	100		%	100		%	—	%	100		%	100		%	—	%
Loans Sold to Third Parties:
Loans	1,201			1,435			(16)	%	3,890			4,465			(13)	%
Principal	$	532,315		$	676,451		(21)	%	$	1,758,383		$	2,068,243		(15)	%