10-Q 1 mho-20240331.htm 10-Q mho-20240331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2024
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _____________________
Commission File Number 1-12434

M/I HOMES, INC.
(Exact name of registrant as specified in it charter)
Ohio
31-1210837
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

4131 Worth Avenue, Suite 500, Columbus, Ohio 43219
(Address of principal executive offices) (Zip Code)

(614) 418-8000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Shares, par value $.01MHONew York Stock Exchange

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. q



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common shares, par value $.01 per common share: 27,751,658 shares outstanding as of April 24, 2024.



M/I HOMES, INC.
FORM 10-Q
TABLE OF CONTENTS
PART 1.FINANCIAL INFORMATION
Item 1.M/I Homes, Inc. and Subsidiaries Unaudited Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Balance Sheets at March 31, 2024 and December 31, 2023
Unaudited Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2024 and 2023
Unaudited Condensed Consolidated Statement of Shareholders’ Equity for the Three Months Ended March 31, 2024 and 2023
Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023
Notes to Unaudited Condensed Consolidated Financial Statements
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
PART II.OTHER INFORMATION
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.
Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits
Signatures

2




M/I HOMES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except par values)March 31,
2024
December 31,
2023
ASSETS:
Cash, cash equivalents and restricted cash$870,162 $732,804 
Mortgage loans held for sale235,047 176,329 
Inventory2,774,165 2,797,151 
Property and equipment - net33,145 34,918 
Investment in joint venture arrangements59,146 44,011 
Operating lease right-of-use assets
57,890 56,364 
Deferred income tax asset
15,313 16,094 
Goodwill16,400 16,400 
Other assets150,683 148,369 
TOTAL ASSETS$4,211,951 $4,022,440 
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Accounts payable$224,972 $204,678 
Customer deposits92,516 85,128 
Operating lease liabilities59,163 57,566 
Other liabilities246,399 252,303 
Community development district obligations17,124 19,339 
Obligation for consolidated inventory not owned14,608 26,899 
Notes payable bank - financial services operations224,321 165,844 
Senior notes due 2028 - net397,072 396,879 
Senior notes due 2030 - net296,991 296,865 
TOTAL LIABILITIES$1,573,166 $1,505,501 
Commitments and contingencies (Note 6)
  
SHAREHOLDERS’ EQUITY:
Common shares - $0.01 par value; authorized 58,000,000 shares at both March 31, 2024 and December 31, 2023;
   issued 30,137,141 shares at both March 31, 2024 and December 31, 2023
$301 $301 
Additional paid-in capital348,039 349,907 
Retained earnings2,439,409 2,301,348 
Treasury shares - at cost - 2,385,483 and 2,375,842 shares at March 31, 2024 and December 31, 2023, respectively
(148,964)(134,617)
TOTAL SHAREHOLDERS’ EQUITY$2,638,785 $2,516,939 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$4,211,951 $4,022,440 

See Notes to Unaudited Condensed Consolidated Financial Statements.
3


M/I HOMES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended March 31,
(In thousands, except per common share amounts)
20242023
Revenue$1,046,703 $1,000,530 
Costs and expenses:
Land and housing$763,360 $765,904 
General and administrative56,084 50,960 
Selling53,940 49,080 
Other income
 (7)
Interest income, net of interest expense
(6,920)(1,389)
Total costs and expenses$866,464 $864,548 
Income before income taxes180,239 135,982 
Provision for income taxes42,178 32,916 
Net income$138,061 $103,066 
Earnings per common share:
Basic$4.92 $3.73 
Diluted$4.78 $3.64 
Weighted average shares outstanding:
Basic28,052 27,602 
Diluted28,888 28,305 

See Notes to Unaudited Condensed Consolidated Financial Statements.
4


M/I HOMES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

Three Months Ended March 31, 2024
Common Shares
Shares OutstandingAdditional Paid-in CapitalRetained EarningsTreasury SharesTotal Shareholders’ Equity
(Dollars in thousands)Amount
Balance at December 31, 2023
27,761,299 $301 $349,907 $2,301,348 $(134,617)$2,516,939 
Net income   138,061  138,061 
Stock options exercised135,300  (2,299) 7,794 5,495 
Stock-based compensation expense  3,539   3,539 
Repurchase of common shares(200,000)   (25,278)(25,278)
Deferral of executive and director compensation  29   29 
Executive and director deferred compensation distributions55,059  (3,137) 3,137  
Balance at March 31, 2024
27,751,658 $301 $348,039 $2,439,409 $(148,964)$2,638,785 


Three Months Ended March 31, 2023
Common Shares
Shares OutstandingAdditional Paid-in CapitalRetained EarningsTreasury SharesTotal Shareholders’ Equity
(Dollars in thousands)Amount
Balance at December 31, 2022
27,440,083 $301 $352,639 $1,835,983 $(118,198)$2,070,725 
Net income— — — 103,066 — 103,066 
Stock options exercised218,066 — (3,118)— 9,557 6,439 
Stock-based compensation expense— — 2,023 — — 2,023 
Deferral of executive and director compensation— — 962 — — 962 
Executive and director deferred compensation distributions57,467 — (2,518)— 2,518  
Balance at March 31, 2023
27,715,616 $301 $349,988 $1,939,049 $(106,123)$2,183,215 

See Notes to Unaudited Condensed Consolidated Financial Statements.
5


M/I HOMES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
(Dollars in thousands)20242023
OPERATING ACTIVITIES:
Net income$138,061 $103,066 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Equity in income from joint venture arrangements (7)
Mortgage loan originations(600,946)(494,461)
Proceeds from the sale of mortgage loans539,379 514,346 
Fair value adjustment of mortgage loans held for sale2,849 (3,975)
Capitalization of originated mortgage servicing rights(1,127)(1,390)
Amortization of mortgage servicing rights355 523 
Depreciation3,304 3,214 
Amortization of debt issue costs808 660 
Gain on sale of mortgage servicing rights
(2,613) 
Stock-based compensation expense3,539 2,023 
Change in assets and liabilities:
Inventory15,775 175,316 
Other assets(3,808)(4,564)
Accounts payable20,294 (20,171)
Customer deposits7,388 4,682 
Accrued compensation(40,047)(38,969)
Other liabilities32,561 11,206 
Net cash provided by operating activities
115,772 251,499 
INVESTING ACTIVITIES:
Purchase of property and equipment(276)(2,079)
Investment in joint venture arrangements(23,685)(2,714)
Proceeds from sale of mortgage servicing rights6,853  
Net cash used in investing activities(17,108)(4,793)
FINANCING ACTIVITIES:
Net proceeds from (repayments of) bank borrowings - financial services operations
58,477 (22,123)
Repurchase of common shares(25,278) 
Proceeds from exercise of stock options5,495 6,439 
Net cash provided by (used in) financing activities
38,694 (15,684)
Net increase in cash, cash equivalents and restricted cash
137,358 231,022 
Cash, cash equivalents and restricted cash balance at beginning of period732,804 311,542 
Cash, cash equivalents and restricted cash balance at end of period$870,162 $542,564 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest — net of amount capitalized
$7,788 $8,458 
Income taxes$683 $838 
NON-CASH TRANSACTIONS DURING THE PERIOD:
Community development district infrastructure$(2,215)$(2,641)
Consolidated inventory not owned$(12,291)$2,600 
Distribution of single-family lots from joint venture arrangements$8,550 $5,244 

See Notes to Unaudited Condensed Consolidated Financial Statements.
6


M/I HOMES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. Basis of Presentation

The accompanying Unaudited Condensed Consolidated Financial Statements (the “financial statements”) of M/I Homes, Inc. and its subsidiaries (the “Company”) and notes thereto have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. The financial statements include the accounts of the Company. All intercompany transactions have been eliminated. Results for the interim period are not necessarily indicative of results for a full year. In the opinion of management, the accompanying financial statements reflect all adjustments (all of which are normal and recurring in nature) necessary for a fair presentation of financial results for the interim periods presented. These financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”).

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during that period. Actual results could differ from these estimates and have a significant impact on the financial condition and results of operations and cash flows. With regard to the Company, estimates and assumptions are inherent in calculations relating to valuation of inventory and investment in unconsolidated joint ventures, property and equipment depreciation, valuation of derivative financial instruments, accounts payable on inventory, accruals for costs to complete inventory, accruals for warranty claims, accruals for self-insured general liability claims, litigation, accruals for health care and workers’ compensation, accruals for guaranteed or indemnified loans, stock-based compensation expense, income taxes, and contingencies. Items that could have a significant impact on these estimates and assumptions include the risks and uncertainties listed in “Item 1A. Risk Factors” in Part I of our 2023 Form 10-K, as the same may be updated from time to time in our subsequent filings with the SEC.

Impact of New Accounting Standards and SEC Guidance.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity’s CODM. The amendments in this update also expand the interim segment disclosure requirements. ASU 2023-07 will be applied retrospectively and is effective for annual reporting periods in fiscal years beginning after December 15, 2023, and interim reporting periods in fiscal years beginning after December 31, 2024. The Company is currently evaluating the impact the adoption of ASU 2023-07 may have on our consolidated financial statements and disclosures, but we do not expect the impact to be significant.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires public companies to annually (1) disclose specific categories in the income tax rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than five percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate). ASU 2023-09 will be effective for the annual reporting periods in fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact the adoption of ASU 2023-09 may have on our consolidated financial statements and disclosures, but we do not expect the impact to be significant.
In March 2024, the SEC issued Final Rule Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors. This rule will require registrants to disclose certain climate-related information in registration statements and annual reports. The rules require information about a registrant’s climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition. The required information about climate-related risks will also include disclosure of a registrant’s greenhouse gas emissions. In addition, the rules will require registrants to present certain climate-related financial metrics in their audited financial statements. These requirements are effective for the Company in various fiscal years, starting with the disclosure requirements in the Company's fiscal year beginning January 1, 2025. Disclosures will be required prospectively, with information for prior periods required only to the extent it was previously disclosed in an SEC filing. The Company is currently evaluating the final rule to determine its impact on the Company's
7


disclosures. The Rule is currently the subject of litigation in the 8th Circuit Court of Appeals. On April 4, 2024, the SEC voluntarily stayed the implementation of the Rule pending completion of the litigation.

Significant Accounting Policies

There have been no significant changes to our significant accounting policies during the quarter ended March 31, 2024 as compared to those disclosed in our 2023 Form 10-K.
NOTE 2. Inventory and Capitalized Interest
Inventory
Inventory is recorded at cost, unless events and circumstances indicate that the carrying value of the inventory is impaired, at which point the inventory is written down to fair value (see Note 4 to our financial statements for additional details relating to our procedures for evaluating our inventories for impairment). Inventory includes the costs of land acquisition, land development and home construction, capitalized interest, real estate taxes, direct overhead costs incurred during development and home construction, and common costs that benefit the entire community, less impairments, if any.
A summary of the Company’s inventory as of March 31, 2024 and December 31, 2023 is as follows:
(In thousands)March 31, 2024December 31, 2023
Single-family lots, land and land development costs$1,448,459 $1,446,576 
Land held for sale136 6,932 
Homes under construction1,169,791 1,177,101 
Model homes and furnishings - at cost (less accumulated depreciation: March 31, 2024 - $11,120;
   December 31, 2023 - $10,940)
72,567 68,696 
Community development district infrastructure17,124 19,339 
Land purchase deposits51,480 51,608 
Consolidated inventory not owned14,608 26,899 
Total inventory$2,774,165 $2,797,151 

Single-family lots, land and land development costs include raw land that the Company has purchased to develop into lots, costs incurred to develop the raw land into lots, and lots for which development has been completed, but which have not yet been used to start construction of a home.
Homes under construction include homes that are in various stages of construction. As of March 31, 2024 and December 31, 2023, we had 1,896 homes (with a carrying value of $366.9 million) and 2,023 homes (with a carrying value of $424.2 million), respectively, included in homes under construction that were not subject to a sales contract.
Model homes and furnishings include homes that are under construction or have been completed and are being used as sales models. The amount also includes the net book value of furnishings included in our model homes. Depreciation on model home furnishings is recorded using an accelerated method over the estimated useful life of the assets, which is typically three years.
We own lots in certain communities in Florida that have Community Development Districts (“CDDs”). The Company records a liability for the estimated developer obligations that are probable and estimable and user fees that are required to be paid or transferred at the time the parcel or unit is sold to an end user.  The Company reduces this liability at the time of closing and the transfer of the property.  The Company recorded a $17.1 million liability and a $19.3 million liability related to these CDD bond obligations as of March 31, 2024 and December 31, 2023, respectively, along with the related inventory infrastructure.

Land purchase deposits include both refundable and non-refundable amounts paid to third party sellers relating to the purchase of land. On an ongoing basis, the Company evaluates the land option agreements relating to the land purchase deposits. The Company expenses any deposits and accumulated pre-acquisition costs relating to such agreements in the period when the Company makes the decision not to proceed with the purchase of land under an agreement.
8


Capitalized Interest
The Company capitalizes interest during land development and home construction.  Capitalized interest is charged to land and housing costs and expensed as the related inventory is delivered to a third party.  A summary of capitalized interest for the three months ended March 31, 2024 and 2023 is as follows:
Three Months Ended March 31,
(In thousands)20242023
Capitalized interest, beginning of period$32,144 $29,625 
Interest capitalized to inventory8,950 9,024 
Capitalized interest charged to land and housing costs and expenses(8,302)(8,040)
Capitalized interest, end of period$32,792 $30,609 
Interest incurred - net$2,030 $7,635 
NOTE 3. Investment in Joint Venture Arrangements
Investment in Joint Venture Arrangements
In order to minimize our investment and risk of land exposure in a single location, we have periodically partnered with other land developers or homebuilders to share in the land investment and development of a property through joint ownership and development agreements, joint ventures, and other similar arrangements. As of March 31, 2024 and December 31, 2023, our investment in such joint venture arrangements totaled $59.1 million and $44.0 million, respectively, and was reported as Investment in Joint Venture Arrangements on our Unaudited Condensed Consolidated Balance Sheets. The $15.1 million increase during the three-month period ended March 31, 2024 was driven primarily by our cash contributions to our joint venture arrangements during the first quarter of 2024 of $23.7 million, offset, in part, by lot distributions from our joint venture arrangements of $8.6 million.
The majority of our investment in joint venture arrangements for both March 31, 2024 and December 31, 2023 consisted of joint ownership and development agreements for which a special purpose entity was not established (“JODAs”). In these JODAs, we own the property jointly with partners which are typically other builders, and land development activities are funded jointly until the developed lots are subdivided for separate ownership by the partners in accordance with the JODA and the approved site plan. As of March 31, 2024 and December 31, 2023, the Company had $53.5 million and $38.4 million, respectively, invested in JODAs.
The remainder of our investment in joint venture arrangements was comprised of joint venture arrangements where a special purpose entity was established to own and develop the property. For these joint venture arrangements, we generally enter into limited liability company or similar arrangements (“LLCs”) with the other partners. These entities typically engage in land development activities for the purpose of distributing or selling developed lots to the Company and its partners in the LLC. As of both March 31, 2024 and December 31, 2023, the Company had $5.6 million of equity invested in LLCs. The Company’s percentage of ownership in these LLCs as of both March 31, 2024 and December 31, 2023 ranged from 25% to 50%.
We use the equity method of accounting for investments in LLCs and other joint venture arrangements, including JODAs, over which we exercise significant influence but do not have a controlling interest. Under the equity method, our share of the LLCs’ earnings or loss, if any, is included in our Unaudited Condensed Consolidated Statements of Income. The Company’s share of losses from its LLCs was less than $0.1 million for the three months ended March 31, 2023. There were no losses or income from the Company’s LLCs during the three months ended March 31, 2024. Our share of the profit relating to lots we purchase from our LLCs is deferred until homes are delivered by us and title passes to a homebuyer.
We believe that the Company’s maximum exposure related to its investment in these joint venture arrangements as of March 31, 2024 was the amount invested of $59.1 million, which is reported as Investment in Joint Venture Arrangements on our Unaudited Condensed Consolidated Balance Sheets. We expect to invest further amounts in these joint venture arrangements as development of the properties progresses.
The Company assesses its investments in unconsolidated LLCs for recoverability on a quarterly basis. See Note 4 to our financial statements for additional details relating to our procedures for evaluating our investments for impairment.
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Variable Interest Entities
With respect to our investments in these LLCs, we are required, under Accounting Standards Codification (“ASC”) 810-10, Consolidation (“ASC 810”), to evaluate whether or not such entities should be consolidated into our consolidated financial statements. We initially perform these evaluations when each new entity is created and upon any events that require reconsideration of the entity. See Note 1, “Summary of Significant Accounting Policies - Variable Interest Entities” in the Company’s 2023 Form 10-K for additional information regarding the Company’s methodology for evaluating entities for consolidation.
Land Option Agreements
In the ordinary course of business, the Company enters into land option or purchase agreements for which we generally pay non-refundable deposits. Pursuant to these land option agreements, the Company provides a deposit to the seller as consideration for the right to purchase land at different times in the future, usually at predetermined prices.  In accordance with ASC 810, we analyze our land option or purchase agreements to determine whether the corresponding land sellers are variable interest entities (“VIEs”) and, if so, whether we are the primary beneficiary, as further described in Note 1, “Summary of Significant Accounting Policies - Land Option Agreements” in the 2023 Form 10-K. If we are deemed to be the primary beneficiary of the VIE, we will consolidate the VIE in our consolidated financial statements and reflect such assets and liabilities in our Consolidated Inventory Not Owned in our Unaudited Condensed Consolidated Balance Sheets. At both March 31, 2024 and December 31, 2023, we concluded that we were not the primary beneficiary of any VIEs from which we are purchasing land under option or purchase agreements.
NOTE 4. Fair Value Measurements
There are three measurement input levels for determining fair value: Level 1, Level 2, and Level 3. Fair values determined by Level 1 inputs utilize quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.
Assets Measured on a Recurring Basis
The Company measures both mortgage loans held for sale and interest rate lock commitments (“IRLCs”) at fair value. Fair value measurement results in a better presentation of the changes in fair values of the loans and the derivative instruments used to economically hedge them.
In the normal course of business, our financial services segment enters into contractual commitments to extend credit to buyers of single-family homes with fixed expiration dates.  The commitments become effective when the borrowers “lock-in” a specified interest rate within established time frames.  Market risk arises if interest rates move adversely between the time of the “lock-in” of rates by the borrower and the sale date of the loan to an investor.  To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, the Company enters into optional or mandatory delivery forward sale contracts to sell whole loans and mortgage-backed securities to broker/dealers.  The forward sale contracts lock in an interest rate and price for the sale of loans similar to the specific rate lock commitments.  The Company does not engage in speculative trading or derivative activities.  Both the rate lock commitments to borrowers and the forward sale contracts to broker/dealers or investors are undesignated derivatives, and accordingly, are marked to fair value through earnings.  Changes in fair value measurements are included in earnings in the accompanying statements of income.
The fair value of mortgage loans held for sale is estimated based primarily on published prices for mortgage-backed securities with similar characteristics.  To calculate the effects of interest rate movements, the Company utilizes applicable published mortgage-backed security prices, and multiplies the price movement between the rate lock date and the balance sheet date by the notional loan commitment amount.  The Company applies a fallout rate to IRLCs when measuring the fair value of rate lock commitments.  Fallout is defined as locked loan commitments for which the Company does not close a mortgage loan and is based on management’s judgment and company experience.
The Company sells loans on a servicing released or servicing retained basis and receives servicing compensation.  Thus, the value of the servicing rights included in the fair value measurement is based upon contractual terms with investors and depends on the loan type. Mortgage servicing rights (Level 3 financial instruments as they are measured using significant unobservable inputs such as mortgage prepayment rates, discount rates and delinquency rates) are periodically evaluated for impairment. The
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amount of impairment is the amount by which the mortgage servicing rights, net of accumulated amortization, exceed their fair value, which is calculated using third-party valuations. Impairment, if any, is recognized through a valuation allowance and a reduction of revenue. Both the carrying value and fair value of our mortgage servicing rights were $6.4 million at March 31, 2024. At December 31, 2023, both the carrying value and fair value of our mortgage servicing rights were $10.7 million.
The fair value of the Company’s forward sales contracts to broker/dealers solely considers the market price movement of the same type of security between the trade date and the balance sheet date.  The market price changes are multiplied by the notional amount of the forward sales contracts to measure the fair value.
Interest Rate Lock Commitments. IRLCs are extended to certain homebuying customers who have applied for a mortgage loan and meet certain defined credit and underwriting criteria. Typically, the IRLCs will have a term of less than six months; however, in certain markets, the term could extend to nine months.
Some IRLCs are committed to a specific third-party investor through the use of whole loan delivery commitments matching the exact terms of the IRLC loan. Uncommitted IRLCs are considered derivative instruments and are fair value adjusted, with the resulting gain or loss recorded in current earnings.
Forward Sales of Mortgage-Backed Securities. Forward sales of mortgage-backed securities (“FMBSs”) are used to protect uncommitted IRLC loans against the risk of changes in interest rates between the lock date and the funding date. FMBSs related to uncommitted IRLCs and FMBSs related to mortgage loans held for sale are classified and accounted for as non-designated derivative instruments and are recorded at fair value, with gains and losses recorded in current earnings.

Mortgage Loans Held for Sale. Mortgage loans held for sale consists primarily of single-family residential loans collateralized by the underlying property.  Generally, all of the mortgage loans and related servicing rights are sold to third-party investors shortly after origination.  During the period between when a loan is closed and when it is sold to an investor, the interest rate risk is covered through the use of a whole loan contract or by FMBSs.
The table below shows the notional amounts of our financial instruments at March 31, 2024 and December 31, 2023:
Description of Financial Instrument (in thousands)March 31, 2024December 31, 2023
Uncommitted IRLCs$215,306 $174,274 
FMBSs related to uncommitted IRLCs217,000 174,000 
Whole loan contracts and related mortgage loans held for sale7,797 10,398 
FMBSs related to mortgage loans held for sale209,000 152,000 
Mortgage loans held for sale covered by FMBSs225,360 160,547 

The following table sets forth the amount of (loss) gain recognized, within our revenue in the Unaudited Condensed Consolidated Statements of Income, on assets and liabilities measured on a recurring basis for the three months ended March 31, 2024 and 2023:
Three Months Ended March 31,
Description (in thousands)20242023
Mortgage loans held for sale$(2,849)$3,975 
Forward sales of mortgage-backed securities7,241 1,235 
Interest rate lock commitments(857)3,498 
Whole loan contracts(892)(380)
Total gain recognized
$2,643 $8,328 
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The following tables set forth the fair value of the Company’s derivative instruments and their location within the Unaudited Condensed Consolidated Balance Sheets for the periods indicated (except for mortgage loans held for sale which are disclosed as a separate line item):
Asset DerivativesLiability Derivatives
March 31, 2024March 31, 2024
Description of DerivativesBalance Sheet
Location
Fair Value
(in thousands)
Balance Sheet LocationFair Value
(in thousands)
Forward sales of mortgage-backed securitiesOther assets$21 Other liabilities$ 
Interest rate lock commitmentsOther assets2,757 Other liabilities 
Whole loan contractsOther assets Other liabilities1,224 
Total fair value measurements$2,778 $1,224 

Asset DerivativesLiability Derivatives
December 31, 2023December 31, 2023
Description of DerivativesBalance Sheet
Location
Fair Value
(in thousands)
Balance Sheet LocationFair Value
(in thousands)
Forward sales of mortgage-backed securitiesOther assets$ Other liabilities$7,220 
Interest rate lock commitmentsOther assets3,617 Other liabilities 
Whole loan contractsOther assets Other liabilities335 
Total fair value measurements$3,617 $7,555 
Assets Measured on a Non-Recurring Basis
Inventory. The Company assesses inventory for recoverability on a quarterly basis based on the difference in the carrying value of the inventory and its fair value at the time of the evaluation. Determining the fair value of a community’s inventory involves a number of variables, estimates and projections, which are Level 3 measurement inputs. See Note 1, “Summary of Significant Accounting Policies - Inventory” in the 2023 Form 10-K for additional information regarding the Company’s methodology for determining fair value.
The Company uses significant assumptions to evaluate the recoverability of its inventory, such as estimated average selling price, construction and development costs, absorption rate (reflecting any product mix change strategies implemented or to be implemented), selling strategies, alternative land uses (including disposition of all or a portion of the land owned), or discount rates. Changes in these assumptions could materially impact future cash flow and fair value estimates and may lead the Company to incur additional impairment charges in the future. Our analysis is conducted only if indicators of a decline in value of our inventory exist, which include, among other things, declines in gross margin on sales contracts in backlog or homes that have been delivered, slower than anticipated absorption pace, declines in average sales price or high incentive offers by management to improve absorptions, declines in margins regarding future land sales, or declines in the value of the land itself as a result of third party appraisals. If communities are not recoverable based on the estimated future undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. During the three months ended March 31, 2024 and 2023, the Company did not record any impairment charges on its inventory.
Investment in Unconsolidated Joint Ventures.  We evaluate our investments in unconsolidated joint ventures for impairment on a quarterly basis based on the difference in the investment’s carrying value and its fair value at the time of the evaluation. If the Company has determined that the decline in value is other than temporary, the Company would write down the value of the investment to its estimated fair value. Determining the fair value of investments in unconsolidated joint ventures involves a number of variables, estimates and assumptions, which are Level 3 measurement inputs. See Note 1, “Summary of Significant Accounting Policies - Investment in Unconsolidated Joint Ventures,” in the 2023 Form 10-K for additional information regarding the Company’s methodology for determining fair value. Because of the high degree of judgment involved in developing these assumptions, it is possible that changes in these assumptions could materially impact future cash flow and fair value estimates of the investments which may lead the Company to incur additional impairment charges in the future. During the three months ended March 31, 2024 and 2023, the Company did not record any impairment charges on its investments in unconsolidated joint ventures.
Financial Instruments
Counterparty Credit Risk. To reduce the risk associated with losses that would be recognized if counterparties failed to perform as contracted, the Company limits the entities with whom management can enter into commitments. This risk of
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accounting loss is the difference between the market rate at the time of non-performance by the counterparty and the rate to which the Company committed.
The following table presents the carrying amounts and fair values of the Company’s financial instruments at March 31, 2024 and December 31, 2023. The objective of the fair value measurement is to estimate the price at which an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions.
March 31, 2024December 31, 2023
(In thousands)Fair Value HierarchyCarrying AmountFair ValueCarrying AmountFair Value
Assets:
Cash, cash equivalents and restricted cashLevel 1$870,162 $870,162 $732,804 $732,804 
Mortgage loans held for saleLevel 2235,047 235,047 176,329 176,329 
Interest rate lock commitmentsLevel 22,757 2,757 3,617 3,617 
Forward sales of mortgage-backed securitiesLevel 221 21   
Liabilities:
Notes payable - homebuilding operationsLevel 2    
Notes payable - financial services operationsLevel 2224,321 224,321 165,844 165,844 
Senior notes due 2028 (a)
Level 2400,000 379,500 400,000 383,500 
Senior notes due 2030 (a)
Level 2300,000 266,625 300,000 267,375 
Whole loan contracts for committed IRLCs and mortgage loans held for saleLevel 21,224 1,224 335 335 
Forward sales of mortgage-backed securitiesLevel 2  7,220 7,220 
(a)Our senior notes are stated at the principal amount outstanding which does not include the impact of premiums, discounts, and debt issuance costs that are amortized to interest cost over the respective terms of the notes.
The following methods and assumptions were used by the Company in estimating its fair value disclosures of financial instruments at March 31, 2024 and December 31, 2023:
Cash, Cash Equivalents and Restricted Cash. The carrying amounts of these items approximate fair value because they are short-term by nature.
Mortgage Loans Held for Sale, Forward Sales of Mortgage-Backed Securities, Interest Rate Lock Commitments, Whole Loan Contracts for Committed IRLCs and Mortgage Loans Held for Sale, Senior Notes due 2028 and Senior Notes due 2030. The fair value of these financial instruments was determined based upon market quotes at March 31, 2024 and December 31, 2023. The market quotes used were quoted prices for similar assets or liabilities along with inputs taken from observable market data by correlation. The inputs were adjusted to account for the condition of the asset or liability.
Notes Payable - Homebuilding Operations. The interest rate available to the Company during the quarter ended March 31, 2024 under the Company’s $650 million unsecured revolving credit facility, dated July 18, 2013, as amended (the “Credit Facility”), fluctuated daily with the secured overnight financing rate (“SOFR”) plus a margin of 175 basis points, and thus the carrying value is a reasonable estimate of fair value. See Note 8 to our financial statements for additional information regarding the Credit Facility.
Notes Payable - Financial Services Operations. M/I Financial, LLC, a 100% owned subsidiary of M/I Homes, Inc. (“M/I Financial”), is a party to a $300 million mortgage repurchase agreement, dated October 24, 2023 (the “MIF Mortgage Repurchase Facility”). For this credit facility, the interest rate is based on a variable rate index, and thus its carrying value is a reasonable estimate of fair value. The interest rate available to M/I Financial fluctuated with SOFR. See Note 8 to our financial statements for additional information regarding the MIF Mortgage Repurchase Facility.
NOTE 5. Guarantees and Indemnifications
In the ordinary course of business, M/I Financial enters into agreements that provide a limited-life guarantee on loans sold to certain third-party purchasers of its mortgage loans that M/I Financial will repurchase a loan if certain conditions occur, primarily if the mortgagor does not meet the terms of the loan within the first six months after the sale of the loan. Loans totaling approximately $531.3 million and $544.5 million were covered under these guarantees as of March 31, 2024 and December 31, 2023, respectively.  The decrease in loans covered by these guarantees from December 31, 2023 is a result of a change in the mix of investors and their related purchase terms. A portion of the revenue paid to M/I Financial for providing the guarantees on these loans was deferred at March 31, 2024, and will be recognized in income as M/I Financial is released
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from its obligation under the guarantees. The risk associated with the guarantees above is offset by the value of the underlying assets.
M/I Financial has received inquiries concerning underwriting matters from purchasers of its loans regarding certain loans totaling approximately $4.3 million and $6.3 million at March 31, 2024 and December 31, 2023, respectively.
M/I Financial has also guaranteed the collectability of certain loans to third party insurers (U.S. Department of Housing and Urban Development and U.S. Veterans Administration) of those loans for periods ranging from five to thirty years. The maximum potential amount of future payments is equal to the outstanding loan value less the value of the underlying asset plus administrative costs incurred related to foreclosure on the loans, should this event occur.
The Company recorded a liability relating to the guarantees described above totaling $1.2 million and $1.7 million at March 31, 2024 and December 31, 2023, respectively, which is management’s best estimate of the Company’s liability with respect to such guarantees.
NOTE 6. Commitments and Contingencies
Warranty
We use subcontractors for nearly all aspects of home construction. Although our subcontractors are generally required to repair and replace any product or labor defects, we are, during applicable warranty periods, ultimately responsible to the homeowner for making such repairs. As such, we record warranty reserves to cover our exposure to the costs for materials and labor not expected to be covered by our subcontractors to the extent they relate to warranty-type claims. Warranty reserves are established by charging cost of sales and crediting a warranty reserve for each home delivered.  The amounts charged are estimated by management to be adequate to cover expected warranty-related costs under the Company’s warranty programs. Warranty reserves are recorded for warranties under our Home Builder’s Limited Warranty (“HBLW”) and our transferable structural warranty in Other Liabilities on the Company’s Unaudited Condensed Consolidated Balance Sheets.
The warranty reserves for the HBLW are established as a percentage of average sales price and adjusted based on historical payment patterns determined, generally, by geographic area and recent trends. Factors that are given consideration in determining the HBLW reserves include: (1) the historical range of amounts paid per average sales price on a home; (2) type and mix of amenity packages added to the home; (3) any warranty expenditures not considered to be normal and recurring; (4) timing of payments; (5) improvements in quality of construction expected to impact future warranty expenditures; and (6) conditions that may affect certain projects and require a different percentage of average sales price for those specific projects. Changes in estimates for warranties occur due to changes in the historical payment experience and differences between the actual payment pattern experienced during the period and the historical payment pattern used in our evaluation of the warranty reserve balance at the end of each quarter. Actual future warranty costs could differ from our current estimated amount.
Our warranty reserves for our transferable structural warranty programs are established on a per-unit basis. While the structural warranty reserve is recorded as each house is delivered, the sufficiency of the structural warranty per unit charge and total reserve is reevaluated on an annual basis, with the assistance of an actuary, using our own historical data and trends, industry-wide historical data and trends, and other project specific factors. The reserves are also evaluated quarterly and adjusted if we encounter activity that is inconsistent with the historical experience used in the annual analysis. These reserves are subject to variability due to uncertainties regarding structural defect claims for products we build, the markets in which we build, claim settlement history, insurance and legal interpretations, among other factors.
Our warranty reserve amounts are based upon historical experience and geographic location. While we believe that our warranty reserves are sufficient to cover our projected costs, there can be no assurances that historical data and trends will accurately predict our actual warranty costs.
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A summary of warranty activity for the three months ended March 31, 2024 and 2023 is as follows:
Three Months Ended March 31,
(In thousands)20242023
Warranty reserves, beginning of period$31,980 $32,902 
Warranty expense on homes delivered during the period5,599 5,373 
Changes in estimates for pre-existing warranties22 643 
Settlements made during the period(5,338)(5,725)
Warranty reserves, end of period$32,263 $33,193 

Performance Bonds and Letters of Credit

At March 31, 2024, the Company had outstanding approximately $438.7 million of completion bonds and standby letters of credit, some of which were issued to various local governmental entities that expire at various times through February 2029. Included in this total are: (1) $360.7 million of performance and maintenance bonds and $59.4 million of performance letters of credit that serve as completion bonds for land development work in progress; (2) $11.5 million of financial letters of credit, of which $11.0 million represent deposits on land and lot purchase agreements; (3) $4.6 million of financial bonds; and (4) $2.5 million of corporate notes.

Land Option Contracts and Other Similar Contracts

At March 31, 2024, the Company also had options and contingent purchase agreements to acquire land and developed lots with an aggregate purchase price of approximately $1.13 billion. Purchase of properties under these agreements is contingent upon satisfaction of certain requirements by the Company and the sellers.
Legal Matters
The Company and certain of its subsidiaries have been named as defendants in certain other legal proceedings which are incidental to our business. While management currently believes that the ultimate resolution of these other legal proceedings, individually and in the aggregate, will not have a material effect on the Company’s financial position, results of operations and cash flows, such legal proceedings are subject to inherent uncertainties. The Company has recorded a liability to provide for the anticipated costs, including legal defense costs, associated with the resolution of these other legal proceedings. However, the possibility exists that the costs to resolve these legal proceedings could differ from the recorded estimates and, therefore, have a material effect on the Company’s net income for the periods in which they are resolved. At both March 31, 2024 and December 31, 2023, we had $1.0 million reserved for legal expenses.
NOTE 7. Goodwill
Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired and liabilities assumed in business combinations. In connection with the Company’s acquisition of the homebuilding assets and operations of Pinnacle Homes in Detroit, Michigan in March of 2018, the Company recorded goodwill of $16.4 million, which is included as Goodwill in our Consolidated Balance Sheets. This amount was based on the estimated fair values of the acquired assets and liabilities at the date of the acquisition in accordance with ASC 350.

In accordance with ASC 350, the Company analyzes goodwill for impairment on an annual basis (or more often if indicators of impairment exist). The Company performs a qualitative assessment to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment indicates that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then a quantitative assessment is performed to determine the reporting unit’s fair value. If the reporting unit’s carrying value exceeds its fair value, then an impairment loss is recognized for the amount of the excess of the carrying amount over the reporting unit’s fair value. The Company performed its annual goodwill impairment analysis via a quantitative test during the fourth quarter of 2023, and there was no impairment recorded at December 31, 2023. At March 31, 2024, no indicators for impairment existed and therefore no impairment was recorded. However, we will continue to monitor the fair value of the reporting unit in future periods if conditions worsen or other events occur that could impact the fair value of the reporting unit.
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NOTE 8. Debt
Notes Payable - Homebuilding
The Credit Facility provides for an aggregate commitment amount of $650 million and also includes an accordion feature pursuant to which the maximum borrowing availability may be increased to an aggregate of $800 million, subject to obtaining additional commitments from lenders. The Credit Facility matures on December 9, 2026. Interest on amounts borrowed under the Credit Facility is payable at multiple interest rate options including one, three or six month adjusted term SOFR (subject to a floor of 0.25%) plus a margin of 175 basis points (subject to adjustment in subsequent quarterly periods based on the Company’s leverage ratio). The Credit Facility also contains certain financial covenants. At March 31, 2024, the Company was in compliance with all financial covenants of the Credit Facility.
The available amount under the Credit Facility is computed in accordance with a borrowing base, which is calculated by applying various advance rates for different categories of inventory, and totaled $2.03 billion of availability for additional senior debt at March 31, 2024. As a result, the full $650 million commitment amount of the Credit Facility was available, less any borrowings and letters of credit outstanding. At March 31, 2024, there were no borrowings outstanding and $70.8 million of letters of credit outstanding, leaving a net remaining borrowing availability of $579.2 million. The Credit Facility includes a $250 million sub-facility for letters of credit.
The Company’s obligations under the Credit Facility are guaranteed by all of the Company’s subsidiaries, with the exception of subsidiaries that are primarily engaged in the business of mortgage financing, title insurance or similar financial businesses relating to the homebuilding and home sales business, certain subsidiaries that are not 100%-owned by the Company or another subsidiary, and other subsidiaries designated by the Company as Unrestricted Subsidiaries (as defined in the Credit Facility), subject to limitations on the aggregate amount invested in such Unrestricted Subsidiaries in accordance with the terms of the Credit Facility and the indentures governing the Company’s $300.0 million aggregate principal amount of 3.95% Senior Notes due 2030 (the “2030 Senior Notes”) and the Company’s $400.0 million aggregate principal amount of 4.95% Senior Notes due 2028 (the “2028 Senior Notes”). The guarantors for the Credit Facility (the “Subsidiary Guarantors”) are the same subsidiaries that guarantee the 2030 Senior Notes and the 2028 Senior Notes.
The Company’s obligations under the Credit Facility are general, unsecured senior obligations of the Company and the Subsidiary Guarantors and rank equally in right of payment with all our and the Subsidiary Guarantors’ existing and future unsecured senior indebtedness. Our obligations under the Credit Facility are effectively subordinated to our and the Subsidiary Guarantors’ existing and future secured indebtedness with respect to any assets comprising security or collateral for such indebtedness.
Notes Payable - Financial Services
The MIF Mortgage Repurchase Facility is used to finance eligible residential mortgage loans originated by M/I Financial. The MIF Mortgage Repurchase Facility provides for a mortgage repurchase facility with a maximum borrowing availability of $300 million (subject to increases and decreases during certain periods). The borrowing availability under the MIF Mortgage Repurchase Facility is $240 million through September 17, 2024 and will increase to $270 million from September 18, 2024 until maturity. The MIF Mortgage Repurchase Facility expires on October 22, 2024. M/I Financial pays interest on each advance under the MIF Mortgage Repurchase Facility at a per annum rate based on Daily Adjusting One-Month Term SOFR plus a margin as defined in the repurchase agreement. The MIF Mortgage Repurchase Facility also contains certain financial covenants. At March 31, 2024, M/I Financial was in compliance with all financial covenants of the MIF Mortgage Repurchase Facility.
At March 31, 2024 and December 31, 2023, M/I Financial’s maximum borrowing availability under its credit facility was $240.0 million and $300.0 million, respectively. At March 31, 2024 and December 31, 2023, M/I Financial had $224.3 million and $165.8 million, respectively, in borrowings outstanding under its credit facility.
Senior Notes
As of both March 31, 2024 and December 31, 2023, we had $300.0 million of our 2030 Senior Notes outstanding. The 2030 Senior Notes bear interest at a rate of 3.95% per year, payable semiannually in arrears on February 15 and August 15 of each year, and mature on February 15, 2030. The Company may redeem some or all of the 2030 Senior Notes at any time prior to August 15, 2029 (the date that is six months prior to the maturity of the 2030 Senior Notes), at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the redemption date, plus a “make-whole” amount set forth in the indenture governing the 2030 Senior Notes. In addition, on or after August 15, 2029 (the date that is six months prior to the maturity of the 2030 Senior Notes), the Company may redeem some or all of the 2030 Senior
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Notes at a redemption price equal to 100.000% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the redemption date.
As of both March 31, 2024 and December 31, 2023, we had $400.0 million of our 2028 Senior Notes outstanding. The 2028 Senior Notes bear interest at a rate of 4.95% per year, payable semiannually in arrears on February 1 and August 1 of each year and mature on February 1, 2028. We may redeem all or any portion of the 2028 Senior Notes at a stated redemption price, together with accrued and unpaid interest thereon. The redemption price is currently 102.475% of the principal amount outstanding, but will decline to 101.238% of the principal amount outstanding if redeemed during the 12-month period beginning on February 1, 2025 and will further decline to 100.000% of the principal amount outstanding if redeemed on or after February 1, 2026, but prior to maturity.
The 2030 Senior Notes contain certain covenants, as more fully described and defined in the indenture governing the 2030 Senior Notes, which limit the ability of the Company and the restricted subsidiaries to, among other things: incur certain liens securing indebtedness without equally and ratably securing the 2030 Senior Notes and the guarantees thereof; enter into certain sale and leaseback transactions; and consolidate or merge with or into other companies, liquidate or sell or otherwise dispose of all or substantially all of the Company’s assets. These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2030 Senior Notes. As of March 31, 2024, the Company was in compliance with all terms, conditions, and covenants under the indenture.
The 2028 Senior Notes contain certain covenants, as more fully described and defined in the indenture governing the 2028 Senior Notes, which limit the ability of the Company and the restricted subsidiaries to, among other things: incur additional indebtedness; make certain payments, including dividends, or repurchase any shares, in an aggregate amount exceeding our “restricted payments basket”; make certain investments; and create or incur certain liens, consolidate or merge with or into other companies, or liquidate or sell or transfer all or substantially all of our assets. These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2028 Senior Notes. As of March 31, 2024, the Company was in compliance with all terms, conditions, and covenants under the indenture.
The 2030 Senior Notes and the 2028 Senior Notes are fully and unconditionally guaranteed jointly and severally on a senior unsecured basis by the Subsidiary Guarantors. The 2030 Senior Notes and the 2028 Senior Notes are general, unsecured senior obligations of the Company and the Subsidiary Guarantors and rank equally in right of payment with all our and the Subsidiary Guarantors’ existing and future unsecured senior indebtedness.  The 2030 Senior Notes and the 2028 Senior Notes are effectively subordinated to our and the Subsidiary Guarantors’ existing and future secured indebtedness with respect to any assets comprising security or collateral for such indebtedness.
The indenture governing the 2028 Senior Notes limits our ability to pay dividends on, and repurchase, our common shares and any of our preferred shares then outstanding to the amount of the positive balance in our “restricted payments basket,” as defined in the indenture. The “restricted payments basket” is equal to $125.0 million plus (1) 50% of our aggregate consolidated net income (or minus 100% of our aggregate consolidated net loss) from October 1, 2015, excluding income or loss from Unrestricted Subsidiaries (as defined in the indenture), plus (2) 100% of the net cash proceeds from either contributions to the common equity of the Company after December 1, 2015 or the sale of qualified equity interests after December 1, 2015, plus other items and subject to other exceptions. The positive balance in our restricted payments basket was $852.5 million at March 31, 2024 and $813.7 million at December 31, 2023. The determination to pay future dividends on, or make future repurchases of, our common shares will be at the discretion of our board of directors and will depend upon our results of operations, financial condition, capital requirements and compliance with debt covenants, and other factors deemed relevant by our board of directors (see Note 12 to our financial statements for more information).

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NOTE 9. Earnings Per Common Share
The table below presents a reconciliation between basic and diluted weighted average shares outstanding, net income, and basic and diluted income per common share for the three months ended March 31, 2024 and 2023:
Three Months Ended
March 31,
(In thousands, except per common share amounts)
20242023
NUMERATOR
Net income$138,061 $103,066 
DENOMINATOR
Basic weighted average shares outstanding28,052 27,602 
Dilutive securities
836 703 
Diluted weighted average shares outstanding28,888 28,305 
Earnings per common share:
Basic$4.92 $3.73 
Diluted$4.78 $3.64 
Anti-dilutive equity awards not included in the calculation of diluted earnings per common share
 266 
NOTE 10. Income Taxes
The Inflation Reduction Act (IRA) was enacted on August 16, 2022 to address the high cost of prescription drugs, healthcare availability, climate change and inflation. The IRA extended the energy efficient homes credit through 2032 and, as a result, the Company recognized a $0.6 million tax benefit for energy efficient homes credit during the first three months of 2024. The Company recognized a $0.9 million tax benefit for energy efficient homes credit in 2023's first three months.
During the three months ended March 31, 2024 and 2023, the Company recorded a tax provision of $42.2 million and $32.9 million, respectively, which reflects income tax expense related to income before income taxes for the periods. The effective tax rate for the three months ended March 31, 2024 and 2023 was 23.4% and 24.2%, respectively. The decrease in the effective rate from the three months ended March 31, 2023 was primarily attributable to an increase in tax benefit from equity compensation in 2024.
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NOTE 11. Business Segments
The Company’s chief operating decision makers evaluate the Company’s performance in various ways, including: (1) the results of our individual homebuilding operating segments and the results of our financial services operations; (2) the results of our homebuilding reportable segments; and (3) our consolidated financial results.
In accordance with ASC 280, Segment Reporting (“ASC 280”), we have identified each homebuilding division as an operating segment and have elected to aggregate our operating segments into separate reportable segments as they share similar aggregation characteristics prescribed in ASC 280 in the following regards: (1) long-term economic characteristics; (2) historical and expected future long-term gross margin percentages; (3) housing products, production processes and methods of distribution; and (4) geographical proximity.
The homebuilding operating segments that comprise each of our reportable segments are as follows:
NorthernSouthern
Chicago, IllinoisFt. Myers/Naples, Florida
Cincinnati, OhioOrlando, Florida
Columbus, OhioSarasota, Florida
Indianapolis, IndianaTampa, Florida
Minneapolis/St. Paul, MinnesotaAustin, Texas
Detroit, MichiganDallas/Fort Worth, Texas
Houston, Texas
San Antonio, Texas
Charlotte, North Carolina
Raleigh, North Carolina
Nashville, Tennessee

The following table shows, by segment, revenue, operating income (loss) and interest (income) expense - net for the three months ended March 31, 2024 and 2023, as well as the Company’s income before income taxes for such periods:
Three Months Ended March 31,
(In thousands)20242023
Revenue:
Northern homebuilding$408,520 $382,730 
Southern homebuilding611,221 592,519 
Financial services (a)
26,962 25,281 
Total revenue$1,046,703 $1,000,530 
Operating income (loss):
Northern homebuilding$58,061 $39,160 
Southern homebuilding117,843 97,612 
Financial services (a)
15,187 14,968 
Less: Corporate selling, general and administrative expense(17,772)(17,154)
Total operating income$173,319 $134,586 
Interest (income) expense - net:
Northern homebuilding$(80)$(46)
Southern homebuilding(398)(2)
Financial services (a)
2,875 2,327 
Corporate(9,317)(3,668)
Total interest income, net of interest expense
$(6,920)$(1,389)
Other income
 (7)
Income before income taxes$180,239 $135,982 
(a)Our financial services operational results should be viewed in connection with our homebuilding business as its operations originate loans and provide title services primarily for our homebuying customers, with the exception of an immaterial amount of mortgage refinancing.
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The following tables show total assets by segment at March 31, 2024 and December 31, 2023:
March 31, 2024
(In thousands)NorthernSouthernCorporate, Financial Services and UnallocatedTotal
Deposits on real estate under option or contract$9,473 $42,007 $ $51,480 
Inventory (a)
990,437 1,732,248  2,722,685 
Investments in joint venture arrangements 59,146  59,146 
Other assets42,488 116,548 
(b)
1,219,604 1,378,640 
Total assets$1,042,398 $1,949,949 $1,219,604 $4,211,951 

December 31, 2023
(In thousands)NorthernSouthernCorporate, Financial Services and UnallocatedTotal
Deposits on real estate under option or contract$8,990 $42,618 $ $51,608 
Inventory (a)
1,016,982 1,728,561  2,745,543 
Investments in joint venture arrangements 44,011  44,011 
Other assets37,171 104,306 
(b)
1,039,801 1,181,278 
Total assets$1,063,143 $1,919,496 $1,039,801 $4,022,440 
(a)Inventory includes single-family lots, land and land development costs; land held for sale; homes under construction; model homes and furnishings; community development district infrastructure; and consolidated inventory not owned.
(b)Includes development reimbursements from local municipalities.
NOTE 12. Share Repurchase Program
On July 28, 2021, the Company announced that its Board of Directors approved a new share repurchase program pursuant to which the Company may purchase up to $100 million of its outstanding common shares (the “2021 Share Repurchase Program”). On February 17, 2022, the Company announced that its Board of Directors approved an increase to its 2021 Share Repurchase Program by an additional $100 million. On November 15, 2023, the Company announced that its Board of Directors approved an increase to its 2021 Share Repurchase Program by an additional $100 million.

Pursuant to the 2021 Share Repurchase Program, the Company may purchase up to $300 million of its outstanding common shares through open market transactions, privately negotiated transactions or otherwise in accordance with all applicable laws. The timing, amount and other terms and conditions of any additional repurchases under the 2021 Share Repurchase Program will be based on a variety of factors, including the market price of the Company’s common shares, business considerations, general market and economic conditions and legal requirements. The 2021 Share Repurchase Program does not have an expiration date and the Board may modify, discontinue or suspend it at any time.

The Company repurchased 0.2 million outstanding common shares at an aggregate purchase price of $25.3 million under the 2021 Share Repurchase Program during the first quarter of 2024. As of March 31, 2024, $102.5 million remained available for repurchases under the 2021 Share Repurchase Program.
NOTE 13. Revenue Recognition
Revenue and the related profit from the sale of a home and revenue and the related profit from the sale of land to third parties are recognized in the financial statements on the date of closing if delivery has occurred, title has passed to the buyer, all performance obligations (as defined below) have been met, and control of the home or land is transferred to the buyer in an amount that reflects the consideration we expect to be entitled to receive in exchange for the home or land. If not received immediately upon closing, cash proceeds from home closings are held in escrow for the Company’s benefit, typically for up to three days, and are included in Cash, cash equivalents and restricted cash on the Condensed Consolidated Balance Sheets.

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

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

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

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

Although our third party land sale contracts may include multiple performance obligations, the revenue we expect to recognize in any future year related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, is not material. We do not disclose the value of unsatisfied performance obligations for land sale contracts with an original expected duration of one year or less.
We recognize the majority of the revenue associated with our mortgage loan operations when the mortgage loans are sold and/or related servicing rights are sold to third party investors or retained and managed under a third party sub-service arrangement. The revenue recognized is reduced by the fair value of the related guarantee provided to the investor. The fair value of the guarantee is recognized in revenue when the Company is released from its obligation under the guarantee (note that guarantees are excluded from the scope of ASC 606, Revenue from Contracts with Customers). We recognize financial services revenue associated with our title operations as homes are delivered, closing services are rendered, and title policies are issued, all of which generally occur simultaneously as each home is delivered. All of the underwriting risk associated with title insurance policies is transferred to third-party insurers.
The following table presents our revenues disaggregated by revenue source:
Three Months Ended March 31,
(In thousands)
20242023
Housing$1,016,513 $974,946 
Land sales3,228 303 
Financial services (a)
26,962 25,281 
Total revenue$1,046,703 $1,000,530 
(a)Revenue includes hedging losses of $2.9 million for the three months ended March 31, 2024 and hedging gains of $4.2 million for the three months ended March 31, 2023. Hedging gains/losses do not represent revenue recognized from contracts with customers.

Refer to Note 11 for presentation of our revenues disaggregated by geography. As our homebuilding operations accounted for over 97% of our total revenues for the three months ended March 31, 2024 and 2023, with most of those revenues generated from home purchase contracts with customers, we believe the disaggregation of revenues as disclosed above and in Note 11 fairly depict how the nature, amount, timing and uncertainty of cash flows are affected by economic factors.
NOTE 14. Stock-Based Compensation
The Company maintains the M/I Homes, Inc. 2018 Long-Term Incentive Plan (the “2018 LTIP”), an equity compensation plan administered by the Compensation Committee of our Board of Directors. Under the 2018 LTIP, the Company is permitted to grant (1) nonqualified stock options to purchase common shares, (2) incentive stock options to purchase common shares, (3) stock appreciation rights, (4) restricted common shares, (5) other stock-based awards (awards that are valued in whole or in part by reference to, or otherwise based on, the fair market value of our common shares), and (6) cash-based awards to its officers, employees, non-employee directors and other eligible participants. Subject to certain adjustments, the 2018 LTIP authorizes awards to officers, employees, non-employee directors and other eligible participants for up to 4,211,261 common shares, of which 974,452 remain available for grant at March 31, 2024.
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The 2018 LTIP replaced the M/I Homes, Inc. 2009 Long-Term Incentive Plan (the “2009 LTIP”), which was terminated immediately following our 2018 Annual Meeting of Shareholders. Awards outstanding under the 2009 LTIP Plan remain in effect in accordance with their respective terms.
Stock Options
The Company did not any issue stock option awards in 2024. Total stock-based compensation expense related to stock option awards that were issued in previous years that has been charged against income was $1.5 million and $2.0 million for the three months ended March 31, 2024 and 2023, respectively.  As of March 31, 2024, there was a total of $16.0 million of unrecognized compensation expense related to unvested stock option awards that will be recognized as stock-based compensation expense over a weighted average period of 2.1 years.
Employee Restricted Share Units
In lieu of issuing stock option awards, on February 15, 2024, the Company awarded certain of its employees 133,149 (in the aggregate) restricted share units under the 2018 LTIP, at a price of $124.66 (the closing price of our common shares on the New York Stock Exchange on such date) that vest ratably over a three-year period (subject to the employee’s continued service on the vesting date (except in certain circumstances)) and will be settled in common shares. Stock-based compensation expense for our employee restricted share units is recognized over the period of the award (amortized over three years). The Company recognized compensation expense related to the awards of $0.7 million in 2024. As of March 31, 2024, there was a total of $15.9 million of unrecognized compensation expense related to unvested restricted share units that will be recognized as stock-based compensation expense over a weighted average period of 1.9 years.
Performance Share Unit Awards
On February 15, 2024, February 15, 2023 and February 17, 2022, the Company awarded its executive officers (in the aggregate) a target number of performance share units (“PSU’s”) equal to 20,856, 27,243 and 33,619 PSU’s, respectively. Each PSU represents a contingent right to receive one common share of the Company if vesting is satisfied at the end of a three-year performance period (the “Performance Period”). The ultimate number of PSU’s that will vest and be earned, if any, after the completion of the Performance Period, is based on (1) (a) the Company’s cumulative annual pre-tax income from operations, excluding extraordinary items, as defined in the underlying award agreements with the executive officers, over the Performance Period (weighted 80%) (the “Performance Condition”), and (b) the Company’s relative total shareholder return over the Performance Period compared to the total shareholder return of a peer group of other publicly-traded homebuilders (weighted 20%) (the “Market Condition”) and (2) the participant’s continued employment through the end of the Performance Period, except in the case of termination due to death, disability or retirement or involuntary termination without cause by the Company. The number of PSU’s that vest may increase by up to 50% from the target number based on levels of achievement of the above criteria as set forth in the applicable award agreements and decrease to zero if the Company fails to meet the minimum performance levels for both of the above criteria. If the Company achieves the minimum performance levels for both of the above criteria, 50% of the target number of PSU’s will vest and be earned. Any portion of PSU’s that does not vest at the end of the Performance Period will be forfeited. Additionally, the PSU’s have no dividend or voting rights during the Performance Period.
The grant date fair value of the portion of the PSU’s subject to the Performance Condition and the Market Condition component was $124.66 and $112.53 for the 2024 PSU’s, respectively, $58.73 and $64.45 for the 2023 PSU’s, respectively, and $47.59 and $50.51 for the 2022 PSU’s, respectively. In accordance with ASC 718, for the portion of the PSU’s subject to a Market Condition, stock-based compensation expense is derived using the Monte Carlo simulation methodology and is recognized ratably over the service period regardless of whether or not the attainment of the Market Condition is probable. Therefore, the Company recognized less than $0.1 million in stock-based compensation expense during the first quarter of 2024 related to the Market Condition portion of the 2024, 2023 and 2022 PSU awards. There was a total of $0.4 million of unrecognized stock-based compensation expense related to the Market Condition portion of the 2024, 2023 and 2022 PSU awards as of March 31, 2024.
For the portion of the PSU’s subject to the Performance Condition, we recognize stock-based compensation expense on a straight-line basis over the Performance Period based on the probable outcome of the related Performance Condition. Otherwise, stock-based compensation expense recognition is deferred until probability is attained and a cumulative stock-based compensation expense adjustment is recorded and recognized ratably over the remaining service period. The Company reassesses the probability of the satisfaction of the Performance Condition on a quarterly basis, and stock-based compensation expense is adjusted based on the portion of the requisite service period that has passed. As of March 31, 2024, the Company had not recognized any stock-based compensation expense related to the Performance Condition portion of the 2024 PSU awards. If the Company achieves the minimum performance levels for the Performance Conditions to be met for the 2024 PSU
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awards, the Company would record unrecognized stock-based compensation expense of $1.0 million as of March 31, 2024, for which $0.1 million would be immediately recognized had attainment been probable at March 31, 2024. The Company recognized a total of $0.3 million of stock-based compensation expense related to the Performance Condition portion of the 2022 and 2023 PSU awards during the first quarter of 2024 based on the probability of attaining the respective performance conditions. The Company has a total of $1.2 million of unrecognized stock-based compensation expense for the 2022 and 2023 PSU awards as of March 31, 2024.
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ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

OVERVIEW
M/I Homes, Inc. and subsidiaries (the “Company” or “we”) is one of the nation’s leading builders of single-family homes having sold over 153,900 homes since commencing homebuilding activities in 1976.  The Company’s homes are marketed and sold primarily under the M/I Homes brand. The Company has homebuilding operations in Columbus and Cincinnati, Ohio; Indianapolis, Indiana; Chicago, Illinois; Minneapolis/St. Paul, Minnesota; Detroit, Michigan; Ft. Myers/Naples, Tampa, Sarasota and Orlando, Florida; Austin, Dallas/Fort Worth, Houston and San Antonio, Texas; Charlotte and Raleigh, North Carolina; and Nashville, Tennessee.
Included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are the following topics relevant to the Company’s performance and financial condition:
Information Relating to Forward-Looking Statements;
Application of Critical Accounting Estimates and Policies;
Results of Operations;
Discussion of Our Liquidity and Capital Resources; and
Impact of Interest Rates and Inflation.
FORWARD-LOOKING STATEMENTS
Certain information included in this report or in other materials we have filed or will file with the Securities and Exchange Commission (the “SEC”) (as well as information included in oral statements or other written statements made or to be made by us) contains or may contain forward-looking statements, including, but not limited to, statements regarding our future financial performance and financial condition.  Words such as “expects,” “anticipates,” “envisions,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements involve a number of risks and uncertainties.  Any forward-looking statements that we make herein and in future reports and statements are not guarantees of future performance, and actual results may differ materially from those in such forward-looking statements as a result of various risk factors, including, without limitation, factors relating to the economic environment, interest rates, availability of resources, competition, market concentration, land development activities, construction defects, product liability and warranty claims and various governmental rules and regulations.  See “Item 1A. Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”), as the same may be updated from time to time in our subsequent filings with the SEC, for more information regarding those risk factors.
Any forward-looking statement speaks only as of the date made. Except as required by applicable law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in our subsequent reports on Forms 10-K, 10-Q and 8-K should be consulted.  This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995, and all of our forward-looking statements are expressly qualified in their entirety by the cautionary statements contained or referenced in this section.
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APPLICATION OF CRITICAL ACCOUNTING ESTIMATES AND POLICIES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.  Management bases its estimates and assumptions on historical experience and various other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.  On an ongoing basis, management evaluates such estimates and assumptions and makes adjustments as deemed necessary.  Actual results could differ from these estimates using different estimates and assumptions, or if conditions are significantly different in the future.  See Note 1 (Summary of Significant Accounting Policies) to our consolidated financial statements included in our 2023 Form 10-K for additional information about our accounting policies.
We believe that there have been no significant changes to our critical accounting policies during the quarter ended March 31, 2024 as compared to those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2023 Form 10-K.
RESULTS OF OPERATIONS
Our reportable segments are: Northern homebuilding; Southern homebuilding; and financial services operations. The homebuilding operating segments that comprise each of our reportable segments are as follows:
NorthernSouthern
Chicago, IllinoisFt. Myers/Naples, Florida
Cincinnati, OhioOrlando, Florida
Columbus, OhioSarasota, Florida
Indianapolis, IndianaTampa, Florida
Minneapolis/St. Paul, MinnesotaAustin, Texas
Detroit, MichiganDallas/Fort Worth, Texas
Houston, Texas
San Antonio, Texas
Charlotte, North Carolina
Raleigh, North Carolina
Nashville, Tennessee
Overview
For the quarter ended March 31, 2024, we achieved first quarter record levels of homes delivered and revenue, while also improving our gross margin by 360 basis points to 27% when compared to 2023’s first quarter, leading us to first quarter records in income before income taxes, net income and diluted earnings per share. In addition, while not a record, our new contracts for the first quarter of 2024 increased 17% compared to the first quarter of 2023 as we experienced improvements in homebuyer demand as a result of the limited supply of resale and new home inventory and potential homebuyers adjusting to the interest rate environment compared to the hesitation that appeared to exist in 2023’s first quarter. We also had strong cash flow and liquidity and ended the quarter with low leverage.

We achieved the following results during the first quarter of 2024 in comparison to the first quarter of 2023:
Revenue increased 5% to $1.05 billion (a first quarter record)
Number of homes delivered increased 8% to 2,158 homes (a first quarter record);
Income before income taxes increased 33% to $180.2 million (a first quarter record);
Net income increased 34% to $138.1 million (a first quarter record);
New contracts increased 17% to 2,547 from 2,171 (second highest first quarter in Company history);
Shareholders’ equity of $2.64 billion (a record high for the Company);
Book value per common share increased to a record high $95 per share; and
Homebuilding debt to capital ratio was 21%.

In addition to the results described above, our financial services operations also achieved strong income before income taxes for the first quarter of 2024, benefiting from higher margins and an increase in loans originated.

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Our company-wide absorption pace of sales per community for the first quarter of 2024 improved to 3.9 per month compared to 3.7 per month for the prior year’s first quarter as a result of the 17% increase in the number of new contracts during the quarter compared to prior year, partially offset by a smaller 9% increase in our average community count to 216 for the first quarter of 2024 from 198 for the first quarter of 2023. We plan to open additional new communities during 2024 and increase our average community count by approximately 10% from 2023.
Summary of Company Financial Results

Income before income taxes for the first quarter of 2024 increased 33% from $136.0 million in the first quarter of 2023 to a first quarter record $180.2 million in 2024. We achieved first quarter record net income of $138.1 million, or $4.78 per diluted share, in 2024's first quarter, compared to net income of $103.1 million, or $3.64 per diluted share, in 2023's first quarter. Our effective tax rate was 23.4% in 2024’s first quarter compared to 24.2% in 2023.
During the quarter ended March 31, 2024, we achieved record first quarter total revenue of $1.05 billion, of which $1.02 billion was from homes delivered, $3.2 million was from land sales and $27.0 million was from our financial services operations. Revenue from homes delivered increased 4% in 2024's first quarter compared to the same period in 2023 driven primarily by an 8% increase in the number of homes delivered (151 units), offset partially by a 3% decrease in the average sales price of homes delivered ($15,000 per home delivered). Revenue from land sales increased $2.9 million from the first quarter of 2023 due to more land sales in the current year compared to the prior year. Revenue from our financial services segment increased 7% to $27.0 million in the first quarter of 2024 as a result of higher margins on and an increase in loans sold during the period compared to the first quarter of 2023, partially offset by a decrease in the average loan amount.
Total gross margin (total revenue less total land and housing costs) increased $48.7 million in the first quarter of 2024 compared to the first quarter of 2023 as a result of a $47.0 million improvement in the gross margin of our homebuilding operations (housing gross margin and land sales gross margin) and a $1.7 million increase in the gross margin of our financial services operations. With respect to our homebuilding gross margin, our gross margin on homes delivered (housing gross margin) improved $45.7 million and our housing gross margin percentage improved by 360 basis points to 25.1% from 21.5%. The improvement in both gross margin and gross margin percentage primarily resulted from the 8% increase in homes delivered and a decrease in construction costs. Our housing gross margin may fluctuate from quarter to quarter depending on the mix of communities delivering homes due to the variation in margin between different communities. Our gross margin on land sales (land sale gross margin) increased $1.3 million in the first quarter of 2024 compared to the first quarter of 2023 as a result of the mix of lots sold in the current year compared to the prior year. The gross margin of our financial services operations increased $1.7 million in the first quarter of 2024 compared to the first quarter of 2023 as a result of higher margins on and an increased number of loans sold, and an increase in the number of loan originations, offset partially by a decrease in the average loan amount during the first quarter of 2024 compared to the first quarter of 2023.
We opened 21 new communities during the first quarter of 2024 and closed 15 communities. We sell a variety of home types in various communities and markets, each of which yields a different gross margin. The timing of the openings of new replacement communities as well as underlying lot costs varies from year to year. The mix of communities delivering homes may cause fluctuations in our new contracts and housing gross margin from year to year.
For the three months ended March 31, 2024, selling, general and administrative expense increased $10.0 million, and increased as a percentage of revenue from 10.0% in the first quarter of 2023 to 10.5% in the first quarter of 2024. Selling expense increased $4.9 million from 2023's first quarter and increased as a percentage of revenue to 5.2% in 2024's first quarter from 4.9% for the same period in 2023. Variable selling expense for sales commissions contributed $3.9 million to the increase due to the higher number of homes delivered as well as higher co-op rates during the period compared to prior year. Non-variable selling expense increased $1.0 million primarily as a result of increased costs associated with our sales offices and models due to our increase in community count from prior year. General and administrative expense increased $5.1 million compared to the first quarter of 2023 and increased as a percentage of revenue from 5.1% in the first quarter of 2023 to 5.4% in the first quarter of 2024. The increase in general and administrative expense was primarily due to a $2.7 million increase in compensation-related expenses, a $0.7 million increase in land-related expenses, a $0.7 million increase in computer costs, a $0.4 million increase in professional fees, and a $0.6 million increase in miscellaneous expenses.
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Outlook
Housing market conditions improved over the first quarter of 2024 compared to the same period in 2023. However, the housing market remains subject to unpredictability as a result of uncertainty regarding the near-term direction of mortgage interest rates as well as various macroeconomic conditions, including labor and material costs and availability, inflation, and the economic concerns of our potential homebuyers. The extent to which these factors will impact our business is unpredictable. We believe that we are well positioned to manage through these economic conditions with our affordable product offerings, land position and planned new community openings. We remain sensitive to potential changes in market conditions, and continue to focus on controlling overhead leverage, carefully managing our investment in land and land development spending and selectively offering incentives for closing cost assistance or mortgage rate buydowns. Our strong balance sheet and liquidity position should also provide us with flexibility through changing economic conditions. However, we cannot provide any assurances that the strategic business objectives listed below will remain successful, and we may need to adjust elements of our strategy to effectively address evolving market conditions.

We expect to emphasize the following strategic business objectives throughout the remainder of 2024:
managing our land spend and inventory levels;
improving our construction cycle times;
opening new communities;
managing overhead spend;
maintaining a strong balance sheet and liquidity levels; and
emphasizing customer service, product quality and design, and premier locations.
During the first three months of 2024, we invested $107.7 million in land acquisitions and $119.4 million in land development compared to $45.6 million and $92.4 million, respectively, during the first three months of 2023. We invested in more land acquisitions in the first quarter of 2024 compared to the first quarter of 2023 in line with the land supply needs of our divisions. In the first quarter of 2024, we invested more in land development than in land acquisitions in order to finish lots needed to start homes and allow us to open new communities. We continue to closely review our land acquisition and land development spending and monitor our ongoing pace of home sales and deliveries, and we will adjust our land and investment spend accordingly.
We ended the first quarter of 2024 with approximately 47,500 lots under control, which represents an approximately six-year supply of lots based on the past twelve months of homes delivered, including certain lots that we anticipate selling to third parties. This represents a 16% increase from our approximately 40,700 lots under control at the end of last year’s first quarter.
We opened 21 communities and closed 15 communities in the first quarter of 2024, ending the first quarter with 219 active communities, compared to 200 at the end of last year’s first quarter. Although the timing of opening new communities and closing existing communities is subject to substantial variation, we expect to grow our average community count by approximately 10% by the end of 2024.
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The following table shows, by segment: revenue; gross margin; selling, general and administrative expense; operating income (loss); and interest (income) expense - net for the three months ended March 31, 2024 and 2023:
Three Months Ended March 31,
(In thousands)20242023
Revenue:
Northern homebuilding$408,520 $382,730 
Southern homebuilding611,221 592,519 
Financial services (a)
26,962 25,281 
Total revenue$1,046,703 $1,000,530 
Gross margin:
Northern homebuilding$88,809 $66,500 
Southern homebuilding167,572 142,845 
Financial services (a)
26,962 25,281 
Total gross margin $283,343 $234,626 
Selling, general and administrative expense:
Northern homebuilding$30,748 $27,340 
Southern homebuilding49,729 45,233 
Financial services (a)
11,775 10,313 
Corporate17,772 17,154 
Total selling, general and administrative expense$110,024 $100,040 
Operating income (loss):
Northern homebuilding $58,061 $39,160 
Southern homebuilding117,843 97,612 
Financial services (a)
15,187 14,968 
Less: Corporate selling, general and administrative expense(17,772)(17,154)
Total operating income $173,319 $134,586 
Interest (income) expense - net:
Northern homebuilding$(80)$(46)
Southern homebuilding(398)(2)
Financial services (a)
2,875 2,327 
Corporate(9,317)(3,668)
Total interest income - net of interest expense
$(6,920)$(1,389)
Other expense (income)
 (7)
Income before income taxes$180,239 $135,982 
(a)Our financial services operational results should be viewed in connection with our homebuilding business as its operations originate loans and provide title services primarily for our homebuyers, with the exception of a small amount of mortgage refinancing.
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The following tables show total assets by segment at March 31, 2024 and December 31, 2023:
At March 31, 2024
(In thousands)NorthernSouthernCorporate, Financial Services and UnallocatedTotal
Deposits on real estate under option or contract$9,473 $42,007 $ $51,480 
Inventory (a)
990,437 1,732,248  2,722,685 
Investments in joint venture arrangements 59,146  59,146 
Other assets42,488 116,548 
(b)
1,219,604 1,378,640 
Total assets$1,042,398 $1,949,949 $1,219,604 $4,211,951 
At December 31, 2023
(In thousands)NorthernSouthernCorporate, Financial Services and UnallocatedTotal
Deposits on real estate under option or contract$8,990 $42,618 $— $51,608 
Inventory (a)
1,016,982 1,728,561 — 2,745,543 
Investments in joint venture arrangements— 44,011 — 44,011 
Other assets37,171 104,306 
(b)
1,039,801 1,181,278 
Total assets$1,063,143 $1,919,496 $1,039,801 $4,022,440 
(a)Inventory includes: single-family lots, land and land development costs; land held for sale; homes under construction; model homes and furnishings; community development district infrastructure; and consolidated inventory not owned.
(b)Includes development reimbursements from local municipalities.
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Reportable Segments
The following table presents, by reportable segment, selected operating and financial information as of and for the three months ended March 31, 2024 and 2023:
Three Months Ended March 31,
(Dollars in thousands)20242023
Northern Region
Homes delivered843 797 
New contracts, net1,162 828 
Backlog at end of period1,567 1,087 
Average sales price of homes delivered$483 $480 
Average sales price of homes in backlog$525 $515 
Aggregate sales value of homes in backlog$822,226 $559,536 
Housing revenue$407,520 $382,630 
Land sale revenue$1,000 $100 
Operating income homes (a)
$57,656 $39,156 
Operating income land
$405 $
Number of average active communities102 101 
Number of active communities, end of period101 104 
Southern Region
Homes delivered1,315 1,210 
New contracts, net1,385 1,343 
Backlog at end of period1,824 2,214 
Average sales price of homes delivered$463 $490 
Average sales price of homes in backlog$530 $526 
Aggregate sales value of homes in backlog$967,114 $1,165,014 
Housing revenue$608,993 $592,316 
Land sale revenue$2,228 $203 
Operating income homes (a)
$116,935 $97,619 
Operating income (loss) land
$908 $(7)
Number of average active communities114 97 
Number of active communities, end of period118 96 
Total Homebuilding Regions
Homes delivered2,158 2,007 
New contracts, net2,547 2,171 
Backlog at end of period3,391 3,301 
Average sales price of homes delivered$471 $486 
Average sales price of homes in backlog$528 $522 
Aggregate sales value of homes in backlog$1,789,340 $1,724,550 
Housing revenue$1,016,513 $974,946 
Land sale revenue$3,228 $303 
Operating income homes (a)
$174,591 $136,775 
Operating income (loss) land
$1,313 $(3)
Number of average active communities216 198 
Number of active communities, end of period219 200 
(a)Includes the effect of total homebuilding selling, general and administrative expense for the region as disclosed in the first table set forth in this “Outlook” section.
Three Months Ended March 31,
(Dollars in thousands)20242023
Financial Services
Number of loans originated1,556 1,258 
Value of loans originated$600,946 $494,461 
Revenue$26,962 $25,281 
Less: Selling, general and administrative expenses11,775 10,313 
Less: Interest expense2,875 2,327 
Income before income taxes$12,312 $12,641 

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A home is included in “new contracts” when our standard sales contract is executed. “Homes delivered” represents homes for which the closing of the sale has occurred. “Backlog” represents homes for which the standard sales contract has been executed, but which are not included in homes delivered because closings for these homes have not yet occurred as of the end of the period specified.
The composition of our homes delivered, new contracts, net and backlog is constantly changing and may be based on a dissimilar mix of communities between periods as new communities open and existing communities wind down. Further, home types and individual homes within a community can range significantly in price due to differing square footage, option selections, lot sizes and quality and location of lots. These variations may result in a lack of meaningful comparability between homes delivered, new contracts, net and backlog due to the changing mix between periods.
Cancellation Rates
The following table sets forth the cancellation rates for each of our homebuilding segments for the three months ended March 31, 2024 and 2023:
Three Months Ended March 31,
20242023
Northern7.2 %10.8 %
Southern9.2 %14.0 %
Total cancellation rate8.3 %12.8 %

Seasonality
Typically, our homebuilding operations experience significant seasonality and quarter-to-quarter variability in homebuilding activity levels. In general, homes delivered increase in the second half of the year compared to the first half of the year. We believe that this seasonality reflects the tendency of homebuyers to shop for a new home in the spring with the goal of closing in the fall or winter, as well as the scheduling of construction to accommodate seasonal weather conditions. Our financial services operations also experience seasonality because loan originations correspond with the delivery of homes in our homebuilding operations.
Year Over Year Comparison
Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023
Northern Region. During the three months ended March 31, 2024, homebuilding revenue in our Northern region increased $25.8 million, from $382.7 million in the first quarter of 2023 to $408.5 million in the first quarter of 2024. This 7% increase in homebuilding revenue was primarily the result of a 6% increase in the number of homes delivered (46 more units), which was primarily the result of mix, a 1% increase in the average sales price of homes delivered ($3,000 per home delivered), and a $0.9 million increase in land sale revenue. Operating income in our Northern region increased $18.9 million from $39.2 million in the first quarter of 2023 to $58.1 million during the quarter ended March 31, 2024. This increase in operating income was the result of a $22.3 million improvement in our gross margin offset partially by a $3.4 million increase in selling, general and administrative expense. With respect to our homebuilding gross margin, our housing gross margin improved $21.9 million and our housing gross margin percentage improved 430 basis points to 21.7% in the first quarter of 2024 from 17.4% in the prior year’s first quarter. These improvements were primarily due to the increase in the number of homes delivered in addition to the mix of homes being delivered compared to prior year. Our land sale gross margin improved $0.4 million in the first quarter of 2024 compared to the same period in 2023 as a result of the mix of lots sold in the current year compared to the prior year.

Selling, general and administrative expense increased $3.4 million, from $27.3 million for the quarter ended March 31, 2023 to $30.7 million for the quarter ended March 31, 2024 and increased as a percentage of revenue to 7.5% in 2024's first quarter from 7.1% in 2023's first quarter. The increase in selling, general and administrative expense was attributable to a $2.9 million increase in selling expense primarily due to a $2.6 million increase in variable selling expenses resulting from increases in sales commissions produced by the higher number of homes delivered as well as a $0.3 million increase in non-variable selling expense primarily as a result of increased costs associated with our sales offices and models due to our increase in community count compared to prior year. This increase in selling, general and administrative expense was also attributable to a $0.5 million increase in general and administrative expense, which was primarily related to an increase in compensation-related expenses.
During the three months ended March 31, 2024, we experienced a 40% increase in new contracts in our Northern region, from 828 in the first quarter of 2023 to 1,162 in the first quarter of 2024. The increase in new contracts was primarily due to the
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increase in overall demand compared to prior year. Homes in backlog increased 44% from 1,087 homes at March 31, 2023 to 1,567 homes at March 31, 2024. The increase in backlog was primarily a result of improved demand compared to prior year. Average sales price in backlog increased to $525,000 at March 31, 2024 compared to $515,000 at March 31, 2023 primarily due to the mix of homes being sold. During the first quarter of 2024, we opened seven new communities in our Northern region compared to 11 during the first quarter of 2023. Our monthly absorption rate in our Northern region improved to 3.8 per community in the first quarter of 2024 compared to 2.7 per community in 2023's first quarter due to the increase in new contracts during the quarter, partially offset by a smaller increase in our average communities compared to prior year.
Southern Region. During the three month period ended March 31, 2024, homebuilding revenue in our Southern region increased $18.7 million, from $592.5 million in the first quarter of 2023 to $611.2 million in the first quarter of 2024. This 3% increase in homebuilding revenue was the result of a 9% increase in the number of homes delivered (105 more units) due to increased availability of inventory homes, offset partially by a 6% decrease in the average sales price of homes delivered ($27,000 per home delivered), which was primarily due to mix. Operating income in our Southern region increased $20.2 million from $97.6 million in the first quarter of 2023 to $117.8 million during the quarter ended March 31, 2024. This increase in operating income was the result of a $24.7 million improvement in our gross margin, offset partially by a $4.5 million increase in selling, general, and administrative expense. With respect to our homebuilding gross margin, our housing gross margin improved $23.8 million, due primarily to the increase in the number of homes delivered during the period and the mix of homes being delivered compared to prior year, offset partially by the decrease in the average sales price of homes delivered. Our housing gross margin percentage improved from 24.1% in prior year’s first quarter to 27.4% in the first quarter of 2024, primarily due to the mix of homes being delivered, offset partially by the decrease in average sales price of homes delivered compared to prior year. Our land sale gross margin improved $0.9 million in the first quarter of 2024 compared to the first quarter of 2023 as a result of the mix of lots sold in the current year compared to the prior year.
Selling, general and administrative expense increased $4.5 million from $45.2 million in the first quarter of 2023 to $49.7 million in the first quarter of 2024 and increased as a percentage of revenue to 8.1% from 7.6% in the first quarter of 2023. The increase in selling, general and administrative expense was attributable to a $2.0 million increase in selling expense primarily due to a $1.3 million increase in variable selling expenses resulting from increases in sales commissions produced by the higher number of homes delivered as well as a $0.7 million increase in non-variable selling expense primarily as a result of increased costs associated with our sales offices and models due to our increased community count. This increase in selling, general and administrative expense was also attributable to a $2.5 million increase in general and administrative expense, which was due to a $1.4 million increase in compensation-related expenses, a $0.8 million increase in land-related expenses, and a $0.3 million increase in professional fees.
During the three months ended March 31, 2024, we experienced a 3% increase in new contracts in our Southern region, from 1,343 in the first quarter of 2023 to 1,385 in the first quarter of 2024, which was primarily due to our increased community count compared to prior year. Homes in backlog decreased, however, by 18% from 2,214 homes at March 31, 2023 to 1,824 homes at March 31, 2024, primarily as a result of improved construction cycle times allowing us to deliver homes in backlog at a faster rate compared to last year as well as specs sold and closed in the same quarter. Average sales price in backlog increased to $530,000 at March 31, 2024 from $526,000 at March 31, 2023 primarily due to the mix of homes being sold. During the three months ended March 31, 2024, we opened 14 new communities in our Southern region compared to opening eight communities during 2023's first quarter. Our monthly absorption rate in our Southern region declined to 4.0 per community in the first quarter of 2024 compared to 4.6 per community in the first quarter of 2023 as a result of our 18% increase in our average communities compared to prior year, partially offset by a smaller increase in new contracts during the quarter.
Financial Services. Revenue from our mortgage and title operations increased 7% to $27.0 million in the first quarter of 2024 from $25.3 million in the first quarter of 2023 due to higher margins on loans sold during the period compared to prior year’s first quarter and a 24% increase in the number of loan originations from 1,258 in 2023's first quarter to 1,556 in the first quarter of 2024, partially offset by a decrease in the average loan amount from $393,000 in the quarter ended March 31, 2023 to $386,000 in the quarter ended March 31, 2024.
Our financial services segment experienced a $0.2 million increase in operating income in the first quarter of 2024 compared to 2023's first quarter, which was primarily due to the increase in revenue discussed above offset, in part, by a $1.5 million increase in selling, general and administrative expense compared to the first quarter of 2023, which was primarily the result of a $0.8 million increase in compensation-related expenses and a $0.7 million increase in other miscellaneous expenses.
At March 31, 2024, M/I Financial provided financing services in all of our markets. Approximately 88% of our homes delivered during the first quarter of 2024 were financed through M/I Financial, compared to 78% in the first quarter of 2023.
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Capture rate is influenced by financing availability and competition in the mortgage market and can fluctuate from quarter to quarter.
Corporate Selling, General and Administrative Expense. Corporate selling, general and administrative expense increased $0.6 million from $17.2 million for the first quarter of 2023 to $17.8 million for the first quarter of 2024. This increase primarily resulted from an increase in equity compensation-related expenses.
Interest Income, net of Interest Expense. The Company earned $6.9 million of interest income - net for the three months ended March 31, 2024 compared to earning $1.4 million of interest income - net for the three months ended March 31, 2023. This increase was primarily due to a higher average cash balance on hand compared to prior year.
Income Taxes. Our overall effective tax rate was 23.4% for the three months ended March 31, 2024 and 24.2% for the three months ended March 31, 2023. The decrease in the effective tax rate from the three months ended March 31, 2023 was primarily attributable to an increase in tax benefit from equity compensation in 2024.
LIQUIDITY AND CAPITAL RESOURCES
Overview of Capital Resources and Liquidity.
At March 31, 2024, we had $870.2 million of cash, cash equivalents and restricted cash, with $869.7 million of this amount comprised of unrestricted cash and cash equivalents, which represents a $137.1 million increase in unrestricted cash and cash equivalents from December 31, 2023. The increase in cash is primarily due to house closings, the timing of land spend compared to prior year as well as a larger beginning of year balance on hand. Our principal uses of cash for the three months ended March 31, 2024 were investment in land and land development, construction of homes, mortgage loan originations, investment in joint ventures, operating expenses, short-term working capital, and debt service requirements, including the repayment of amounts outstanding under our credit facilities, and the repurchase of $25.3 million of our outstanding common shares under our 2021 Share Repurchase Program (as defined below). In order to fund these uses of cash, we used proceeds from home deliveries, the sale of mortgage loans, the sale of mortgage servicing rights, excess cash balances, borrowings under our credit facilities, and other sources of liquidity.
The Company is a party to two primary credit agreements: (1) a $650 million unsecured revolving credit facility, dated July 18, 2013, as amended (the “Credit Facility”), with M/I Homes, Inc. as borrower and guaranteed by the Company’s wholly owned homebuilding subsidiaries; and (2) a $300 million (subject to increases and decreases during certain periods) mortgage repurchase agreement, dated October 24, 2023, with M/I Financial as borrower (the “MIF Mortgage Repurchase Facility”).

As of March 31, 2024, we had outstanding notes payable (consisting primarily of notes payable for our financial services operations, the 2030 Senior Notes and the 2028 Senior Notes) with varying maturities in an aggregate principal amount of $924.3 million, with $224.3 million payable within 12 months. Future interest payments associated with these notes payable totaled $150.5 million as of March 31, 2024, with $31.9 million payable within 12 months.
As of March 31, 2024, there were no borrowings outstanding and $70.8 million of letters of credit outstanding under our $650 million Credit Facility, leaving $579.2 million available. We expect to continue managing our balance sheet and liquidity carefully in the remainder of 2024 by managing our spending on land acquisition and development and construction of inventory homes, as well as overhead expenditures, relative to our ongoing volume of home deliveries, and we expect to meet our current and anticipated cash requirements in 2024 from cash receipts, excess cash balances and availability under our credit facilities.
During the first quarter of 2024, we delivered 2,158 homes, started 2,135 homes, ended the quarter with 4,500 homes under construction compared to 4,300 at the end of last year’s first quarter, and spent $107.7 million on land purchases and $119.4 million on land development.

We are actively acquiring and developing lots in our markets to replenish our lot supply and will continue to monitor market conditions and our pace of home sales and deliveries and adjust our land spending accordingly. Pursuant to our land option agreements, as of March 31, 2024, we had a total of 23,631 lots under contract, with an aggregate purchase price of approximately $1.13 billion, to be acquired during the remainder of 2024 through 2029.
Our off-balance sheet arrangements relating to our homebuilding operations include joint venture arrangements, land option agreements, guarantees and indemnifications associated with acquiring and developing land, and the issuance of letters of credit and completion bonds. We use these arrangements to secure the most desirable lots on which to build homes for our homebuyers in a manner that we believe reduces the overall risk to the Company.
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Operating Cash Flow Activities. During the three-month period ended March 31, 2024, we generated $115.8 million of cash from operating activities, compared to generating $251.5 million of cash from operating activities during the first quarter of 2023. The cash provided by operating activities in the first quarter of 2024 was primarily a result of net income of $138.1 million, $61.6 million of proceeds from the sale of mortgage loans net of mortgage loan originations, a $15.8 million decrease in inventory purchases due to delays and timing of land purchases and an increase of $52.9 million in accounts payable and other liabilities, offset, in part, by a decrease in accrued compensation totaling $40.0 million. The cash provided by operating activities during the first quarter of 2023 was primarily a result of net income of $103.1 million, $19.9 million of proceeds from the sale of mortgage loans net of mortgage loan originations, a $175.3 million decrease in inventory due to decline in demand and an increase of $15.9 million in customer deposits and other liabilities, offset, in part, by an increase in accounts payable and accrued compensation totaling $59.1 million and an increase in other assets of $4.6 million.
Investing Cash Flow Activities. During the first quarter of 2024, we used $17.1 million of cash in investing activities, compared to using $4.8 million of cash in investing activities during the first quarter of 2023. The cash used in investing activities in the first quarter of 2024 was primarily a result of a $23.7 million increase in our investment in joint venture arrangements, offset, in part, by $6.9 million of proceeds from the sale of a portion of our mortgage servicing rights. The cash used in investing activities during the first quarter of 2023 was primarily a result of an increase in our investment in joint venture arrangements and purchase of property and equipment.

Financing Cash Flow Activities. During the three months ended March 31, 2024, we generated $38.7 million of cash in financing activities, compared to using $15.7 million of cash in financing activities during the first three months of 2023. The cash provided by from financing activities in 2024 was primarily due to proceeds from borrowings (net of repayments) under our M/I Financial credit facility of $58.5 million and $5.5 million in proceeds from the exercise of stock options during the first quarter of 2024, offset partially by the repurchase of $25.3 million of our outstanding common shares during the first quarter of 2024. The cash used in financing activities in the first quarter of 2023 was primarily due to repayments of $22.1 million (net of proceeds from borrowings) under our two then-outstanding M/I Financial credit facilities, offset partially by the $6.4 million in proceeds from the exercise of stock options during the first quarter of 2023.

On July 28, 2021, the Company announced that its Board of Directors authorized a new share repurchase program pursuant to which the Company was permitted to purchase up to $100 million of its outstanding common shares (the “2021 Share Repurchase Program”). On February 17, 2022, the Company announced that its Board of Directors approved a $100 million increase to its 2021 Share Repurchase Program. On November 15, 2023, the Company announced that its Board of Directors approved an additional increase of $100 million, for a total of $300 million authorized for repurchases under the 2021 Share Repurchase Program. During the first quarter of 2024, the Company repurchased 0.2 million outstanding common shares for an aggregate purchase price of $25.3 million under the 2021 Share Repurchase Program which was funded with cash on hand. As of March 31, 2024, the Company is authorized to repurchase an additional $102.5 million of outstanding common shares under the 2021 Share Repurchase Program (see Note 12 to our financial statements for more information).
Based on current market conditions, expected capital needs and availability, and the current market price of the Company’s common shares, we expect to continue repurchasing shares during the remainder of 2024. The timing and amount of any future purchases under the 2021 Share Repurchase Program will be based on a variety of factors, including the market price of the Company’s common shares, business considerations, general market and economic conditions and legal requirements.

At March 31, 2024 and December 31, 2023, our ratio of homebuilding debt to capital was 21% and 22%, respectively, calculated as the carrying value of our outstanding homebuilding debt (which consists of borrowings under our Credit Facility, our 2030 Senior Notes and our 2028 Senior Notes) divided by the sum of the carrying value of our outstanding homebuilding debt plus shareholders’ equity. We believe that this ratio provides useful information for understanding our financial position and the leverage employed in our operations, and for comparing us with other homebuilders.
We fund our operations with cash flows from operating activities, including proceeds from home deliveries, land sales and the sale of mortgage loans. We believe that these sources of cash, along with our balance of unrestricted cash and borrowings available under our credit facilities, will be sufficient to fund our currently anticipated working capital needs, investment in land and land development, construction of homes, operating expenses, planned capital spending, and debt service requirements for at least the next twelve months. In addition, we routinely monitor current and anticipated operational and debt service requirements, financial market conditions, and credit relationships, and we may choose to seek additional capital by issuing new debt and/or equity securities or engaging in other financial transactions to strengthen our liquidity or our long-term capital structure. The financing needs of our homebuilding and financial services operations depend on anticipated sales and home delivery volume in the current year as well as future years, inventory levels and related turnover, forecasted land and lot purchases, debt maturity dates, and other factors. If we seek such additional capital or engage in such other financial transactions, there can be no assurance that we would be able to obtain such additional capital or consummate such other
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financial transactions on terms acceptable to us, if at all, and such additional equity or debt financing or other financial transactions could dilute the interests of our existing shareholders, add operational limitations and/or increase our interest costs.
Included in the table below is a summary of our available sources of cash from the Credit Facility and the MIF Mortgage Repurchase Facility as of March 31, 2024:
(In thousands)Expiration
Date
Outstanding
Balance
Available
Amount
Notes payable – homebuilding (a)
(a)$— $579,186 
Notes payable – financial services (b)
(b)$224,321 $45 
(a)The available amount under the Credit Facility is computed in accordance with the borrowing base calculation under the Credit Facility, which applies various advance rates for different categories of inventory and totaled $2.03 billion of availability for additional senior debt at March 31, 2024. As a result, the full $650 million commitment amount of the facility was available, less any borrowings and letters of credit outstanding. There were no borrowings outstanding and $70.8 million of letters of credit outstanding at March 31, 2024, leaving $579.2 million available. The Credit Facility has an expiration date of December 9, 2026.
(b)The available amount is computed in accordance with the borrowing base calculations under the MIF Mortgage Repurchase Facility, which may be increased by pledging additional mortgage collateral, not to exceed the maximum aggregate commitment amount of M/I Financial's repurchase agreement as of March 31, 2024, which was $240 million. The MIF Mortgage Repurchase Facility has an expiration date of October 22, 2024.
Notes Payable - Homebuilding.  

Homebuilding Credit Facility. The Credit Facility provides for an aggregate commitment amount of $650 million and also includes an accordion feature pursuant to which the maximum borrowing availability may be increased to an aggregate of $800 million, subject to obtaining additional commitments from lenders. The Credit Facility matures on December 9, 2026. Interest on amounts borrowed under the Credit Facility is payable at multiple interest rate options, including one, three, or six month adjusted term secured overnight financing rate (“SOFR”) (subject to a floor of 0.25%) plus a margin of 175 basis points (subject to adjustment in subsequent quarterly periods based on the Company’s leverage ratio).

Borrowings under the Credit Facility constitute senior, unsecured indebtedness and availability is subject to, among other things, a borrowing base calculated using various advance rates for different categories of inventory. The Credit Facility also provides for a $250 million sub-facility for letters of credit. The Credit Facility contains various representations, warranties and covenants which require, among other things, that the Company maintain (1) a minimum level of Consolidated Tangible Net Worth of $1.60 billion at March 31, 2024 (subject to increase over time based on earnings and proceeds from equity offerings), (2) a leverage ratio not in excess of 60%, and (3) either a minimum Interest Coverage Ratio of 1.5 to 1.0 or a minimum amount of available liquidity. In addition, the Credit Facility contains covenants that limit the Company’s number of unsold housing units and model homes, as well as the amount of Investments in Unrestricted Subsidiaries and Joint Ventures (each as defined in the Credit Facility).

The Company’s obligations under the Credit Facility are guaranteed by all of the Company’s subsidiaries, with the exception of subsidiaries that are primarily engaged in the business of mortgage financing, title insurance or similar financial businesses relating to the homebuilding and home sales business, certain subsidiaries that are not 100%-owned by the Company or another subsidiary, and other subsidiaries designated by the Company as Unrestricted Subsidiaries (as defined in the Credit Facility), subject to limitations on the aggregate amount invested in such Unrestricted Subsidiaries. The guarantors for the Credit Facility are the same subsidiaries that guarantee our 2030 Senior Notes and our 2028 Senior Notes.
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As of March 31, 2024, the Company was in compliance with all covenants of the Credit Facility, including financial covenants. The following table summarizes the most significant restrictive covenant thresholds under the Credit Facility and our compliance with such covenants as of March 31, 2024:
Financial CovenantCovenant RequirementActual
 (Dollars in millions)
Consolidated Tangible Net Worth$1,598.4 $2,555.6 
Leverage Ratio0.60-0.04
Interest Coverage Ratio1.5 to 1.021.33 to 1.0
Investments in Unrestricted Subsidiaries and Joint Ventures$766.7 $6.0 
Unsold Housing Units and Model Homes2,924 1,276 

Notes Payable - Financial Services.

MIF Mortgage Repurchase Facility. The MIF Mortgage Repurchase Facility is used to finance eligible residential mortgage loans originated by M/I Financial. The MIF Mortgage Repurchase Facility provides for a maximum borrowing availability of $300 million (subject to increases and decreases during certain periods). The borrowing availability under the MIF Mortgage Repurchase Facility is $240 million through September 17, 2024 and will increase to $270 million from September 18, 2024 until maturity. The MIF Mortgage Repurchase Facility expires on October 22, 2024. As is typical for similar credit facilities in the mortgage origination industry, at closing, the expiration of the MIF Mortgage Repurchase Facility was set at approximately one year and is under consideration for extension annually by the participating lenders. We expect to extend the MIF Mortgage Repurchase Facility on or prior to the current expiration date of October 22, 2024, but we cannot provide any assurance that we will be able to obtain such an extension.

M/I Financial pays interest on each advance under the MIF Mortgage Repurchase Facility at a per annum rate based on Daily Adjusting One-Month Term SOFR plus a margin as defined in the repurchase agreement. The MIF Mortgage Repurchase Facility provides for limits with respect to certain loan types that can secure outstanding borrowings. The MIF Mortgage Repurchase Facility also contains certain financial covenants each of which is defined in the repurchase agreement. There are no guarantors of the MIF Mortgage Repurchase Facility.

As of March 31, 2024, there was $224 million outstanding under the MIF Mortgage Repurchase Facility (which at the time had a maximum borrowing availability of $240 million), and M/I Financial was in compliance with all covenants thereunder. The financial covenants, as more fully described and defined in the MIF Mortgage Repurchase Facility, are summarized in the following table, which also sets forth M/I Financial’s compliance with such covenants as of March 31, 2024:
Financial CovenantCovenant RequirementActual
(Dollars in millions)
Leverage Ratio12.0 to 1.05.37 to 1.0
Liquidity$10.0 $35.9 
Adjusted Net Income>$0.0 $19.7 
Tangible Net Worth$25.0 $44.5 
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Senior Notes.

3.95% Senior Notes. On August 23, 2021, the Company issued $300.0 million aggregate principal amount of 3.95% Senior Notes due 2030. The 2030 Senior Notes contain certain covenants, as more fully described and defined in the indenture governing the 2030 Senior Notes, which limit the ability of the Company and the restricted subsidiaries to, among other things: incur certain liens securing indebtedness without equally and ratably securing the 2030 Senior Notes and the guarantees thereof; enter into certain sale and leaseback transactions; and consolidate or merge with or into other companies, liquidate or sell or otherwise dispose of all or substantially all of the Company’s assets. These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2030 Senior Notes. As of March 31, 2024, the Company was in compliance with all terms, conditions, and covenants under the indenture.

4.95% Senior Notes. On January 22, 2020, the Company issued $400.0 million aggregate principal amount of 4.95% Senior Notes due 2028. The 2028 Senior Notes contain certain covenants, as more fully described and defined in the indenture governing the 2028 Senior Notes, which limit the ability of the Company and the restricted subsidiaries to, among other things: incur additional indebtedness; make certain payments, including dividends, or repurchase any shares, in an aggregate amount exceeding our “restricted payments basket”; make certain investments; and create or incur certain liens, consolidate or merge with or into other companies, or liquidate or sell or transfer all or substantially all of our assets. These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2028 Senior Notes. As of March 31, 2024, the Company was in compliance with all terms, conditions, and covenants under the indenture.
See Note 8 to our financial statements for more information regarding the 2030 Senior Notes and the 2028 Senior Notes.
Supplemental Financial Information.
As of March 31, 2024, M/I Homes, Inc. had $300.0 million aggregate principal amount of its 2030 Senior Notes and $400.0 million aggregate principal amount of its 2028 Senior Notes outstanding.
The 2030 Senior Notes and the 2028 Senior Notes are fully and unconditionally guaranteed, on a joint and several basis, by all of M/I Homes, Inc.’s subsidiaries (the “Subsidiary Guarantors”) with the exception of subsidiaries that are primarily engaged in the business of mortgage financing, title insurance or similar financial businesses relating to the homebuilding and home sales business, certain subsidiaries that are not 100%-owned by M/I Homes, Inc. or another subsidiary, and other subsidiaries designated as Unrestricted Subsidiaries (as defined in the indentures governing the 2030 Senior Notes and the 2028 Senior Notes), subject to limitations on the aggregate amount invested in such Unrestricted Subsidiaries in accordance with the terms of the Credit Facility and the indentures governing the 2030 Senior Notes and the 2028 Senior Notes (the “Non-Guarantor Subsidiaries”). The Subsidiary Guarantors of the 2030 Senior Notes, the 2028 Senior Notes and the Credit Facility are the same.

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

The guarantees are “full and unconditional,” as those terms are used in Regulation S-X, Rule 3-10(b)(3), except that the indentures governing the 2030 Senior Notes and the 2028 Senior Notes provide that a Subsidiary Guarantor’s guarantee will be released if: (1) all of the assets of such Subsidiary Guarantor have been sold or otherwise disposed of in a transaction in compliance with the terms of the applicable indenture; (2) all of the Equity Interests (as defined in the applicable indenture) held by M/I Homes, Inc. and the Restricted Subsidiaries (as defined in the applicable Indenture) of such Subsidiary Guarantor have been sold or otherwise disposed of to any person other than M/I Homes, Inc. or a Restricted Subsidiary in a transaction in compliance with the terms of the applicable indenture; (3) the Subsidiary Guarantor is designated an Unrestricted Subsidiary (or otherwise ceases to be a Restricted Subsidiary (including by way of liquidation or merger)) in compliance with the terms of the applicable indenture; (4) M/I Homes, Inc. exercises its legal defeasance option or covenant defeasance option under the applicable indenture; or (5) all obligations under the applicable indenture are discharged in accordance with the terms of the applicable indenture.
The enforceability of the obligations of the Subsidiary Guarantors under their guarantees may be subject to review under applicable federal or state laws relating to fraudulent conveyance or transfer, voidable preference and similar laws affecting the rights of creditors generally. In certain circumstances, a court could void the guarantees, subordinate amounts owing under the guarantees or order other relief detrimental to the holders of the 2030 Senior Notes and the 2028 Senior Notes.

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

Summarized Balance Sheet Data
(In thousands)As of March 31, 2024As of December 31, 2023
Assets:
Cash$828,379 $695,810 
Investment in joint venture arrangements$53,508 $38,373 
Amounts due from Non-Guarantor Subsidiaries$7,753 $6,949 
Total assets$3,903,567 $3,769,713 
Liabilities and Shareholders’ Equity:
Total liabilities$1,320,035 $1,306,433 
Shareholders’ equity$2,583,532 $2,463,280 

Summarized Statement of Income Data
Three Months Ended
(In thousands)March 31, 2024
Revenues$1,019,741 
Land and housing costs$763,360 
Selling, general and administrative expense$97,921 
Income before income taxes$168,254 
Net income$404,189 

Weighted Average Borrowings. For the three months ended March 31, 2024 and 2023, our weighted average borrowings outstanding were $719.0 million and $750.5 million, respectively, with a weighted average interest rate of 5.29% and 5.26%, respectively. The decrease in our weighted average borrowings related to decreased borrowings under our M/I Financial credit facility during the first quarter of 2024 compared to the same period in 2023. The increase in our weighted average borrowing rate was due to higher interest rates on our credit facility in 2024 compared to the prior year.
At both March 31, 2024 and December 31, 2023, we had no borrowings outstanding under the Credit Facility. Based on our currently anticipated spending on home construction, overhead expenses and land acquisition and development during 2024, offset by expected cash receipts from home deliveries and other sources, we do not expect to incur borrowings under the Credit Facility during 2024. To the extent we elect to borrow under the Credit Facility during the remainder of 2024, the actual amount borrowed and the related timing will be subject to numerous factors, which are subject to significant variation as a result of the timing and amount of land and house construction expenditures, payroll and other general and administrative expenses, and cash receipts from home deliveries. The amount borrowed will also be impacted by other cash receipts and payments, any capital markets transactions or other additional financings by the Company, any repayments or redemptions of outstanding debt, any additional share repurchases under the 2021 Share Repurchase Program and any other extraordinary events or transactions.  The Company may also experience significant variation in cash and Credit Facility balances from week to week due to the timing of such receipts and payments.
There were $70.8 million of letters of credit issued and outstanding under the Credit Facility at March 31, 2024. During the three months ended March 31, 2024, the average daily amount of letters of credit outstanding under the Credit Facility was $64.9 million and the maximum amount of letters of credit outstanding under the Credit Facility was $70.8 million.

At March 31, 2024, M/I Financial had $224.3 million outstanding under the MIF Mortgage Repurchase Facility.  During the three months ended March 31, 2024, the average daily amount outstanding under the MIF Mortgage Repurchase Facility was $19.0 million and the maximum amount outstanding was $224.3 million, which occurred during March 2024.
Universal Shelf Registration. In June 2022, the Company filed a universal shelf registration statement with the SEC, which registration statement became effective upon filing and will expire in June 2025. Pursuant to the registration statement, the Company may, from time to time, offer debt securities, common shares, preferred shares, depositary shares, warrants to purchase debt securities, common shares, preferred shares, depositary shares or units of two or more of those securities, rights to purchase debt securities, common shares, preferred shares or depositary shares, stock purchase contracts and units. The timing and amount of offerings, if any, will depend on market and general business conditions.
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INTEREST RATES AND INFLATION

Our business is significantly affected by general economic conditions within the United States and, particularly, by the impact of interest rates and inflation. These macroeconomic trends have pressured housing affordability, negatively impacted homebuyer sentiment and impacted the costs of financing land development activities and housing construction.
The annual rate of inflation in the United States was 3.5% in March 2024, as measured by the Consumer Price Index, up slightly from December 2023, but down significantly from 6.5% in December 2022 and 9.1% in June 2022 (which was the highest inflation rate experienced in 40 years). As the rate of inflation has declined from 2022’s historic levels, our costs have stabilized. However, continued increases in inflation rates could impact our costs, potentially reduce our gross margins, reduce the purchasing power of potential homebuyers, and negatively impact their ability and desire to buy a home.
Interest rates began to rise in the second half of 2023 from 6.5% at the end of 2022 to over 8% by the end of October 2023 (the highest rates since 2001). Rates declined slightly by the end of 2023 to approximately 7% and held steady during the first quarter of 2024 around 7%. Following the first quarter of 2024, rates have risen to over 7%. The higher mortgage interest rates are making it more difficult for homebuyers to qualify for mortgages or to obtain mortgages at interest rates that are acceptable to them.  Rising interest rates, as well as increased materials and labor costs, can also reduce gross margins.
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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary market risk results from fluctuations in interest rates. We are exposed to interest rate risk through borrowings under our revolving credit facilities, consisting of the Credit Facility and the MIF Mortgage Repurchase Facility, which permitted borrowings of up to $890 million as of March 31, 2024, subject to availability constraints. Additionally, M/I Financial is exposed to interest rate risk associated with its mortgage loan origination services.

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

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

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

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

The table below shows the notional amounts of our financial instruments at March 31, 2024 and December 31, 2023:
March 31,December 31,
Description of Financial Instrument (in thousands)20242023
Uncommitted IRLCs$215,306 $174,274 
FMBSs related to uncommitted IRLCs217,000 174,000 
Whole loan contracts and related mortgage loans held for sale7,797 10,398 
FMBSs related to mortgage loans held for sale209,000 152,000 
Mortgage loans held for sale covered by FMBSs225,360 160,547 

The table below shows the measurement of assets and liabilities at March 31, 2024 and December 31, 2023:
March 31,December 31,
Description of Financial Instrument (in thousands)20242023
Mortgage loans held for sale$235,047 $176,329 
Forward sales of mortgage-backed securities21 (7,220)
Interest rate lock commitments2,757 3,617 
Whole loan contracts(1,224)(335)
Total$236,601 $172,391 

The following table sets forth the amount of (loss) gain recognized on assets and liabilities for the three months ended March 31, 2024 and 2023:
Three Months Ended March 31,
Description (in thousands)20242023
Mortgage loans held for sale$(2,849)