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

- 8 -

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

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

Three Months Ended

March 31,

2019

2018

(Dollars in thousands)

Beginning balance ¹
$ - $ 3,992
Adoption of accounting standards
- (3,992 )
Ending balance
$ - $ -


⁽¹⁾ ~~Amounts net-of-tax.~~

During the first quarter of 2018, an election was made to reclassify the income tax effects of the Tax Cuts and Jobs Act related to net unrealized gains on equity investments from accumulated other comprehensive income to retained earnings.

65.	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.

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

		Fair Value					Fair Value
Financial Instrument	Hierarchy	March 31, 2019		December 31, 2018		Hierarchy	March 31, 2020		December 31, 2019
		(Dollars in thousands)
Cash and cash equivalents
Debt securities (available-for-sale)	Level 1	$	34,860	$	34,866
							(Dollars in thousands)
Marketable securities
Equity securities	Level 1	$	45,767	$	40,879	Level 1	$	43,985	$	56,747

Mortgage loans held-for-sale, net	Level 2	$	110,810	$	149,211	Level 2	$	133,921	$	197,021

~~- 9 -~~

~~Table of Contents~~

The following methods and assumptions were used to estimate the fair value of each class of financial instruments as of March 31, ~~2019~~ 2020 and December 31, ~~2018.~~2019.

Cash and cash equivalents (excluding debt securities with an original maturity of three months or less), 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.

Equity securities. Our equity securities consist of holdings in common stock and exchange traded funds. As of March 31, ~~2019~~ 2020 and December 31, ~~2018,~~ 2019, all of our equity securities were recorded at fair value with all changes in fair value recorded to other income (expense), net ~~gain (loss) on marketable equity securities~~ in the financial services section of our consolidated statements of operations and comprehensive income.

~~Debt~~ ~~securities~~. Our debt securities consist of U.S. government securities. As of March 31, 2019 and December 31, 2018, all of our debt securities were treated as available-for-sale investments and, as such, are recorded at fair value with all changes in fair value initially recorded through AOCI, subject to an assessment to determine if any unrealized loss, if applicable, is other-than-temporary.

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

March 31, 2019

Amortized
Cost Basis

OTTI

Net Amortized
Cost

Fair Value

(Dollars in thousands)

Financial Services
Cash and cash equivalents

Debt securities
$ 34,860 $ - $ 34,860 $ 34,860

December 31, 2018

Amortized
Cost Basis

OTTI

Net Amortized
Cost

Fair Value

Financial Services

Cash and cash equivalents

Debt securities
$ 34,866 $ - $ 34,866 $ 34,866

~~- 10 -~~

~~Table of Contents~~

The following table reconciles the net gain (loss) recognized during the three months ended March 31, ~~2019~~ 2020 and ~~2018~~2019 on equity securities to the unrealized gain (loss) recognized during the periods on equity securities still held at the reporting date.

	Three Months Ended
	March 31,
	2020			2019
	(Dollars in thousands)
Net gain (loss) recognized during the period on equity securities	$	(13,268	)	$	4,840
Less: Net gain (loss) recognized during the period on equity securities sold during the period		609			(237	)
Unrealized gain (loss) recognized during the reporting period on equity securities still held at the reporting date	$	(13,877	)	$	4,603

Three Months Ended

March 31,

2019

2018

Net gain (loss) recognized during the period on equity securities
$ 4,840 $ (1,153 )
Less: Net gain recognized during the period on equity securities sold during the period
(237 ) (96 )
Unrealized gain (loss) recognized during the reporting period on equity securities still held at the reporting date
$ 4,603 $ (1,057 )

- 9 -

Table of Contents

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 March 31, ~~2019~~ 2020 and December 31, ~~2018,~~ 2019, we had ~~$96.2~~$88.1 million and ~~$130.8~~$136.8 million, respectively, of mortgage loans held-for-sale under commitments to sell. The fair value for those loans was based on quoted market prices for those mortgage loans, which are Level 2 fair value inputs. At March 31, ~~2019~~ 2020 and December 31, ~~2018,~~ 2019, we had ~~$14.6~~$45.8 million and ~~$18.5~~$60.2 million, respectively, of mortgage loans held-for-sale that were not under commitments to sell. The fair value for those loans was primarily based upon the estimated market price received from an outside party, which is a Level 2 fair value input.

Gains on sales of mortgage loans, net, are included as a component of revenues in the financial services section of our consolidated statements of operations and comprehensive income. For the three months ended March 31, ~~2019,~~ 2020, we recorded net gains on the sales of mortgage loans of ~~$11.7~~$16.7 million, compared to ~~$9.0~~$11.7 million for the same period in the prior year.

Mortgage Repurchase Facility. The debt associated with our mortgage repurchase facility (see Note 1918 for further discussion) is at floating rates that approximate current market rates and have relatively short-term maturities, generally within 30 days. The fair value approximates carrying value and is based on Level 2 inputs.

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

March 31, 2019

December 31, 2018

Carrying
Amount

Fair Value

Carrying
Amount

Fair Value

(Dollars in thousands)

$250 Million 5⅝% Senior Notes due February 2020, net
$ 249,109 $ 254,304 $ 248,850 $ 253,413
$250 Million 5½% Senior Notes due January 2024, net
248,841 258,479 248,789 242,983
$500 Million 6% Senior Notes due January 2043, net
490,372 434,117 490,328 386,552
Total
$ 988,322 $ 946,900 $ 987,967 $ 882,948

	March 31, 2020				December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(Dollars in thousands)
$250 Million 5.625% Senior Notes due February 2020, net	$	-	$	-	$	249,909	$	250,400
$250 Million 5.500% Senior Notes due January 2024, net		249,060		228,750		249,005		272,083
$300 Million 3.850% Senior Notes due January 2030, net		297,285		270,750		-		-
$500 Million 6.000% Senior Notes due January 2043, net		490,555		466,250		490,508		528,542
Total	$	1,036,900	$	965,750	$	989,422	$	1,051,025

- 1110 -

Table of Contents

76.	Inventories

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

	March 31,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
	(Dollars in thousands)				(Dollars in thousands)
Housing completed or under construction:
West	$	516,900	$	521,960	$	699,039	$	589,040
Mountain		356,177		347,738		411,077		358,370
East		77,197		82,738		105,098		88,781
Subtotal		950,274		952,436		1,215,214		1,036,191
Land and land under development:
West		699,704		705,591		760,606		772,189
Mountain		420,155		402,657		448,492		468,718
East		78,965		72,310		92,335		89,477
Subtotal		1,198,824		1,180,558		1,301,433		1,330,384
Total inventories	$	2,149,098	$	2,132,994	$	2,516,647	$	2,366,575

Our inventories are primarily associated with communities where we intend to construct and sell homes, including models and unsold homes. Costs capitalized to land and land under development primarily include: ~~(1)~~(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 Margin” (which is defined as home sale revenues less home cost of sales and all incremental costs associated directly with the subdivision, including sales commissions and marketing costs);

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

~~forecasted Operating Margin for homes in backlog;~~

~~actual and trending net home orders;~~

~~homes available for sale;~~

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

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

	•	actual and trending “Operating Margin” (which is defined as home sale revenues less home cost of sales and all incremental costs associated directly with the subdivision, including sales commissions and marketing costs);
	•	estimated future undiscounted cash flows and Operating Margin;
	•	forecasted Operating Margin for homes in backlog;
	•	actual and trending net home orders;
	•	homes available for sale;
	•	market information for each sub-market, including competition levels, home foreclosure levels, the size and style of homes currently being offered for sale and lot size; and
	•	known or probable events indicating that the carrying value may not be recoverable.

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

- 1211 -

Table of Contents

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

Impairments of homebuilding inventory by segment for the three months ended March 31, ~~2019~~ 2020 and ~~2018~~2019 are shown in the table below.

	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2019		2018		2020		2019
	(Dollars in thousands)				(Dollars in thousands)
West	$	-	$	375	$	-	$	-
Mountain		400		175		-		400
East		210		-		-		210
Total inventory impairments	$	610	$	550	$	-	$	610

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

	Impairment Data								Quantitative Data			Impairment Data						Quantitative Data
Three Months Ended	Total Subdivisions Tested		Inventory Impairments		Fair Value of Inventory After Impairments		Number of Subdivisions Impaired		Discount Rate			Inventory Impairments		Fair Value of Inventory After Impairments		Number of Subdivisions Impaired		Discount Rate
	(Dollars in thousands)
March 31, 2019		16	$	610	$	10,476		2		N/A		$	610	$	10,476		2		N/A
March 31, 2018		24	$	550	$	5,223		2		12	%

8.7.	Capitalization of Interest

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

	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2019			2018			2020			2019
	(Dollars in thousands)						(Dollars in thousands)
Homebuilding interest incurred	$	16,031		$	15,625		$	16,534		$	16,031
Less: Interest capitalized		(16,031	)		(15,625	)		(16,534	)		(16,031	)
Homebuilding interest expensed	$	-		$	-		$	-		$	-

Interest capitalized, beginning of period	$	54,845		$	57,541		$	55,310		$	54,845
Plus: Interest capitalized during period		16,031			15,625			16,534			16,031
Less: Previously capitalized interest included in home and land cost of sales		(13,929	)		(14,428	)
Less: Previously capitalized interest included in home cost of sales								(12,767	)		(13,929	)
Interest capitalized, end of period	$	56,947		$	58,738		$	59,077		$	56,947

- 1312 -

Table of Contents

9.8.

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

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

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

Three Months Ended

March 31, 2019

(Dollars in thousands)

Operating lease cost ¹
$ 1,980
Less: Sublease income (Note 20)
(37 )
Net lease cost
$ 1,943

~~_________________________________________~~
¹~~Includes variable lease costs, which are immaterial.~~

	Three Months Ended
	March 31,
	2020			2019
	(Dollars in thousands)
Operating lease cost ¹	$	2,046		$	1,980
Less: Sublease income (Note 19)		(38	)		(37	)
Net lease cost	$	2,008		$	1,943

¹Includes variable lease costs, which are immaterial.

Supplemental cash flow information related to leases was as follows:

			Three Months Ended
	Three Months Ended		March 31,
	March 31, 2019		2020		2019
	(Dollars in thousands)		(Dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,771	$	1,906	$	1,771
Leased assets obtained in exchange for new operating lease liabilities	$	1,477	$	2,645	$	1,477

Supplemental cash flow information related to non-cash transactions also includes the recognition of operating lease right-of-use assets of $33.5 million and operating lease liabilities of $34.3 million upon adoption of ASC 842.

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

March 31, ~~2019~~

2020

Weighted-average remaining lease term (in years)

~~6.8~~6.0

Weighted-average discount rate

5.5

~~5.5~~%

- 1413 -

Table of Contents

Maturities of operating lease liabilities were as follows:

	Year Ended		Year Ended
	December 31,		December 31,
	(Dollars in thousands)		(Dollars in thousands)
2019 (excluding the three months ended March 31, 2019)	$	5,315
2020		6,317
2020 (excluding the three months ended March 31, 2020)			$	5,112
2021		6,066		7,009
2022		5,752		6,670
2023		5,148		5,718
2024				5,307
Thereafter		13,118		9,529
Total operating lease payments ¹	$	41,716
Total operating lease payments			$	39,345

Less: Interest		7,133		6,073
Present value of operating lease liabilities ²	$	34,583
Present value of operating lease liabilities ¹			$	33,272

~~__________________________________________________~~
¹~~Operating lease payments exclude $0.6 million of legally binding lease payments for leases signed but not yet commenced.~~
²~~Financial~~Homebuilding and financial services operating lease liabilities of $32.2 million and $1.1 million, respectively, are included as a component of accrued and other liabilities and accounts payable and accrued liabilities, respectively, in the homebuilding and financial services section of our consolidated balance sheet at March 31, ~~2019.~~2020.

109.

Homebuilding Prepaid and Other Assets

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

	March 31,		December 31,
	2020		2019
	(Dollars in thousands)
Operating lease right-of-use asset (Note 8)	$	31,619	$	30,277
Land option deposits		27,126		27,361
Prepaid expenses		6,997		7,294
Goodwill		6,008		6,008
Deferred debt issuance costs on revolving credit facility, net		5,746		6,130
Other		506		1,288
Total	$	78,002	$	78,358

March 31,

December 31,

2019

2018

(Dollars in thousands)

Land option deposits
$ 21,951 $ 23,805
Goodwill
6,008 6,008
Prepaid expenses
6,614 7,324
Deferred debt issuance costs on revolving credit facility, net
7,279 7,662
Other
693 995
Total
$ 42,545 $ 45,794

- 14 -

Table of Contents

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

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

	March 31,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
	(Dollars in thousands)				(Dollars in thousands)
Customer and escrow deposits	$	36,986	$	34,463	$	43,342	$	39,001
Warranty accrual		29,992		28,262		30,887		31,386
Accrued compensation and related expenses		22,438		39,459		26,333		45,003
Lease liability (Note 8)						32,182		30,830
Accrued interest		13,281		27,734		14,018		27,734
Construction defect claim reserves		8,367		8,464		8,318		8,196
Land development and home construction accruals		9,064		8,683		8,862		9,750
Income taxes payable		18,337		6,245
Other accrued liabilities		46,666		42,937		69,092		54,040
Total accrued liabilities	$	185,131	$	196,247	$	233,034	$	245,940

~~- 15 -~~

~~Table of Contents~~

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

	March 31,		December 31,
	2020		2019
	(Dollars in thousands)
Insurance reserves	$	53,132	$	52,219
Accounts payable and other accrued liabilities		17,845		16,310
Total accounts payable and accrued liabilities	$	70,977	$	68,529

March 31,

December 31,

2019

2018

(Dollars in thousands)

Insurance reserves
$ 47,852 $ 46,844
Accounts payable and other accrued liabilities
11,022 11,699
Total accounts payable and accrued liabilities
$ 58,874 $ 58,543

- 15 -

Table of Contents

121.	Warranty Accrual

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

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

The table set forth below summarizes accrual, adjustment and payment activity related to our warranty accrual for the three months ended March 31, ~~2019~~ 2020 and 2018. For the three months ended March 31, 2019 and 2018, we recorded adjustments to increase our warranty accrual by $0.9 million and $3.1 million, respectively. The adjustments recorded during the three months ended March 31, 2019 related to homes with structural related issues, while the adjustments recorded during the three months ended March 31, 2018 were due to higher than expected general warranty related expenditures.2019.

	Three Months Ended
	March 31,
	2020			2019
	(Dollars in thousands)
Balance at beginning of period	$	31,386		$	28,262
Expense provisions		3,165			3,348
Cash payments		(3,664	)		(2,493	)
Adjustments		-			875
Balance at end of period	$	30,887		$	29,992

Three Months Ended

March 31,

2019

2018

(Dollars in thousands)

Balance at beginning of period
$ 28,262 $ 21,909
Expense provisions
3,348 2,598
Cash payments
(2,493 ) (2,500 )
Adjustments
875 3,106
Balance at end of period
$ 29,992 $ 25,113

- 16 -

Table of Contents

176.	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 March 31, ~~2019,~~ 2020, we had outstanding surety bonds and letters of credit totaling ~~$245.5~~$284.0 million and ~~$89.3~~$96.6 million, respectively, including ~~$61.7~~$70.9 million in letters of credit issued by HomeAmerican. The estimated cost to complete obligations related to these bonds and letters of credit were approximately ~~$126.6~~$152.4 million and $51.2 million, respectively. All letters of credit as of March 31, ~~2019,~~ 2020, excluding those issued by HomeAmerican, were issued under our unsecured revolving credit facility (see Note 1918 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.~~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 March 31, ~~2019,~~ 2020, we had cash deposits and letters of credit totaling ~~$19.3~~$21.4 million and ~~$4.8~~$8.2 million, respectively, at risk associated with the option to purchase ~~6,368~~8,533 lots.

Coronavirus/COVID-19 Pandemic. While the response to the pandemic continues to rapidly evolve, many state and local governments had extended and expanded on restrictions that substantially limited the operations of non-essential businesses and the activities of individuals. Certain markets in which we do business stopped our construction and sales of homes and others limited the operations of sales centers and model homes. We continue to market and sell homes in all markets, but economic uncertainty and shelter in place requirements have caused a significant decline in traffic at our sales centers and model homes, and we have seen a significant increase in our cancellation rate. The impact of the decreased traffic and increased cancellation rate was evident in our net new orders for the month of April, which fell 53% year-over-year. While the extent to which the pandemic will impact our financial results in the coming periods depends on future developments, the pandemic and its associated impact on the U.S. economy and consumer confidence could have a material impact to the Company’s future results of operations, financial condition and cash flows.

- 20 -

Table of Contents

187.	Derivative Financial Instruments

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

At March 31, ~~2019,~~ 2020, we had interest rate lock commitments with an aggregate principal balance of ~~$149.4~~$221.0 million. Additionally, we had ~~$14.1~~$43.7 million of mortgage loans held-for-sale at March 31, ~~2019~~ 2020 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 ~~$121.0~~$162.0 million at March 31, ~~2019.~~2020.

For the three months ended March 31, ~~2019~~ 2020 and ~~2018,~~2019, we recorded net gains on derivatives of $1.0 million and $0.9 million, respectively, in revenues in the financial services section of our consolidated statements of operations and ~~$1.5 million, respectively, on our derivatives.~~comprehensive income.

~~- 20 -~~

~~Table of Contents~~

198.	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 November 1, 2018 to ~~(1)~~(1) extend the Revolving Credit Facility maturity to December 18, 2023, ~~(2)~~(2) increase the aggregate commitment from $700 million to $1.0 billion (the “Commitment”) and ~~(3)~~(3) provide that the aggregate amount of the commitments may increase to an amount not to exceed $1.5 billion upon our request, subject to receipt of additional commitments from existing or additional lenders and, in the case of additional lenders, the consent of the co-administrative agents. As defined in the Revolving Credit Facility, interest rates on base rate borrowings are equal to the highest of ~~(1)~~(1) 0.0%, ~~(2)~~(2) a prime rate, ~~(3)~~(3) a federal funds effective rate plus 1.50%, and ~~(4)~~(4) a specified eurocurrency rate plus 1.00% and, in each case, plus a margin that is determined based on our credit ratings and leverage ratio. Interest rates on eurocurrency borrowings are equal to a specified eurocurrency rate plus a margin that is determined based on our credit ratings and leverage ratio. At any time at which our leverage ratio, as of the last day of the most recent calendar quarter, exceeds 55%, the aggregate principal amount of all consolidated senior debt borrowings outstanding may not exceed the borrowing base. There is no borrowing base requirement if our leverage ratio, as of the last day of the most recent calendar quarter, is 55% or less.

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

The Revolving Credit Facility is subject to acceleration upon certain specified events of default, including breach of the consolidated tangible net worth covenant, a violation of anti-corruption or sanctions laws, failure to make timely payments, breaches of certain representations or covenants, failure to pay other material indebtedness, or another person becoming beneficial owner of 50% or more of our outstanding common stock. We believe we were in compliance with the representations, warranties and covenants included in the Revolving Credit Facility as of March 31, ~~2019.~~2020.

We incur costs associated with unused commitment fees pursuant to the terms of the Revolving Credit Facility. At March 31, ~~2019~~ 2020 and December 31, ~~2018,~~ 2019, there were ~~$27.6~~$25.7 million and ~~$27.8~~$23.5 million, respectively, in letters of credit outstanding, which reduced the amounts available to be borrowed under the Revolving Credit Facility. We had $15.0 million outstanding under the Revolving Credit Facility as of March 31, ~~2019~~ 2020 and December 31, ~~2018.~~ 2019. As of March 31, ~~2019,~~ 2020, availability under the Revolving Credit Facility was approximately ~~$957.4~~$959.3 million.

- 21 -

Table of Contents

Mortgage Repurchase Facility. HomeAmerican has a Master Repurchase Agreement (the “Mortgage Repurchase Facility”) with U.S. Bank National Association (“USBNA”). Effective ~~August 9, 2018,~~ May 23, 2019, the Mortgage Repurchase Facility was amended to extend its termination date to ~~August 8, 2019.~~ May 21, 2020. 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 on March ~~27, 2019~~ 30, 2020 from ~~$75~~$75 million to ~~$100~~$110 million ~~and was~~ effective through April ~~24, 2019.~~ 27, 2020. The Mortgage Repurchase Facility also had a temporary increase in the maximum aggregate commitment from $75 million to ~~$130~~$150 million on December ~~27, 2018 and was~~ 24, 2019 effective through January ~~25, 2019.~~ 22, 2020. At March 31, ~~2019~~ 2020 and December 31, ~~2018,~~ 2019, HomeAmerican had ~~$84.9~~$108.7 million and ~~$116.8~~$149.6 million, respectively, of mortgage loans that HomeAmerican was obligated to repurchase under the Mortgage Repurchase Facility. Mortgage loans that HomeAmerican is obligated to repurchase under the Mortgage Repurchase Facility are accounted for as a debt financing arrangement and are reported as mortgage repurchase facility in the consolidated balance sheets. Advances under the Mortgage Repurchase Facility carry a price range that is based on a LIBOR rate or successor benchmark rate.

The Mortgage Repurchase Facility contains various representations, warranties and affirmative and negative covenants that we believe are customary for agreements of this type. The negative covenants include, among others, (i) a minimum Adjusted Tangible Net Worth requirement, (ii) a maximum Adjusted Tangible Net Worth ratio, (iii) a minimum adjusted net income requirement, and (iv) a minimum Liquidity requirement. The foregoing capitalized terms are defined in the Mortgage Repurchase Facility. We believe HomeAmerican was in compliance with the representations, warranties and covenants included in the Mortgage Repurchase Facility as of March 31, ~~2019.~~2020.

~~- 21 -~~

~~Table of Contents~~

2019.

Related Party Transactions

We contributed ~~$0.5~~$1.5 million in cash to the MDC/Richmond American Homes Foundation (the “Foundation”) during the three months ended March 31, ~~2019.~~ 2020. The Foundation is a non-profit organization operated exclusively for charitable, educational and other purposes beneficial to social welfare within the meaning of Section ~~501(c)(3)~~501(c)(3) of the Internal Revenue Code. The following Directors and/or officers of the Company served as directors of the Foundation at March 31, ~~2019,~~ 2020, 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 the Company, also serve as directors of the Foundation. All directors of the Foundation serve without compensation.

The Company has a sublease agreement with CVentures, Inc. Larry A. Mizel, the Chief Executive Officer of the Company, is the President of CVentures, Inc. The sublease is for office space that CVentures, Inc. has continuously leased from the Company since 2005. The current sublease term commenced November 1, 2016 and will continue through October 31, 2021, with an option to extend to October 31, 2026. The sublease agreement is for approximately 5,437 rentable square feet at a base rent that increases over the initial term from $26.50 to $28.68 per rentable square foot per year, and increasing over the extension term from $29.26 to $31.67 per rentable square foot per year. The sublease rent is an allocation of the rent under the master lease agreement based on the sublease square footage.

- 22 -

Table of Contents

210.	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

●

~~M.D.C. Land Corporation~~RAH of Florida, Inc.

●

~~RAH of Florida,~~Richmond American Construction, Inc.

●

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

●

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

●

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

●

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

●

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

●

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

●

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

●

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

●

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

●

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

●

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

●

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

●

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

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

We have determined that separate, full financial statements of the Guarantor Subsidiaries would not be material to investors and, accordingly, supplemental financial information for the Guarantor and Non-Guarantor Subsidiaries is presented below.

- 2223 -

Table of Contents

Supplemental Condensed Combining Balance Sheet

	March 31, 2019											March 31, 2020
					Non-											Non-
			Guarantor		Guarantor		Eliminating			Consolidated				Guarantor		Guarantor		Eliminating			Consolidated
	MDC		Subsidiaries		Subsidiaries		Entries			MDC		MDC		Subsidiaries		Subsidiaries		Entries			MDC
	(Dollars in thousands)											(Dollars in thousands)
ASSETS
Homebuilding:
Cash and cash equivalents	$	411,750	$	4,624	$	-	$	-		$	416,374	$	380,318	$	6,386	$	-	$	-		$	386,704
Restricted cash		-		8,136		-		-			8,136		-		15,762		-		-			15,762
Trade and other receivables		589		67,371		-		-			67,960		694		68,607		-		-			69,301
Inventories:
Housing completed or under construction		-		950,274		-		-			950,274		-		1,215,214		-		-			1,215,214
Land and land under development		-		1,198,824		-		-			1,198,824		-		1,301,433		-		-			1,301,433
Total inventories		-		2,149,098		-		-			2,149,098		-		2,516,647		-		-			2,516,647

Intercompany receivables		1,939,500		6,509		-		(1,946,009	)		-		2,265,553		5,919		-		(2,271,472	)		-
Investment in subsidiaries		272,420		-		-		(272,420	)		-		279,593		-		-		(279,593	)		-
Property and equipment, net		23,608		36,157		-		-			59,765		23,033		39,283		-		-			62,316
Operating lease right-of-use asset		32,604		-		-		-			32,604
Deferred tax asset, net		34,513		-		-		(9	)		34,504		18,962		-		-		1,698			20,660
Prepaid and other assets		11,050		31,495		-		-			42,545		32,961		45,041		-		-			78,002
Total homebuilding assets		2,726,034		2,303,390		-		(2,218,438	)		2,810,986		3,001,114		2,697,645		-		(2,549,367	)		3,149,392

Financial Services:
Cash and cash equivalents		-		-		51,556		-			51,556		-		-		22,159		-			22,159
Marketable securities		-		-		45,767		-			45,767		-		-		43,985		-			43,985
Intercompany receivables		-		-		21,713		(21,713	)		-		-		-		64,666		(64,666	)		-
Mortgage loans held-for-sale, net		-		-		110,810		-			110,810		-		-		133,921		-			133,921
Other assets		-		-		15,791		9			15,800		-		-		25,953		(1,698	)		24,255
Total financial services assets		-		-		245,637		(21,704	)		223,933		-		-		290,684		(66,364	)		224,320
Total Assets	$	2,726,034	$	2,303,390	$	245,637	$	(2,240,142	)	$	3,034,919	$	3,001,114	$	2,697,645	$	290,684	$	(2,615,731	)	$	3,373,712

LIABILITIES AND EQUITY

Homebuilding:
Accounts payable	$	39	$	58,531	$	-	$	-		$	58,570	$	515	$	97,465	$	-	$	-		$	97,980
Accrued liabilities		50,285		132,666		-		2,180			185,131
Operating lease liabilities		33,460		-		-		-			33,460
Accrued and other liabilities													67,874		162,742		-		2,418			233,034
Advances and notes payable to parent and subsidiaries		28,222		1,930,727		296		(1,959,245	)		-		69,748		2,254,742		-		(2,324,490	)		-
Revolving credit facility		15,000		-		-		-			15,000		15,000		-		-		-			15,000
Senior notes, net		988,322		-		-		-			988,322		1,036,900		-		-		-			1,036,900
Total homebuilding liabilities		1,115,328		2,121,924		296		(1,957,065	)		1,280,483		1,190,037		2,514,949		-		(2,322,072	)		1,382,914

Financial Services:
Accounts payable and other liabilities		-		-		61,054		(2,180	)		58,874		-		-		73,395		(2,418	)		70,977
Advances and notes payable to parent and subsidiaries		-		-		8,477		(8,477	)		-		-		-		11,648		(11,648	)		-
Mortgage repurchase facility		-		-		84,856		-			84,856		-		-		108,744		-			108,744
Total financial services liabilities		-		-		154,387		(10,657	)		143,730		-		-		193,787		(14,066	)		179,721
Total Liabilities		1,115,328		2,121,924		154,683		(1,967,722	)		1,424,213		1,190,037		2,514,949		193,787		(2,336,138	)		1,562,635

Equity:
Total Stockholders' Equity		1,610,706		181,466		90,954		(272,420	)		1,610,706		1,811,077		182,696		96,897		(279,593	)		1,811,077
Total Liabilities and Stockholders' Equity	$	2,726,034	$	2,303,390	$	245,637	$	(2,240,142	)	$	3,034,919	$	3,001,114	$	2,697,645	$	290,684	$	(2,615,731	)	$	3,373,712

- 2324 -

Table of Contents

Supplemental ~~Condensed~~Condensed Combining Balance Sheet

	December 31, 2018											December 31, 2019
					Non-											Non-
			Guarantor		Guarantor		Eliminating			Consolidated				Guarantor		Guarantor		Eliminating			Consolidated
	MDC		Subsidiaries		Subsidiaries		Entries			MDC		MDC		Subsidiaries		Subsidiaries		Entries			MDC
	(Dollars in thousands)											Dollars in thousands
ASSETS
Homebuilding:
Cash and cash equivalents	$	410,127	$	4,597	$	-	$	-		$	414,724	$	418,822	$	5,364	$	-	$	-		$	424,186
Restricted cash		-		6,363		-		-			6,363		-		14,279		-		-			14,279
Trade and other receivables		758		52,224		-		-			52,982		624		65,205		-		-			65,829
Inventories:
Housing completed or under construction		-		952,436		-		-			952,436		-		1,036,191		-		-			1,036,191
Land and land under development		-		1,180,558		-		-			1,180,558		-		1,330,384		-		-			1,330,384
Total inventories		-		2,132,994		-		-			2,132,994		-		2,366,575		-		-			2,366,575

Intercompany receivables		1,735,342		7,369		-		(1,742,711	)		-		1,936,075		6,370		-		(1,942,445	)		-
Investment in subsidiaries		455,848		-		-		(455,848	)		-		488,993		-		-		(488,993	)		-
Property and equipment, net		23,896		34,271		-		-			58,167		23,192		37,222		-		-			60,414
Deferred tax assets, net		36,168		-		-		1,010			37,178		22,508		-		-		(740	)		21,768
Metropolitan district bond securities (related party)		-		-		-		-			-
Other assets		12,234		33,560		-		-			45,794		34,728		43,630		-		-			78,358
Total Homebuilding Assets		2,674,373		2,271,378		-		(2,197,549	)		2,748,202		2,924,942		2,538,645		-		(2,432,178	)		3,031,409

Financial Services:
Cash and cash equivalents		-		-		49,052		-			49,052		-		-		35,747		-			35,747
Marketable securities		-		-		40,879		-			40,879		-		-		56,747		-			56,747
Intercompany receivables		-		-		22,346		(22,346	)		-		-		-		47,753		(47,753	)		-
Mortgage loans held-for-sale, net		-		-		149,211		-			149,211		-		-		197,021		-			197,021
Other assets		-		-		14,743		(1,010	)		13,733		-		-		16,692		740			17,432
Total Financial Services Assets		-		-		276,231		(23,356	)		252,875		-		-		353,960		(47,013	)		306,947
Total Assets	$	2,674,373	$	2,271,378	$	276,231	$	(2,220,905	)	$	3,001,077	$	2,924,942	$	2,538,645	$	353,960	$	(2,479,191	)	$	3,338,356

LIABILITIES AND EQUITY

Homebuilding:
Accounts payable	$	-	$	50,505	$	-	$	-		$	50,505	$	289	$	87,075	$	-	$	-		$	87,364
Accrued liabilities		65,691		125,387		-		5,169			196,247
Accrued and other liabilities													84,088		156,652		-		5,200			245,940
Advances and notes payable to parent and subsidiaries		29,715		1,727,248		295		(1,757,258	)		-		53,658		1,912,969		-		(1,966,627	)		-
Revolving credit facility		15,000		-		-		-			15,000		15,000		-		-		-			15,000
Senior notes, net		987,967		-		-		-			987,967		989,422		-		-		-			989,422
Total Homebuilding Liabilities		1,098,373		1,903,140		295		(1,752,089	)		1,249,719		1,142,457		2,156,696		-		(1,961,427	)		1,337,726

Financial Services:
Accounts payable and accrued liabilities		-		-		63,712		(5,169	)		58,543		-		-		73,729		(5,200	)		68,529
Advances and notes payable to parent and subsidiaries		-		-		7,799		(7,799	)		-		-		-		23,571		(23,571	)		-
Mortgage repurchase facility		-		-		116,815		-			116,815		-		-		149,616		-			149,616
Total Financial Services Liabilities		-		-		188,326		(12,968	)		175,358		-		-		246,916		(28,771	)		218,145
Total Liabilities		1,098,373		1,903,140		188,621		(1,765,057	)		1,425,077		1,142,457		2,156,696		246,916		(1,990,198	)		1,555,871

Equity:
Total Stockholders' Equity		1,576,000		368,238		87,610		(455,848	)		1,576,000		1,782,485		381,949		107,044		(488,993	)		1,782,485
Total Liabilities and Stockholders' Equity	$	2,674,373	$	2,271,378	$	276,231	$	(2,220,905	)	$	3,001,077	$	2,924,942	$	2,538,645	$	353,960	$	(2,479,191	)	$	3,338,356

- 2425 -

Table of Contents

Supplemental Condensed Combining Statement of Operations

Three Months Ended March 31, 2019

Non-

Guarantor

Guarantor

Eliminating

Consolidated

MDC

Subsidiaries

Subsidiaries

Entries

MDC

(Dollars in thousands)

Homebuilding:
Revenues
$ - $ 647,278 $ - $ - $ 647,278
Cost of sales
- (524,552 ) - - (524,552 )
Inventory impairments
- (610 ) - - (610 )
Gross margin
- 122,116 - - 122,116
Selling, general, and administrative expenses
(17,438 ) (64,701 ) - (122 ) (82,261 )
Equity income of subsidiaries
52,165 - - (52,165 ) -
Interest and other income
2,409 155 - (173 ) 2,391
Other expense
7 (1,198 ) - - (1,191 )
Homebuilding pretax income (loss)
37,143 56,372 - (52,460 ) 41,055
Financial Services:

Financial services pretax income
- - 14,256 295 14,551
Income before income taxes
37,143 56,372 14,256 (52,165 ) 55,606
(Provision) benefit for income taxes
3,407 (15,264 ) (3,199 ) - (15,056 )
Net income
$ 40,550 $ 41,108 $ 11,057 $ (52,165 ) $ 40,550
Other comprehensive income related to available-for-sale securities, net of tax
- - - - -
Comprehensive income
$ 40,550 $ 41,108 $ 11,057 $ (52,165 ) $ 40,550

	Three Months Ended March 31, 2018
							Non-									Three Months Ended March 31, 2020
				Guarantor			Guarantor			Eliminating			Consolidated									Non-
	MDC			Subsidiaries			Subsidiaries			Entries			MDC						Guarantor			Guarantor			Eliminating			Consolidated
	(Dollars in thousands)															MDC			Subsidiaries			Subsidiaries			Entries			MDC
Homebuilding:																(Dollars in thousands)
Revenues	$	-		$	607,688		$	-		$	-		$	607,688		$	-		$	697,085		$	-		$	-		$	697,085
Cost of sales		-			(496,632	)		-			-			(496,632	)		-			(558,647	)		-			-			(558,647	)
Inventory impairments		-			(550	)		-			-			(550	)		-			-			-			-			-
Gross margin		-			110,506			-			-			110,506
Gross profit																	-			138,438			-			-			138,438
Selling, general, and administrative expenses		(12,808	)		(58,329	)		-			(204	)		(71,341	)		(10,782	)		(78,408	)		-			(131	)		(89,321	)
Equity income of subsidiaries		47,169			-			-			(47,169	)		-			43,236			-			-			(43,236	)		-
Interest and other income		1,773			318			2			(234	)		1,859			1,783			291			-			(185	)		1,889
Other expense		7			(570	)		-			-			(563	)		8			(1,345	)		-			-			(1,337	)
Homebuilding pretax income (loss)		36,141			51,925			2			(47,607	)		40,461			34,245			58,976			-			(43,552	)		49,669
Financial Services:
Financial services pretax income		-			-			9,633			438			10,071			-			-			(1,423	)		316			(1,107	)
Income before income taxes		36,141			51,925			9,635			(47,169	)		50,532			34,245			58,976			(1,423	)		(43,236	)		48,562
(Provision) benefit for income taxes		2,623			(12,092	)		(2,299	)		-			(11,768	)		2,515			(14,333	)		16			-			(11,802	)
Net income	$	38,764		$	39,833		$	7,336		$	(47,169	)	$	38,764		$	36,760		$	44,643		$	(1,407	)	$	(43,236	)	$	36,760
Other comprehensive income related to available-for-sale securities, net of tax		-			-			-			-			-			-			-			-			-			-
Comprehensive income	$	38,764		$	39,833		$	7,336		$	(47,169	)	$	38,764		$	36,760		$	44,643		$	(1,407	)	$	(43,236	)	$	36,760

	Three Months Ended March 31, 2019
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
Homebuilding:	(Dollars in thousands)
Revenues	$	-		$	647,278		$	-		$	-		$	647,278
Cost of sales		-			(524,552	)		-			-			(524,552	)
Inventory impairments		-			(610	)		-			-			(610	)
Gross profit		-			122,116			-			-			122,116
Selling, general, and administrative expenses		(17,438	)		(64,701	)		-			(122	)		(82,261	)
Equity income of subsidiaries		52,165			-			-			(52,165	)		-
Interest and other income		2,409			155			-			(173	)		2,391
Other expense		7			(1,198	)		-			-			(1,191	)
Homebuilding pretax income (loss)		37,143			56,372			-			(52,460	)		41,055
Financial Services:
Financial services pretax income		-			-			14,256			295			14,551
Income before income taxes		37,143			56,372			14,256			(52,165	)		55,606
(Provision) benefit for income taxes		3,407			(15,264	)		(3,199	)		-			(15,056	)
Net income	$	40,550		$	41,108		$	11,057		$	(52,165	)	$	40,550
Other comprehensive income related to available-for-sale securities, net of tax		-			-			-			-			-
Comprehensive income	$	40,550		$	41,108		$	11,057		$	(52,165	)	$	40,550

- 2526 -

Table of Contents

Supplemental Condensed Combining Statement of Cash Flows

	Three Months Ended March 31, 2019															Three Months Ended March 31, 2020
							Non-																Non-
				Guarantor			Guarantor			Eliminating			Consolidated							Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC			MDC				Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)															(Dollars in thousands)
Net cash provided by (used in) operating activities	$	(18,145	)	$	31,508		$	40,985		$	-		$	54,348		$	(13,287	)		$	(89,277	)	$	65,391		$	-		$	(37,173	)
Net cash provided by (used in) investing activities		29,796			(6,094	)		(93	)		(30,043	)		(6,434	)		(60,693	)			(6,384	)		(506	)		60,565			(7,018	)
Financing activities:
Payments from (advances to) subsidiaries		-			(23,614	)		(6,429	)		30,043			-			-				98,166			(37,601	)		(60,565	)		-
Mortgage repurchase facility		-			-			(31,959	)		-			(31,959	)		-				-			(40,872	)		-			(40,872	)
Proceeds from issuance of senior notes																	298,050				-			-			-			298,050
Repayment of senior notes																	(250,000	)			-			-			-			(250,000	)
Dividend payments		(17,115	)		-			-			-			(17,115	)		(20,768	)			-			-			-			(20,768	)
Proceeds from exercise of stock options		7,087			-			-			-			7,087
Issuance of shares under stock-based compensation programs, net																	8,194				-			-			-			8,194
Net cash provided by (used in) financing activities		(10,028	)		(23,614	)		(38,388	)		30,043			(41,987	)		35,476				98,166			(78,473	)		(60,565	)		(5,396	)

Net increase (decrease) in cash and cash equivalents		1,623			1,800			2,504			-			5,927			(38,504	)	��		2,505			(13,588	)		-			(49,587	)
Cash and cash equivalents:
Beginning of period		410,127			10,960			49,052			-			470,139			418,822				19,643			35,747			-			474,212
End of period	$	411,750		$	12,760		$	51,556		$	-		$	476,066		$	380,318			$	22,148		$	22,159		$	-		$	424,625

	Three Months Ended March 31, 2019
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Net cash provided by (used in) operating activities	$	(18,145	)	$	31,508		$	40,985		$	-		$	54,348
Net cash provided by (used in) investing activities		29,796			(6,094	)		(93	)		(30,043	)		(6,434	)
Financing activities:
Payments from (advances to) subsidiaries		-			(23,614	)		(6,429	)		30,043			-
Mortgage repurchase facility		-			-			(31,959	)		-			(31,959	)
Dividend payments		(17,115	)		-			-			-			(17,115	)
Issuance of shares under stock-based compensation programs, net		7,087			-			-			-			7,087
Net cash provided by (used in) financing activities		(10,028	)		(23,614	)		(38,388	)		30,043			(41,987	)

Net increase (decrease) in cash and cash equivalents		1,623			1,800			2,504			-			5,927
Cash and cash equivalents:
Beginning of period		410,127			10,960			49,052			-			470,139
End of period	$	411,750		$	12,760		$	51,556		$	-		$	476,066

Three Months Ended March 31, 2018

Non-

Guarantor

Guarantor

Eliminating

Consolidated

MDC

Subsidiaries

Subsidiaries

Entries

MDC

(Dollars in thousands)

Net cash provided by (used in) operating activities
$ (8,950 ) $ (79,547 ) $ 27,011 $ - $ (61,486 )
Net cash provided by (used in) investing activities
(94,576 ) (6,250 ) (60 ) 94,509 (6,377 )
Financing activities:

Payments from (advances to) subsidiaries
- 83,203 11,306 (94,509 ) -
Mortgage repurchase facility
- - (22,214 ) - (22,214 )
Dividend payments
(16,865 ) - - - (16,865 )
Proceeds from the exercise of stock options
282 - - - 282
Net cash provided by (used in) financing activities
(16,583 ) 83,203 (10,908 ) (94,509 ) (38,797 )

Net increase (decrease) in cash and cash equivalents
(120,109 ) (2,594 ) 16,043 - (106,660 )
Cash and cash equivalents:

Beginning of period
468,718 13,051 32,471 - 514,240
End of period
$ 348,609 $ 10,457 $ 48,514 $ - $ 407,580

- 2627 -

Table of Contents

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

The following discussion should be read in conjunction with, and is qualified in its entirety by, the Unaudited Consolidated Financial Statements and Notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This item contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are based upon management’s experiences, observations, and analyses. Actual results may differ materially from those indicated in such forward-looking statements. Factors that may cause such a difference include, but are not limited to, those discussed in "Item 1A: Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 and this Quarterly Report on Form 10-Q.

Specifically, as a result of the Coronavirus/COVID-19 pandemic, we experienced increasingly adverse business conditions, especially iTn the latter half of March 2020, w~~he Company distributed~~hich negatively impacted our operating results. ~~an 8% stock dividend on~~These adverse business conditions have continued into the 2020 second quarter. ~~February~~28~~, 201~~9 ~~to shareholders of record on~~ ~~February~~14, ~~201~~9~~. In accordance with Accounting Standards Codific~~~~ation 260, “Earnings per Share,”~~ ~~basic and diluted earnings per share amounts, weighted-average shares outstanding, and dividends declared per share have been restated for all periods present~~~~ed to reflect the effect of this stock dividend~~.It is unclear how long these adverse conditions will persist or how they will impact our results in future periods.

	Three Months Ended
	March 31,						Three Months Ended
	2019			2018			March 31,
	(Dollars in thousands, except per share amounts)						2020			2019
Homebuilding:							(Dollars in thousands, except per share amounts)
Home sale revenues	$	647,278		$	607,688		$	697,085		$	647,278
Home cost of sales		(524,552	)		(496,632	)		(558,647	)		(524,552	)
Inventory impairments		(610	)		(550	)		-			(610	)
Total cost of sales		(525,162	)		(497,182	)		(558,647	)		(525,162	)
Gross profit		122,116			110,506			138,438			122,116
Gross margin		18.9	%		18.2	%		19.9	%		18.9	%
Selling, general and administrative expenses		(82,261	)		(71,341	)		(89,321	)		(82,261	)
Interest and other income		2,391			1,859			1,889			2,391
Other expense		(1,191	)		(563	)		(1,337	)		(1,191	)
Homebuilding pretax income		41,055			40,461			49,669			41,055

Financial Services:
Revenues		17,404			19,035			21,886			17,404
Expenses		(8,957	)		(8,831	)		(10,929	)		(8,957	)
Interest and other income		1,264			1,020
Net gain (loss) on marketable equity securities		4,840			(1,153	)
Financial services pretax income		14,551			10,071
Other income (expense), net								(12,064	)		6,104
Financial services pretax income (loss)								(1,107	)		14,551

Income before income taxes		55,606			50,532			48,562			55,606
Provision for income taxes		(15,056	)		(11,768	)		(11,802	)		(15,056	)
Net income	$	40,550		$	38,764		$	36,760		$	40,550

Earnings per share:
Basic	$	0.66		$	0.64		$	0.58		$	0.66
Diluted	$	0.64		$	0.63		$	0.56		$	0.64

Weighted average common shares outstanding:
Basic		60,939,364			60,340,774			62,491,238			60,939,364
Diluted		62,708,334			61,447,563			64,931,225			62,708,334

Dividends declared per share	$	0.30		$	0.28		$	0.33		$	0.30

Cash provided by (used in):
Operating Activities	$	54,348		$	(61,486	)	$	(37,173	)	$	54,348
Investing Activities	$	(6,434	)	$	(6,377	)	$	(7,018	)	$	(6,434	)
Financing Activities	$	(41,987	)	$	(38,797	)	$	(5,396	)	$	(41,987	)

- 2728 -

Table of Contents

Overview

Industry Conditions

During the first quarter of 2020, the new Coronavirus/COVID-19 pandemic emerged as a threat to global health and economic conditions. Starting in March 2020, the pandemic dramatically changed the everyday lives of individuals throughout much of the United States. For example, stay at home and shelter in place orders were issued by many state and local governments, including the required closure of non-essential businesses in many areas, which have had a significant impact on not only our industry, but the overall economy. Some state and local governments did not identify residential construction as an essential business, which has impacted our ability to physically construct homes, while others limited the operations of sales centers and model homes. While certain of these restrictions have started to lapse during the second quarter, the extent to which the pandemic will impact our financial results in the coming periods depends on future developments, which are highly uncertain and cannot be predicted at this time.

Our first priority with regard to the pandemic is to address the health and safety of our employees, customers, subcontractors and suppliers, as well as the communities in which we operate. We have implemented work-from-home arrangements for employees where practical, increased sanitization procedures in offices and subdivisions, imposed significant business travel restrictions and otherwise promoted social distancing measures. We have implemented virtual processes for key operational activities that have traditionally been done in-person, such as model home tours, Home Gallery appointments, and pre-closing walk-throughs. While we have continued to see some demand for new housing, overall we have experienced a significant decline in traffic and net home orders during the second half of March and continuing into the second quarter. The decline in activity to start the second quarter was evident in our net new orders for the month of April, which fell 53% year-over-year.

Three M~~onths~~ E~~nded~~Months Ended March 31~~, 201~~9 31, 2020

For the three months ended March 31, ~~2019,~~2020, our homebuilding operations generated pretax income of $49.7 million, which was a 21% increase compared to $41.1 million for the same period in the prior year. The increase was the result of an improvement in gross margin from home sales as well as an increase in home sale revenues year-over-year. Gross margin from home sales for the first quarter of 2020 rose 100 basis points to 19.9% compared to 18.9% in the prior year. Home sale revenues increased 8% from $647.3 million in the prior year period to $697.1 million in the first quarter of 2020.

Our financial services business incurred a pretax loss of $1.1 million for the three months ended March 31, 2020 compared to pretax income of $14.6 million for the same period in the prior year. This decrease was the result of unrealized losses on equity securities during the first quarter of 2020 totaling $13.9 million as compared to unrealized gains of $4.6 million during the first quarter of 2019. These equity securities form part of the investment portfolio held by our Insurance Entities and the holding period of these investments is intended to align with the longer-term nature of the underlying insurance reserves held by these entities.

For the three months ended March 31, 2020, we reported net income ~~was $40.6~~of $36.8 million, or ~~$0.64~~$0.56 per diluted share, a ~~5% increase~~9% decrease compared to net income of ~~$38.8~~$40.6 million, or ~~$0.63~~$0.64 per diluted share, for the same period in the prior year. ~~The increase~~This decrease was ~~primarily~~ the result of ~~a $4.5 million increase in our pretax income from financial services resulting from $4.8 million of net gains~~the losses incurred on ~~equity securities for~~ the three months ended March 31, 2019 as compared to $1.2 million of net losses on equity securities for the same period in the prior year. Our pretax income from homebuilding increased by only $0.6 million year-over-year, as an $11.6 million increase in homebuilding gross profit was mostly offset by higher selling, general and administrative costs. The increases in financial services and homebuilding pretax incomeinvestment portfolio discussed above, which were partially offset by ~~a higher effective~~the growth in homebuilding pretax income as well as tax ~~rate that was mostly due~~benefits recognized during the first quarter of 2020 related to ~~federal~~vested share-based awards and energy tax credits, which reduced our 2018 first quarter income tax expense by $1.2 million. It is currently uncertain as to the extent, if any, that energy tax credits will impact our 2019 results, and therefore no benefit was recorded for the 2019 first quarter.

Home sale revenues were up from $607.7 million in the 2018 first quarter to $647.3 million in the 2019 first quarter. The $39.6 million year-over-year improvement was the result of a 7% increase in the number of homes delivered during the quarter.

The dollar value of our net new home orders decreased 1% from the prior year period driven by a 4% decrease in the average selling price, consistent with our ongoing focus on offering more affordable home plans. The decrease in the average selling price was also caused by a shift in the mix of home orders to our more affordable markets. However, the average selling price decrease was almost entirely offset by a 3% increase in the number of net new orders, resulting from a 15% increase in average active subdivisions that more than offset an 11% decrease in our monthly sales absorption pace.credits.

~~Industry Conditions and~~ Outlook for MDC*

We ~~have experienced steadily improving net new order activity~~remain confident in our ability to ~~start~~manage through the ~~year as monthly absorption rates remain healthy, albeit down from recent peak levels experienced in 2018. Overall, we believe industry conditions remain strong as we continued~~uncertainty created by the pandemic, even though the extent to ~~see a positive economic environment driven by factors such as low unemployment, increasing wages, controlled inventory levels and low interest rates throughout the first quarter of 2019.~~

~~We have positioned ourselves for continued growth~~which it will impact our financial results in the ~~face of a slower monthly absorption pace environment, through achieving a 15% year-over-year increase~~coming periods depends on future developments, which are highly uncertain and cannot be predicted at this time (see discussion above and in ~~our active community count~~Risk Factors below). Our financial position to end the 2020 first quarter ~~of 2019. In addition, our backlog conversion rates have improved year-over-year, benefiting from lower cycle times for our more affordable home plans. The demand for affordable product lines~~ remained strong, ~~during~~with cash and investment balances exceeding $450 million and available borrowing capacity on our Revolving Credit Facility exceeding $950 million, resulting in total liquidity of more than $1.4 billion. We ended the ~~first~~ quarter ~~of 2019, accounting for 60% of our net new orders compared to 44% in the prior year period.~~

~~Our dollar value~~with $2.2 billion dollars of homes in backlog, towhich was 31% higher than at the end of the 2019 first ~~quarter was down 12% year-over-year~~quarter. However, our ability to ~~$1.65 billion. This decrease is primarily~~convert that backlog into closings has been negatively impacted by a higher rate of cancellations and some limitations that have temporarily been placed on construction and closing activity. We have taken steps to improve cash flow and reduce costs to diminish the ~~result~~future impacts of the pandemic on our business. We have been successful in extending the closing date of some of our ~~continued focus~~planned land purchases and have re-evaluated planned development activities to decrease cash expenditures. Our experienced senior leadership team continues to monitor the impact of the pandemic on ~~more affordable home plans,~~ a ~~shift in the mix of home sales~~daily basis adjusting day-to-day business operations and our ongoing operating strategy as necessary to adapt to our ~~more affordable markets and a lower pace of sales over the past six months.~~current environment.

Our liquidity to end the 2019 first quarter was up 27% year-over-year to $1.49 billion, providing us with significant resources to fund continued growth. This increase was in large part due to the $300 million increase in our homebuilding line of credit to $1.0 billion during the fourth quarter of 2018.

* See "Forward-Looking Statements" below.

- 2829 -

Table of Contents

Homebuilding

Pretax Income:

	Three Months Ended												Three Months Ended
	March 31,						Change						March 31,						Change
	2019			2018			Amount			%			2020			2019			Amount			%
	(Dollars in thousands)												(Dollars in thousands)
West	$	33,200		$	24,373		$	8,827			36	%	$	36,576		$	33,200		$	3,376		10	%
Mountain		21,714			24,185			(2,471	)		(10	%)		21,512			21,714			(202	)	(1)	%
East		1,473			3,375			(1,902	)		(56	%)		900			1,473			(573	)	(39)	%
Corporate		(15,332	)		(11,472	)		(3,860	)		(34	%)		(9,319	)		(15,332	)		6,013		39	%
Total Homebuilding pretax income	$	41,055		$	40,461		$	594			1	%	$	49,669		$	41,055		$	8,614		21	%

~~For the three months ended March 31, 2019,~~

As noted above, we ~~recorded~~generated homebuilding pretax income for the quarter of ~~$41.1~~$49.7 million, an increase of ~~$0.6~~$8.6 million from ~~$40.5~~$41.1 million for the same period in the prior year. The increase was due to a ~~7% increase in home sale revenues and a 70~~100 basis point improvement in our gross margin from home ~~sales. However, these improvements were mostly offset by a 100 basis point~~sales and an 8% increase in ~~our selling, general and administrative expenses as a percentage of~~ home sale revenues.

Our West segment experienced ~~an $8.8~~a $3.4 million year-over-year ~~improvement~~increase in pretax income, ~~primarily~~ due to an improved gross margin from home sales and a ~~16%~~10% increase in home ~~sale revenues.~~sales revenue, which was slightly offset by a $3.4 million increase in general and administrative expenses resulting from a change in our Corporate cost allocation discussed below. Our Mountain segment experienced a ~~$2.5~~$0.2 million decrease in pretax income from the prior year, ~~period, primarily due to increased selling,~~as a result of a $1.6 million increase in general and administrative expenses ~~driven~~due to a change in our Corporate cost allocation, which was mostly offset by ~~an increased average active community count.~~a 7% increase in home sales revenue. Our East segment experienced a ~~$1.9~~$0.6 million decrease in pretax income from the prior year, due primarily to a ~~14% decrease~~$0.7 million increase in ~~home sale revenues.~~general and administrative expenses resulting from a change in our Corporate cost allocation. Our Corporate ~~Segment~~segment experienced a ~~$3.9~~$6.0 million ~~year-over-year decrease~~increase in pretax income, due mostly to ~~additional stock based compensation~~the impact of the change in our Corporate cost allocation.

On a periodic basis, we assess our Corporate cost allocation estimates. Our most recent assessment resulted in increases in Corporate cost allocations to both our homebuilding and financial services segments beginning January 1, 2020, to reflect the use of centralized administrative functions. Applying the most recent cost allocation estimate to the three months ended March 31, 2019 would have resulted in decreased pretax income for our homebuilding and financial services segments of approximately $2.7 million and $0.4 million, respectively, with corresponding increases in our Corporate segment pretax income. Additionally, beginning January 1, 2020, we have reflected the expense ofassociated with all homebuilding employee bonuses in the respective homebuilding segment to which the employee reports, consistent with how the CODM is now evaluating homebuilding division performance and making operating decisions. Had these bonuses been reflected in a similar manner during the three months ended March 31, 2019, pretax income for our homebuilding segments would have decreased by an additional $3.0 million ~~primarily driven by performance-based stock awards.~~with a corresponding increase in our Corporate segment pretax income.

Assets:

	March 31,		December 31,		Change					March 31,		December 31,		Change
	2019		2018		Amount		%			2020		2019		Amount			%
	(Dollars in thousands)									(Dollars in thousands)
West	$	1,307,761	$	1,301,374	$	6,387		0	%	$	1,559,410	$	1,461,645	$	97,765			7	%
Mountain		818,451		793,150		25,301		3	%		907,727		869,665		38,062			4	%
East		170,670		169,485		1,185		1	%		216,063		194,592		21,471			11	%
Corporate		514,104		484,193		29,911		6	%		466,192		505,507		(39,315	)		(8)	%
Total homebuilding assets	$	2,810,986	$	2,748,202	$	62,784		2	%	$	3,149,392	$	3,031,409	$	117,983			4	%

Total homebuilding assets increased 2%4% from December 31, ~~2018~~2019 to March 31, ~~2019. The largest increase outside~~2020. Homebuilding assets increased in each of our ~~Corporate segment was in our Mountain segment and was the result of increases in our inventory balances. These increases were driven by land development spend and~~operating segments largely due to a greater number of homes completed or under construction as of ~~period-end. The increase~~March 31, 2020. However, the funds for the construction activity came from our Corporate segment, causing a decline in our Corporate ~~segment was the result of the adoption of ASC 842 on January 1, 2019, which requires a lessee to recognize a right-of-use asset and a corresponding lease liability for substantially all leases.~~segment’s assets.

- 2930 -

Table of Contents

New Home Deliveries & Home Sale Revenues:

Changes in home sale revenues are impacted by changes in the number of new homes delivered and the average selling price of those delivered homes. Commentary for each of our segments on significant changes in these two metrics is provided below. Our backlog conversion rate has been negatively impacted by the pandemic due to a higher rate of cancellations and some limitations that have temporarily been placed on construction activity.

	Three Months Ended March 31,																					Three Months Ended March 31,
	2019						2018						% Change									2020						2019						% Change
	Homes		Home Sale Revenues		Average Price		Homes		Home Sale Revenues		Average Price		Homes			Home Sale Revenues			Average Price			Homes		Home Sale Revenues		Average Price		Homes		Home Sale Revenues		Average Price		Homes			Home Sale Revenues			Average Price
	(Dollars in thousands)																					(Dollars in thousands)
West		752	$	369,558	$	491.4		681	$	319,509	$	469.2		10	%		16	%		5	%		871	$	405,498	$	465.6		752	$	369,558	$	491.4		16	%		10	%		(5)	%
Mountain		409		209,192		511.5		416		208,632		501.5		(2	%)		0	%		2	%		435		222,858		512.3		409		209,192		511.5		6	%		7	%		0	%
East		197		68,528		347.9		177		79,547		449.4		11	%		(14	%)		(23	%)		241		68,729		285.2		197		68,528		347.9		22	%		0	%		(18)	%
Total		1,358	$	647,278	$	476.6		1,274	$	607,688	$	477.0		7	%		7	%		(0	%)		1,547	$	697,085	$	450.6		1,358	$	647,278	$	476.6		14	%		8	%		(5)	%

West Segment Commentary

~~Our West segment experienced a 10% year-over-year~~For the three months ended March 31, 2020, the increase in ~~the number of~~ new ~~homes delivered as a~~home deliveries was the result of a 5%33% increase in the number of homes in backlog to ~~start~~begin the quarter. Our California markets also benefited from an improved backlog conversion rate as there were a significant number of sales accepted at the end of 2017 that could not be delivered in the first quarter of 2018, which negatively impacted our prior year backlog conversion rate. The 5%period. This increase ~~in average selling price of homes delivered is the result of price increases we implemented across most markets during the 2018 spring selling season, which were~~was partially offset by a ~~shift in mix in our California markets to lower priced communities.~~

~~Mountain Segment Commentary~~

~~While the number of homes~~decrease in backlog ~~to start the quarter was down 17% year-over-year, new homes delivered decreased by only 2% due to an improved backlog~~ conversion ~~rate that~~rates in most of our markets within this segment. This decrease was driven by ~~(1) shorter average cycle times and (2)~~ a ~~higher~~lower percentage of homes both sold and delivered in the first quarter of ~~2019~~2020 as compared to the ~~2018~~2019 first quarter. ~~Cycle time improvements were primarily driven by our Colorado markets~~The average selling price of homes-delivered decreased as a result of a ~~vendor related~~decline in the percentage of deliveries coming from our higher priced communities in Southern California. In addition, a greater percentage of closings within nearly all of our Western markets during the current period were from our more affordable product ~~defect issue~~offerings.

Mountain Segment Commentary

For the three months ended March 31, 2020, the increase in new home deliveries was the result of a 16% increase in the number homes in backlog to begin the period. This increase was partially offset by a decrease in backlog conversion rates in our Colorado markets due to a lower percentage of homes in backlog to start the 2020 first quarter that ~~negatively impacted cycle times for those~~were under construction at that time.

East Segment Commentary

For the three months ended March 31, 2020, the increase in new home deliveries was the result of a 53% increase in the number of homes in backlog to begin the period. This increase was partially offset by a decrease in backlog conversion rates in most of our markets within this segment due to (1) a lower percentage of homes in backlog to start the 2020 first quarter that were under construction at that time and (2) a lower percentage of homes both sold and delivered in the first ~~half~~quarter of ~~2018.~~2020 as compared to the 2019 first quarter. The ~~average selling price of homes delivered increased 2% as a result of price increases implemented in the first half of 2018 in our Colorado markets.~~

~~East Segment Commentary~~

~~The 23%~~ decrease in the average selling price of homes delivered in our East segment iswas due to a change in mix resulting from (1) a higher percentage of deliveries in this segment coming from communities that offer more affordable home plans and (2) a higher percentage of our deliveries coming from our Florida markets, which have a lower average selling price than our mid-Atlantic market and (2) a higher percentage of deliveries in this segment coming from communities that offer more affordable home plans. The 11% increase in new home deliveries was driven by an increased backlog conversion rate across all markets as a result of (1) a decrease in cancellation rates and (2) a higher percentage of deliveries from our more affordable product offerings, which typically have shorter cycle times than our more traditional products.market.

- 3031 -

Table of Contents

Gross Margin from Home Sales:

Our gross margin from home sales for the three months ended March 31, ~~2019~~2020, increased 70100 basis points year-over-year from ~~18.2%~~18.9% to ~~18.9%~~19.9%. During the three months ended March 31, 2019 ~~and 2018,~~ we recorded inventory impairments of $0.6 million and warranty adjustments of $0.9 million, ~~and $3.1 million of expense to adjust our warranty accrual. The adjustments to our warranty accrual~~which negatively impacted gross margin by 10 basis points and 50 basis points, respectively. Our gross margin from home sales in the 2019 first quarter was positively impacted by a 20 basis point improvement in our capitalized interest in cost of sales as a percentage of home sale revenues, while the 2018 first quarter benefited by 20 basis points ~~due to recoveries from a vendor~~in the prior year. Gross margins increased in the first quarter of 2020 on both build-to-order and speculative home deliveries driven by price increases implemented across the majority of our communities over the past nine-months. Gross margins were also positively impacted as a result of ~~product defect related issues.~~a lower percentage of speculative home deliveries in the quarter, which typically have a lower gross margin than our build-to-order deliveries.

Inventory Impairments:

Impairments of homebuilding inventory by segment for the three months ended March 31, ~~2019~~2020 and ~~2018~~2019 are shown in the table below:

	Three Months Ended March 31,				Three Months Ended March 31,
	2019		2018		2020		2019
	(Dollars in thousands)				(Dollars in thousands)
West	$	-	$	375	$	-	$	-
Mountain		400		175		-		400
East		210		-		-		210
Total inventory impairments	$	610	$	550	$	-	$	610

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

	Impairment Data								Quantitative Data			Impairment Data						Quantitative Data
Three Months Ended	Total Subdivisions Tested		Inventory Impairments		Fair Value of Inventory After Impairments		Number of Subdivisions Impaired		Discount Rate			Inventory Impairments		Fair Value of Inventory After Impairments		Number of Subdivisions Impaired		Discount Rate
	(Dollars in thousands)
March 31, 2019		16	$	610	$	10,476		2		N/A		$	610	$	10,476		2		N/A
March 31, 2018		24	$	550	$	5,223		2		12	%

- 3132 -

Table of Contents

~~Selling,~~Selling, General and Administrative Expenses:

	Three Months Ended March 31,								Three Months Ended March 31,
	2019			2018			Change		2020		2019		Change
	(Dollars in thousands)								(Dollars in thousands)
General and administrative expenses	$	42,572		$	35,753		$	6,819	$	45,089	$	42,572	$	2,517
General and administrative expenses as a percentage of home sale revenues		6.6	%		5.9	%	70 bps			6.5%		6.6%	(10) bps

Marketing expenses	$	18,296		$	15,571		$	2,725	$	21,446	$	18,296	$	3,150
Marketing expenses as a percentage of home sale revenues		2.8	%		2.6	%	20 bps			3.1%		2.8%	30 bps

Commissions expenses	$	21,393		$	20,017		$	1,376	$	22,786	$	21,393	$	1,393
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	$	82,261		$	71,341		$	10,920	$	89,321	$	82,261	$	7,060
Total selling, general and administrative expenses as a percentage of home sale revenues		12.7	%		11.7	%	100 bps			12.8%		12.7%	10 bps

For the three months ended March 31, ~~2019,~~2020, the ~~increases~~increase in our ~~general~~marketing expenses was driven by (1) increased sales office expense and product advertising resulting from an increased number of average active subdivisions and (2) increased compensation expense due to a higher average headcount during the quarter.

General and administrative expenses ~~were~~increased for the three months ended March 31, 2020 due to increased compensation-related expenses driven by higher average headcount ~~and additional stock based compensation expense of $3.0 million, primarily caused by~~during the ~~performance-based stock awards that were granted in 2017.~~quarter.

Our marketing expenses increased for the three months ended March 31, 2019 due to increased sales office and model home expenses resulting from a 15% increase in active subdivisions as well as increased compensation-related expenses driven by higher average headcount.

- 3233 -

Table of Contents

Other Homebuilding Operating Data

Net New Orders and Active Subdivisions:

Three Months Ended March 31,

2019

2018

% 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
965 $ 433,307 $ 449.0 3.82 1,033 $ 458,195 $ 443.6 4.78 (7 %) (5 %) 1 % (20 %)
Mountain
719 336,932 468.6 3.52 667 327,006 490.3 3.92 8 % 3 % (4 %) (10 %)
East
272 81,179 298.5 4.17 204 78,459 384.6 2.99 33 % 3 % (22 %) 39 %
Total
1,956 $ 851,418 $ 435.3 3.75 1,904 $ 863,660 $ 453.6 4.19 3 % (1 %) (4 %) (11 %)

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. Our monthly absorption rate has been negatively impacted by the pandemic due to a higher rate of cancellations and a decrease in customer traffic resulting from stay at home and shelter in place orders. The negative impact is shown in net new home orders for the month of March, which decreased 27% year-over-year to 611. Furthermore, to start the 2020 second quarter, April net new orders decreased 53% year-over-year to 357.


	*Calculated as total net new orders in period ÷ average active communities during period ÷ number of months in period

								Average Active Subdivisions							Three Months Ended March 31,
	Active Subdivisions							Three Months Ended							2020						2019						% Change
	March 31,				%			March 31,				%			Homes	Dollar Value		Average Price		Monthly Absorption Rate *	Homes	Dollar Value		Average Price		Monthly Absorption Rate *	Homes		Dollar Value		Average Price			Monthly Absorption Rate
	2019		2018		Change			2019		2018		Change			(Dollars in thousands)
West		88		73		21	%		84		72		17	%	1,382	$	655,892	$	474.6	5.13	965	$	433,307	$	449.0	3.82	43	%	51	%		6	%	34	%
Mountain		64		58		10	%		69		57		21	%	693		339,132		489.4	3.54	719		336,932		468.6	3.52	(4)	%	1	%		4	%	1	%
East		26		24		8	%		22		23		(4	%)	324		97,723		301.6	3.66	272		81,179		298.5	4.17	19	%	20	%		1	%	(12)	%
Total		178		155		15	%		175		152		15	%	2,399	$	1,092,747	$	455.5	4.33	1,956	$	851,418	$	435.3	3.75	23	%	28	%		5	%	16	%

*Calculated as total net new orders in period ÷ average active communities during period ÷ number of months in period

					Average Active Subdivisions
	Active Subdivisions				Three Months Ended
	March 31,		%		March 31,		%
	2020	2019	Change		2020	2019	Change
West	92	88	5	%	90	84	7	%
Mountain	64	64	0	%	65	69	(6	)%
East	29	26	12	%	30	22	36	%
Total	185	178	4	%	185	175	6	%

West Segment Commentary

For the three months ended March 31, ~~2019,~~2020, the ~~dollar value of~~increase in net new orders ~~decreased 5% year-over-year,~~was driven by increases in both the monthly sales absorption rate and average active subdivisions. Nearly all markets experienced an improvement in their sales pace year-over-year, with our Nevada, Phoenix and California markets all experiencing a 7%sales pace in excess of five net new orders per community per month. The increase in average selling price was due to price increases implemented over the past nine-months within the majority of our communities as well as a shift in mix of homes sold from Nevada to more expensive Southern California markets.

Mountain Segment Commentary

For the three months ended March 31, 2020, the decrease in ~~the number of net new orders. The lower number of~~ net new orders was the result of (1) a ~~20%~~slight decrease in the number of average active subdivisions in Colorado and (2) an increased cancellation rate (see further discussion below). The increase in average selling price was the result of price increases implemented across the majority of our communities over the past nine-months.

East Segment Commentary

For the three months ended March 31, 2020, the increase in net new orders was driven by an increase in the number of average active subdivisions in each of our Florida and mid-Atlantic markets. This increase was partially offset by a decrease in the monthly sales absorption ~~rate. While all markets experienced a decline in their sales pace year-over-year, California was the main driver of the decline as a result of:~~rate due to (1) a ~~smaller relative proportion of affordable product offerings currently available~~decrease in ~~this~~close out communities in our mid-Atlantic market and (2) an increased cancellation rate (see further discussion below). The decline in our sales pace was mostly offset by a 17% increase in average active community count as all markets experienced a double digit percentage increase in average active community count with the exception of Arizona, which was flat year-over-year. Oregon, our newest market, finished the quarter with two active communities compared with none a year ago.

~~Mountain Segment Commentary~~

For the three months ended March 31, 2019, the dollar value of net new orders increased 3% from the same period in the prior year primarily due to an 8% increase in our number of net new orders. Our higher number of net new orders was the result of a 21% increase in average active community count as a result of growth in Utah where we continue to see strong potential and have increased our community count accordingly. This increase was partially offset by a 10% decrease in monthly sales absorption pace. Colorado and Utah both experienced a decline in sales pace consistent with industry trends, with Utah further impacted by an increased cancellation rate (see further discussion below).

- 3334 -

Table of Contents

~~East Segment Commentary~~

For the three months ended March 31, 2019, our dollar values of net new orders increased 3% from the same period in 2018 as a 39% improvement in our monthly sales absorption rate was largely offset by a 22% decline in our average selling price of net new orders. The improved sales pace was primarily due to an increased offering of more affordable products in our Florida markets, which have realized a higher selling pace. The sales pace in our Florida markets also benefited from a decreased cancellation rate (see further discussion below). Our average active community count was down slightly due to decreased land acquisition activity in the mid-Atlantic region over the past two years where we have invested less because our returns in this market had been lower than expected. However, as noted above, we have recently experienced improving returns in the mid-Atlantic region resulting in our reinvestment in this market. The decrease in the average selling price of net new orders is due to mix as a result of: (1) a higher percentage of our net new orders coming from an expanded offering of more affordable home plans, due to an increasing level of demand for these plans, and (2) a higher percentage of our net new orders coming from our Florida markets, which have a lower average selling price than our mid-Atlantic operations.

Cancellation Rate:

	Cancellations as a Percentage of Homes in Beginning Backlog									Cancellations as a Percentage of Homes in Beginning Backlog
	Three Months Ended March 31,						Change in			Three Months Ended March 31,				Change in
	2019			2018			Percentage			2020		2019		Percentage
West		14	%		14	%		0	%	15	%	14	%	1	%
Mountain		14	%		11	%		3	%	22	%	14	%	8	%
East		11	%		23	%		(12	%)	23	%	11	%	12	%
Total		14	%		14	%		0	%	18	%	14	%	4	%

Our cancellations as a percentage of homes in beginning backlog to start the quarter (“cancellation rate”) ~~remained unchanged year-over-year. Our East segment experienced the largest percentage decrease as we saw double digit percentage improvements across all~~increased year-over-year in each of our segments, most notably in our Colorado and Florida markets. In ~~addition, the~~general, we experienced a higher cancellation rate during the month of March due to the pandemic as a result of general economic uncertainty and changes in our homebuyers’ employment status. Additionally, our Florida (East segment) markets benefited from the implementation of additional underwriting procedures prior to the acceptance of new home contracts. Our Utah (Mountain segment) and Southern California (West segment) markets experienced the largest percentage increases year-over-year. The increase in Utahmarket was ~~primarily due to~~impacted by a shift in mix to include more first-time homebuyers who have a higher likelihood of ~~cancellation, while the increase in Southern California is largely due to homebuyer uncertainty~~cancellation. Cancellations as a ~~result~~percentage of ~~affordability concerns.~~homes in beginning backlog for the month of April were 6.6% compared to 4.3% in the prior year.

~~- 34 -~~

~~Table of Contents~~

Backlog:

	March 31,																					March 31,
	2019						2018						% Change									2020						2019						% Change
	Homes		Dollar Value		Average Price		Homes		Dollar Value		Average Price		Homes			Dollar Value			Average Price			Homes		Dollar Value		Average Price		Homes		Dollar Value		Average Price		Homes			Dollar Value			Average Price
	(Dollars in thousands)																					(Dollars in thousands)
West		1,736	$	830,703	$	478.5		1,803	$	923,326	$	512.1		(4	%)		(10	%)		(7	%)		2,534	$	1,227,996	$	484.6		1,736	$	830,703	$	478.5		46	%		48	%		1	%
Mountain		1,353		690,623		510.4		1,504		766,010		509.3		(10	%)		(10	%)		0	%		1,469		754,155		513.4		1,353		690,623		510.4		9	%		9	%		1	%
East		445		133,140		299.2		482		190,102		394.4		(8	%)		(30	%)		(24	%)		650		191,972		295.3		445		133,140		299.2		46	%		44	%		(1)	%
Total		3,534	$	1,654,466	$	468.2		3,789	$	1,879,438	$	496.0		(7	%)		(12	%)		(6	%)		4,653	$	2,174,123	$	467.3		3,534	$	1,654,466	$	468.2		32	%		31	%		(0)	%

At March 31, ~~2019,~~2020, we had ~~3,534~~4,653 homes in backlog with a total value of ~~$1.65 billion, representing respective decreases of 7% and 12% from March 31, 2018. The majority of our markets experienced~~$2.2 billion. This represented a ~~year-over-year decline~~32% increase in ~~both~~ the number of homes in backlog and a 31% increase in the ~~average selling price~~dollar value of ~~those~~ homes ~~to end the quarter.~~in backlog from March 31, 2019. The ~~decrease~~increase in the number of homes in backlog is primarily a result of the year-over-year ~~decrease~~increase in net new orders induring the ~~fourth quarter~~last six-months, offset slightly by improved cycle times across each of ~~2018 coupled with an~~our Segments. However, our ability to convert backlog into closings has been negatively impacted by the pandemic due to a higher rate of cancellations and some limitations that have temporarily been placed on construction activity, and therefore the year-over-year increase in backlog ~~conversion rates due to improved cycle times. The decrease~~at March 31, 2020 might not result in ~~the average selling price of~~a year-over-year increase in closings during future periods. At April 30, 2020, we had 4,487 homes in backlog, ~~is due to a shift in mix to lower priced communities, consistent with our focus on offering more affordable home plans, as well as a shift in geographical mix with~~representing an ~~increased proportion~~18% increase from April 30, 2019

- 35 -

Table of ~~net new orders coming from our Arizona (West segment) and Florida (East segment) markets, which have the lowest average selling prices in our Company.~~

Contents

Homes Completed or Under Construction (WIP lots):

	March 31,				%			March 31,				%
	2019		2018		Change			2020		2019		Change
Unsold:
Completed		120		86		40	%		160		120		33	%
Under construction		177		203		(13	%)		216		177		22	%
Total unsold started homes		297		289		3	%		376		297		27	%
Sold homes under construction or completed		2,362		2,549		(7	%)		3,259		2,362		38	%
Model homes under construction or completed		459		366		25	%		502		459		9	%
Total homes completed or under construction		3,118		3,204		(3	%)		4,137		3,118		33	%

~~Our model~~The increase in sold homes under construction or completed ~~were up 25% despite our active community count being up only 15% year-over-year. This~~ is ~~primarily~~due to the increased demand we have experienced in recent periods as a result of ~~models being constructed~~our increased offering of more affordable home plans. The increase in unsold started homes is due to ~~open new communities~~the increased cancellation rate experienced during the first quarter of 2020, particularly during the month of March as a result of the pandemic. We believe that the higher rate of cancellations is likely to continue during the second quarter, which could result in a continued increase in the ~~near future as we plan for growth in our active community count.~~number of unsold started homes.

~~- 35 -~~

~~Table of Contents~~

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

	March 31, 2019						March 31, 2018									March 31, 2020						March 31, 2019
	Lots Owned		Lots Optioned		Total		Lots Owned		Lots Optioned		Total		Total % Change			Lots Owned		Lots Optioned		Total		Lots Owned		Lots Optioned		Total		Total % Change
West		7,894		2,462		10,356		7,421		2,205		9,626		8	%		9,641		2,393		12,034		7,894		2,462		10,356		16	%
Mountain		6,636		2,612		9,248		5,206		3,398		8,604		7	%		6,540		4,007		10,547		6,636		2,612		9,248		14	%
East		1,989		1,294		3,283		1,531		1,692		3,223		2	%		2,410		2,133		4,543		1,989		1,294		3,283		38	%
Total		16,519		6,368		22,887		14,158		7,295		21,453		7	%		18,591		8,533		27,124		16,519		6,368		22,887		19	%

Our total owned and optioned lots at March 31, ~~2019~~2020 were ~~22,887,~~27,124, up 7%19% from March 31, ~~2018,~~2019, but down slightly from 27,386 at December 31, 2019, due to ~~our increased~~a slowdown in land acquisition ~~approval activity over~~during the ~~past year across all markets.~~quarter as a result of the pandemic. We believe that our total lot supply, coupled with our planned acquisition activity, can support growth in future periods. However, due to the pandemic, there is also an increased likelihood that planned acquisition activity may be delayed or abandoned. See "Forward-Looking Statements" below.

- 36 -

Table of Contents

Financial ~~Services~~Services

	Three Months Ended
	March 31,				Change						Three Months Ended
	2019		2018		Amount			%			March 31,					Change
	(Dollars in thousands)										2020			2019		Amount			%
Financial services revenues											(Dollars in thousands)
Mortgage operations	$	10,174	$	12,696	$	(2,522	)		(20	%)	$	14,625		$	10,174	$	4,451			44	%
Other		7,230		6,339		891			14	%		7,261			7,230		31			0	%
Total financial services revenues	$	17,404	$	19,035	$	(1,631	)		(9	%)	$	21,886		$	17,404	$	4,482			26	%

Financial services pretax income
Mortgage operations	$	4,993	$	7,520	$	(2,527	)		(34	%)	$	8,243		$	4,993	$	3,250			65	%
Other		9,558		2,551		7,007			275	%		(9,350	)		9,558		(18,908	)		(198)	%
Total financial services pretax income	$	14,551	$	10,071	$	4,480			44	%
Total financial services pretax income (loss)											$	(1,107	)	$	14,551	$	(15,658	)		(108)	%

For the three months ended March 31, ~~2019,~~2020, our financial services business incurred a pretax loss of $1.1 million compared to pretax income ~~increased $4.5~~of $14.6 million ~~or 44%, from~~for the same period in the prior year. ~~The increase~~This decrease was ~~primarily~~ due to our other financial services segment, ~~and was driven by $4.8 million of net gains~~which had unrealized losses on equity securities ~~for~~during the first quarter of 2020 totaling $13.9 million as compared to unrealized gains of $4.6 million during the first quarter of 2019.

Based on the size and duration of the liabilities held by our Insurance Entities, as well as regulatory capital requirements, we have historically invested the premiums collected by our Insurance Entities in a portfolio of assets to appropriately match these liabilities in duration and also maintain required levels of capital. Based on our investment policy, this portfolio has historically comprised money market funds, U.S. Government securities and equity securities. Given the expected duration of the underlying insurance liabilities and our current liquidity, we do not anticipate a need to liquidate any investments held by our Insurance Entities in the next twelve months.

For the three months ended March 31, ~~2019 as compared to $1.2 million of net losses on equity securities for the three months ended March 31, 2018. This was partially offset by a decrease in~~2020, our mortgage operations ~~segment, which saw~~pretax income increased $3.2 million due to higher interest rate lock volume driven by the year-over-year increase in homes in beginning backlog and to a ~~decrease~~lesser extent lower interest rates during the quarter.

Our mortgage operations have not yet experienced a significant slowdown in loan originations due to the pandemic, but a reduction in our home sales activity would directly impact our mortgage lending activities. As a result of the government intervention in the ~~capture rate~~financial markets, including the Federal Reserve’s purchase of ~~new home deliveries and an increase in special financing offers year-over-year, both of which negatively impacted pretax income for~~mortgage backed securities, we expect to be able to continue making loans that can be readily sold into the ~~three months ended March 31, 2019.~~ secondary mortgage market.

- 3637 -

Table of Contents

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

	Three Months Ended						% or
	March 31,						Percentage			Three Months Ended				% or
	2019			2018			Change			March 31,				Percentage
	(Dollars in thousands)									2020		2019		Change
Total Originations (including transfer loans):										(Dollars in thousands)
Loans		783			807			(3	%)		1,029		783		31	%
Principal	$	285,525		$	298,070			(4	%)	$	379,306	$	285,525		33	%
Capture Rate Data:
Capture rate as % of all homes delivered		58	%		63	%		(5	%)		66%		58%		8	%
Capture rate as % of all homes delivered (excludes cash sales)		62	%		68	%		(6	%)		69%		62%		7	%
Mortgage Loan Origination Product Mix:
FHA loans		17	%		14	%		3	%		22%		17%		5	%
Other government loans (VA & USDA)		20	%		19	%		1	%		22%		20%		2	%
Total government loans		37	%		33	%		4	%		44%		37%		7	%
Conventional loans		63	%		67	%		(4	%)		56%		63%		(7)	%
		100	%		100	%		0	%		100%		100%		0	%
Loan Type:
Fixed rate		96	%		97	%		(1	%)		99%		96%		3	%
ARM		4	%		3	%		1	%		1%		4%		(3)	%
Credit Quality:
Average FICO Score		736			744			(1	%)		735		736		(0)	%
Other Data:	`			`						`		`
Average Combined LTV ratio		81	%		81	%		0	%		85%		81%		4	%
Full documentation loans		100	%		100	%		0	%		100%		100%		0	%
Loans Sold to Third Parties:
Loans		889			873			2	%		1,199		889		35	%
Principal	$	320,414		$	320,753			(0	%)	$	438,101	$	320,414		37	%

Income Taxes

Our overall effective income tax rates were ~~27.1%~~24.3% and ~~23.3%~~27.1% for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively, resulting in income tax expense of ~~$15.1~~$11.8 million and ~~$11.8~~$15.1 million for the same periods, respectively. The year-over-year ~~increase~~decrease in our effective tax rate for the three months ended March 31, ~~2019~~2020 was ~~due to~~primarily impacted by a ~~$1.2 million benefit from~~windfall on non-qualifying stock options exercised and lapsed restricted stock awards during the three months ended March 31, 2020 as well as energy tax credits ~~which reduced our 2018 first quarter tax rate. It~~related to homes closed during the quarter. These benefits were partially offset by a decrease in the amount of executive compensation that is ~~currently uncertain as to the extent, if any, that energy tax credits will impact our 2019 results, and therefore no benefit was recorded for the 2019 first quarter.~~deductible under Internal Revenue Code Section 162(m).

- 3738 -

Table of Contents

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

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

Our critical accounting estimates and policies have not changed from those reported in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.

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 and Mortgage Repurchase Facility (both defined below). Additionally, we have an existing effective shelf registration statement that allows us to issue equity, debt or hybrid securities up to ~~$1.35~~$2.0 billion. Following the issuance of $300 million of 3.850% senior notes on January 9, 2020, $1.70 billion remains on our effective shelf registration statement.

We have marketable equity securities that consist primarily of holdings in common stock and exchange traded funds.

Capital Resources

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

We may from time to time seek to retire or purchase our outstanding 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.

- 3839 -

Table of Contents

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 November 1, 2018 to (1) extend the Revolving Credit Facility maturity to December 18, 2023, (2) increase the aggregate commitment from $700 million to $1.0 billion (the “Commitment”) and (3) provide that the aggregate amount of the commitments may increase to an amount not to exceed $1.5 billion upon our request, subject to receipt of additional commitments from existing or additional lenders and, in the case of additional lenders, the consent of the co-administrative agents. As defined in the Revolving Credit Facility, interest rates on base rate borrowings are equal to the highest of (1) 0.0%, (2) a prime rate, (3) a federal funds effective rate plus 1.50%, and (4) a specified eurocurrency rate plus 1.00% and, in each case, plus a margin that is determined based on our credit ratings and leverage ratio. Interest rates on eurocurrency borrowings are equal to a specified eurocurrency rate plus a margin that is determined based on our credit ratings and leverage ratio. At any time at which our leverage ratio, as of the last day of the most recent calendar quarter, exceeds 55%, the aggregate principal amount of all consolidated senior debt borrowings outstanding may not exceed the borrowing base. There is no borrowing base requirement if our leverage ratio, as of the last day of the most recent calendar quarter, is 55% or less.

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

We incur costs associated with unused commitment fees pursuant to the terms of the Revolving Credit Facility. At March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, there were ~~$27.6~~$25.7 million and ~~$27.8~~$23.5 million, respectively, in letters of credit outstanding, which reduced the amounts available to be borrowed under the Revolving Credit Facility. We had $15.0 million outstanding under the Revolving Credit Facility as of March 31, ~~2019~~2020 and December 31, ~~2018.~~2019. As of March 31, ~~2019,~~2020, availability under the Revolving Credit Facility was approximately ~~$957.4~~$959.3 million.

Mortgage Repurchase Facility. HomeAmerican has a Master Repurchase Agreement (the “Mortgage Repurchase Facility”) with U.S. Bank National Association (“USBNA”). Effective ~~August 9, 2018,~~May 23, 2019, the Mortgage Repurchase Facility was amended to extend its termination date to ~~August 8, 2019.~~May 21, 2020. We are currently in negotiations to extend the Mortgage Repurchase Facility. 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 on March ~~27, 2019~~30, 2020 from $75 million to ~~$100~~$110 million ~~and was~~ effective through April ~~24, 2019.~~27, 2020. The Mortgage Repurchase Facility also had a temporary increase in the maximum aggregate commitment from $75 million to ~~$130~~$150 million on December ~~27, 2018 and was~~24, 2019 effective through January ~~25, 2019.~~22, 2020. At March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, HomeAmerican had ~~$84.9~~$108.7 million and ~~$116.8~~$149.6 million, respectively, of mortgage loans that HomeAmerican was obligated to repurchase under the Mortgage Repurchase Facility. Mortgage loans that HomeAmerican is obligated to repurchase under the Mortgage Repurchase Facility are accounted for as a debt financing arrangement and are reported as mortgage repurchase facility in the consolidated balance sheets. Advances under the Mortgage Repurchase Facility carry a price range that is based on a LIBOR rate or successor benchmark rate.

- 3940 -

Table of Contents

Dividends

During the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, we paid dividends of ~~$0.30~~$0.33 per share and ~~$0.28~~$0.30 per share, respectively.

MDC Common Stock Repurchase Program

At March 31, ~~2019,~~2020, we were authorized to repurchase up to 4,000,000 shares of our common stock. We did not repurchase any shares of our common stock during the three months ended March 31, ~~2019.~~2020.

Consolidated Cash Flow

During the three months ended March 31, ~~2019,~~2020, we ~~generated $54.3~~used $37.2 million of cash ~~from~~for operating activities ~~primarily due to: 1) net income~~compared with cash provided by operating activities of ~~$40.6~~$54.3 million ~~2) a net~~in the prior year period. Cash used to increase housing completed or under construction was $178.9 million for the three months ended March 31, 2020, as homes in inventory increased by 508 homes from December 31, 2019. Cash provided by the decrease in ~~mortgage loans held-for-sale of $38.4~~housing completed or under construction was $2.1 million ~~3) non-cash add-backs to net income related to depreciation and stock-based compensation totaling $9.1 million and 4) a~~in the prior year period as homes in inventory increased only marginally. Cash provided by the decrease ~~in our net deferred tax assets of $2.7 million. These amounts were partially offset by: 1) a net increase~~ in land and land under development was $29.1 million for the three months ended March 31, 2020, as home starts outnumbered lot acquisitions during the quarter due to the slowdown in land acquisition during the quarter as a result of the pandemic. Cash used to increase land and land under development was $18.5 million ~~2) a net increase~~ in ~~trade~~the prior year period primarily due to increased land development spend. Cash provided from the sale of mortgage loans for the three months ended March 31, 2020 and ~~other receivables of $13.8~~2019, was $63.1 million and ~~3) net gains on marketable equity securities~~$38.4 million resulting from increased loan activity during the month of ~~$4.8 million.~~December.

During the three months ended March 31, ~~2019, we~~2020, net cash used ~~$6.4 million of cash for~~in investing activities ~~due~~was $7.0 million. This primarily relates to ~~the~~cash used to purchase ~~of $6.4 million in~~ property and ~~equipment.~~equipment, which remained consistent year-over-year.

During the three months ended March 31, ~~2019, we~~2020, net cash used in financing activities was $5.4 compared with cash use of $42.0 million in the prior year period. The primary driver of this decrease in cash ~~for~~used in financing activities ~~primarily related~~is due to net proceeds from the issuance of senior notes of $48.1 million during the three months ended March 31, 2020. This was slightly offset by an increase in payments on ~~our~~the mortgage repurchase facility driven by the increased proceeds from the sale of ~~$32.0 million and~~mortgage loans noted above. Cash used to fund dividend payments ~~totaling $17.1 million. These amounts were~~increased slightly ~~offset by proceeds~~year-over-year as a result of ~~$7.1 million from~~ the ~~exercise of stock options.~~10% increase in the cash dividend announced in January 2020.

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 March 31, ~~2019,~~2020, we had deposits of ~~$22.0~~$27.1 million in the form of cash and ~~$5.4~~$9.3 million in the form of letters of credit that secured option contracts to purchase ~~6,368~~8,533 lots for a total estimated purchase price of ~~$463.1~~$498.5 million.

Surety Bonds and Letters of Credit. At March 31, ~~2019,~~2020, we had outstanding surety bonds and letters of credit totaling ~~$245.5~~$284.0 million and ~~$89.3~~$96.6 million, respectively, including ~~$61.7~~$70.9 million in letters of credit issued by HomeAmerican. The estimated cost to complete obligations related to these bonds and letters of credit was approximately ~~$126.6~~$152.4 million and $51.2 million, respectively. We expect that the obligations secured by these performance bonds and letters of credit generally will be performed in the ordinary course of business and in accordance with the applicable contractual terms. To the extent that the obligations are performed, the related performance bonds and letters of credit should be released and we should not have any continuing obligations. However, in the event any such performance bonds or letters of credit are called, our indemnity obligations could require us to reimburse the issuer of the performance bond or letter of credit.

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

- 4041 -

Table of Contents

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, ~~2018~~2019 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 is contained under the caption “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 and Item 1A of Part II of this Quarterly Report on Form 10-Q.

~~Item 3.~~

Item 3.Quantitative and Qualitative Disclosures About Market Risk

~~Quantitative and Qualitative Disclosures About Market Risk~~

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

The market value and/or income derived from our equity securities may go up or down, sometimes rapidly or unpredictably. Equity securities may decline in value due to factors affecting equity securities markets generally, particular industries represented in those markets, or the issuer itself. The values of equity securities may decline due to general market conditions that are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. They may also decline due to factors that affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. The value of equity securities may also decline for a number of other reasons that directly relate to the issuer, such as management performance, financial leverage, the issuer’s historical and prospective earnings, the value of its assets and reduced demand for its goods and services. Equity securities generally have greater price volatility than bonds and other debt securities.

As of March 31, ~~2019,~~2020, our cash and cash equivalents included ~~U.S. government securities,~~ commercial bank deposits, money market funds and time deposits, with maturities of three months or less. As of March 31, ~~2019,~~2020, our marketable securities included holdings in common stock and exchange traded funds.

We are exposed to market risks related to fluctuations in interest rates on mortgage loans held-for-sale, mortgage interest rate lock commitments and debt. Derivative instruments utilized in the normal course of business by HomeAmerican include interest rate lock commitments and forward sales of mortgage-backed securities, which are used to manage the price risk on fluctuations in interest rates on our mortgage loans in inventory and interest rate lock commitments to originate mortgage loans. Such contracts are the only significant financial derivative instruments utilized by MDC. HomeAmerican’s mortgage loans in process for which a rate and price commitment had been made to a borrower that had not closed at March 31, ~~2019~~2020 had an aggregate principal balance of ~~$149.4~~$221.0 million, all of which were under interest rate lock commitments at an average interest rate of ~~4.30%~~3.35%. In addition, HomeAmerican had mortgage loans held-for-sale with an aggregate principal balance of ~~$107.0~~$129.5 million at March 31, ~~2019,~~2020, of which ~~$14.1~~$43.7 million had not yet been committed to a mortgage purchaser and had an average interest rate of ~~4.47%~~3.27%. In order to hedge the changes in fair value of interest rate lock commitments and mortgage loans held-for-sale which had not yet been committed to a mortgage purchaser, HomeAmerican had forward sales of securities totaling ~~$121.0~~$162.0 million and ~~$65.5~~$108.5 million at March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

- 4142 -

Table of Contents

HomeAmerican provides mortgage loans that generally are sold forward and subsequently delivered to a third-party purchaser between 10 and 35 days. Forward commitments are used for non-trading purposes to sell mortgage loans and hedge price risk due to fluctuations in interest rates on rate-locked mortgage loans in process that have not closed. Due to this economic hedging philosophy, the market risk associated with these mortgages is limited. For forward sales commitments, as well as commitments to originate mortgage loans that are still outstanding at the end of a reporting period, we record the fair value of the derivatives in the consolidated statements of operations and comprehensive income with an offset to either derivative assets or liabilities, depending on the nature of the change.

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.

~~Item 4.~~

Item 4.Controls and Procedures

~~Controls and Procedures~~

(a) Conclusion regarding the effectiveness of disclosure controls and procedures - An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures was performed under the supervision, and with the participation, of our management, including the Chief Executive Officer (principle executive officer) and the Chief Financial Officer (principal financial officer). Based on that evaluation, our management, including the Chief Executive Officer 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 March 31, ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

- 4243 -

Table of Contents

M.D.C. HOLDINGS, INC.

FORM 10-Q

PART II

Item 1.Legal Proceedings

~~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

~~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 2019 Annual Report on Form 10-K. There are no material changes from the risk factors included within the Company’s 2019 Annual Report on Form 10-K, ~~for~~other than the ~~year ended December 31, 2018. For a more complete discussion of other~~ risk ~~factors that affect our business, see “Risk Factors” in our Form 10-K for the year ended December 31, 2018, which include the following:~~described below.

●

The recent global Coronavirus/COVID-19 pandemic could harm business and results of operations of the Company.

Demand for our homes is dependent on a variety of macroeconomic factors, such as employment levels, availability of financing for homebuyers, interest rates, consumer confidence, wage growth, household formations, levels of new and existing homes for sale, cost of land, labor and construction materials, demographic trends and housing demand. These factors, in particular consumer confidence, can be significantly and adversely affected by a variety of factors beyond our control. In response to the pandemic, many state and local governments have instituted restrictions that have substantially limited the operations of non-essential businesses and the activities of individuals. There is significant uncertainty around the extent and duration of these restrictions as well as their ultimate impact on the U.S. economy and consumer confidence. The degree to which the pandemic will impact our financial results in the coming periods depends on future developments, which are highly uncertain and cannot be predicted at this time, including new information that may emerge concerning the severity of the pandemic and the actions taken to contain or treat the virus. As a result of the pandemic, our sales centers and model homes have experienced a significant decline in traffic and cancellations of sales contracts have increased. If the pandemic continues to cause significant negative impacts to the U.S. economy and consumer confidence, our results of operations, financial condition and cash flows will be significantly and adversely impacted.

~~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.~~

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

●

~~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.

●

~~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 or regulations may have an adverse effect on 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.~~

●

~~The interests of certain controlling shareholders may be adverse to~~ ~~other~~ ~~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 months ended March 31, ~~2019. Additionally, there were no sales of unregistered equity securities during the period.~~2020:

Period:	Total Number of Shares Purchased ⁽¹⁾		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan or Program⁽²⁾		Maximum Number of Shares that may yet be Purchased under the Plan or Program ⁽²⁾
January 1 to January 31, 2020		-		N/A		-		4,000,000
February 1 to February 29, 2020		14,376	$	42.14		-		4,000,000
March 1 to March 31, 2020		-		N/A		-		4,000,000

(1)

Represents shares of common stock withheld by us to cover withholding taxes due, at the election of certain holders of nonvested shares, with market value approximating the amount of withholding taxes due.

(2)

We are authorized to repurchase up to 4,000,000 shares of our common stock. There were no shares of MDC common stock repurchased under this repurchase program during the three month period ended March 31, 2020.

- 4344 -

Table of Contents

Item 6.

Exhibits

4.11

~~10.1~~

~~Restricted Stock Agreement Amendment (Executive Officers) under the 2011 Equity Incentive Plan,~~Supplemental Indenture (3.850% Senior Notes due 2030), dated as of ~~February 6, 2019.~~January 9, 2020, among the Company, the guarantors named therein and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.2 of the Company's Current Report on Form 8-K filed January 9, 2020). *

31.1

~~10.2~~

~~Stock Option Agreement Amendment (Executive Officers) under~~Certification of Chief Executive Officer required by 17 CFR 240.13a-14(a), pursuant to Section 302 of the ~~2011 Equity Incentive Plan, dated as~~Sarbanes-Oxley Act of ~~February 6, 2019.~~2002.

31.2

~~10.3~~

~~Form~~Certification of ~~Executive~~Chief Financial Officer ~~Restricted Stock Agreement under~~required by 17 CFR 240.13a-14(a), pursuant to Section 302 of the ~~2011 Equity Incentive Plan, adopted as~~Sarbanes-Oxley Act of ~~March 18, 2019.~~2002.

~~10.4~~

32.1

~~Form of Executive Officer Stock Option Agreement under the 2011 Equity Incentive Plan, adopted as of March 18, 2019.~~

~~31.1~~

Certification of Chief Executive Officer required by 17 CFR ~~240.13a-14(a)~~240.13a-14(b), pursuant to Section ~~302~~906 of the Sarbanes-Oxley Act of 2002.

32.2

~~31.2~~

Certification of Chief Financial Officer required by 17 CFR ~~240.13a-14(a)~~240.13a-14(b), pursuant to Section ~~302~~906 of the Sarbanes-Oxley Act of 2002.

~~32.1~~

101

~~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:~~Inline Extensible Business Reporting Language (iXBRL): (i) Consolidated Balance Sheets as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, (ii) Consolidated Statements of Operations for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, (iii) Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, (iv) Consolidated Statements of Cash Flows for the three months ended March 31, ~~2019~~2020 and ~~2018;~~2019; and (v) Notes to the Unaudited Consolidated Financial Statements, tagged as blocks of text.

104

Cover Page Interactive Data File (formatted as Inline XBRL and ~~(v) Notes to the Unaudited Consolidated Financial Statements, tagged as blocks of text.~~contained in Exhibit 101).

____________________

* Incorporated by reference.

SIGNATURE

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: ~~April 30, 2019~~ May 5, 2020	M.D.C. HOLDINGS, INC.
	(Registrant)
~~(Registrant)~~

	By:	/s/ Robert N. Martin
		Robert N. Martin
		Senior Vice President, Chief Financial Officer and Principal Accounting Officer (principal financial officer and duly authorized officer)

- 4445 -

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


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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value	552676108	New York Stock Exchange
6% Senior Notes due January 2043	552676AQ1	New York Stock Exchange


Large Accelerated Filer	☒	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller Reporting Company	☐
Emerging growth company	☐

	Three-Month Period Ended March 31, 2019															Three-Month Period Ended March 31, 2020
											Accumulated
						Additional					Other										Additional
	Common Stock					Paid-in		Retained			Comprehensive					Common Stock					Paid-in		Retained
	Shares			Amount		Capital		Earnings			Income		Total			Shares			Amount		Capital		Earnings			Total
Balance at December 31, 2018		56,615,352		$	566	$	1,168,442	$	406,992		$	-	$	1,576,000
Balance at December 31, 2019																	62,574,961		$	626	$	1,348,733	$	433,126		$	1,782,485
Cumulative effect of newly adopted accounting standards (Note 2)		-			-		-		(67	)		-		(67	)		-			-		-		(34	)		(34	)
Balance at January 1, 2019		56,615,352			566		1,168,442		406,925			-		1,575,933
Balance at January 1, 2020																	62,574,961			626		1,348,733		433,092			1,782,451
Net Income		-			-		-		40,550			-		40,550			-			-		-		36,760			36,760
Shares issued upon exercise of stock options and awards of restricted stock		372,344			4		7,083		-			-		7,087
Shares issued under stock-based compensation programs, net																	477,582			5		8,189		-			8,194
Cash dividends declared		-			-		-		(17,019	)		-		(17,019	)		-			-		-		(20,768	)		(20,768	)
Stock dividend declared		4,534,908			45		138,950		(139,091	)				(96	)
Stock-based compensation expense		-			-		4,251		-			-		4,251			-			-		4,440		-			4,440
Forfeiture of restricted stock		(1,714	)		-		-		-			-		-			(48	)		-		-		-			-
Balance at March 31, 2019		61,520,890		$	615	$	1,318,726	$	291,365		$	-	$	1,610,706
Balance at March 31, 2020																	63,052,495		$	631	$	1,361,362	$	449,084		$	1,811,077


	For the quarterly period ended March31, ~~201~~20920

7

			Page No.

Part I. Financial Information:

	Item 1.	Unaudited Consolidated Financial Statements:

		Consolidated Balance Sheets at March 31, ~~2019~~2020 and December 31, ~~2018~~2019	1

		Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, ~~2019~~2020 and ~~2018~~2019	2

		Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, ~~2019~~2020 and ~~2018~~2019	3

		Consolidated Statements of Cash Flows for the three months ended March 31, ~~2019~~2020 and ~~2018~~2019	4

		Notes to Unaudited Consolidated Financial Statements	5

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2728

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4142

	Item 4.	Controls and Procedures	4243

Part II. Other Information:

	Item 1.	Legal Proceedings	4344

	Item 1A.	Risk Factors	4344

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4344

	Item 6.	Exhibits	45

	~~Item 6.~~		~~Exhibits~~Signature	4445

	~~Signature~~		44

	Three-Month Period Ended March 31, 2018																Three-Month Period Ended March 31, 2019
											Accumulated
						Additional					Other											Additional
	Common Stock					Paid-in		Retained			Comprehensive						Common Stock					Paid-in		Retained
	Shares			Amount		Capital		Earnings			Income			Total			Shares			Amount		Capital		Earnings			Total
Balance at December 31, 2017		56,123,228		$	561	$	1,144,570	$	258,164		$	3,992		$	1,407,287
Balance at December 31, 2018																		56,615,352		$	566	$	1,168,442	$	406,992		$	1,576,000
Cumulative effect of newly adopted accounting standards		-			-		-		5,766			(3,992	)		1,774			-			-		-		(67	)		(67	)
Balance at January 1, 2018		56,123,228			561		1,144,570		263,930			-			1,409,061
Balance at January 1, 2019																		56,615,352			566		1,168,442		406,925			1,575,933
Net Income		-			-		-		38,764			-			38,764			-			-		-		40,550			40,550
Shares issued upon exercise of stock options and awards of restricted stock		97,783			1		281		-			-			282
Shares issued under stock-based compensation programs, net																		372,344			4		7,083		-			7,087
Cash dividends declared		-			-		-		(16,865	)		-			(16,865	)		-			-		-		(17,019	)		(17,019	)
Stock dividend declared																		4,534,908			45		138,950		(139,091	)		(96	)
Stock-based compensation expense		-			-		1,251		-			-			1,251			-			-		4,251		-			4,251
Forfeiture of restricted stock		(1,368	)		-		-		-			-			-			(1,714	)		-		-		-			-
Balance at March 31, 2018		56,219,643		$	562	$	1,146,102	$	285,829		$	-		$	1,432,493
Balance at March 31, 2019																		61,520,890		$	615	$	1,318,726	$	291,365		$	1,610,706

	March 31, 2019
	Amortized Cost Basis		OTTI		Net Amortized Cost		Fair Value
	(Dollars in thousands)
Financial Services
Cash and cash equivalents
Debt securities	$	34,860	$	-	$	34,860	$	34,860

					Threshold Goal			Target Goal			Maximum Goal
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		Maximum Potential Expense to be Recognized*
CEO		July 1, 2016	July 1, 2015			61,236			122,472			244,944				$	4,815
COO	July 25, 2016	to	to	$1.975 billion		61,236	$2.074 billion		122,472	$2.173 billion		244,944	$2.370 billion	$	19.66		4,815
CFO		June 30, 2019	June 30, 2016			15,309			30,618			61,236					1,204
																$	10,834

CEO		April 1, 2017	April 1, 2016			64,152			128,304			256,608				$	7,142
COO	June 20, 2017	to	to	$2.426 billion		64,152	$2.547 billion		128,304	$2.669 billion		256,608	$2.911 billion	$	27.83		7,142
CFO		March 31, 2020	March 31, 2017			16,038			32,076			64,152					1,786
																$	16,070

CEO		April 1, 2018	April 1, 2017			64,800			129,600			259,200				$	6,629
COO	May 23, 2018	to	to	$2.543 billion		64,800	$2.670 billion		129,600	$2.797 billion		259,200	$3.052 billion	$	25.57		6,629
CFO		March 31, 2021	March 31, 2018			16,200			32,400			64,800					1,657
_______________________																$	14,915