M/I Homes Inc.
04/24/2026 | Press release | Distributed by Public on 04/24/2026 09:13
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
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 170,500 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 including changes in trade policy affecting business such as new or increased tariffs, as well as the potential impact of retaliatory tariffs and other penalties. See "Item 1A. Risk Factors" in Part I of our Annual Report on Form 10-K for the year ended December 31, 2025 (the "2025 Form 10-K"), as the same may be updated from time to time in our subsequent filings with the SEC, for more information regarding those risk factors.
Any forward-looking statement speaks only as of the date made. Except as required by applicable law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in our subsequent reports on Forms 10-K, 10-Q and 8-K should be consulted. This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995, and all of our forward-looking statements are expressly qualified in their entirety by the cautionary statements contained or referenced in this section.
APPLICATION OF CRITICAL ACCOUNTING ESTIMATES AND POLICIES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates and assumptions on historical experience and various other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. On an ongoing basis, management evaluates such estimates and assumptions and makes adjustments as deemed necessary. Actual results could differ from these estimates using different estimates and assumptions, or if conditions are significantly different in the future. See Note 1 (Summary of Significant Accounting Policies) to our consolidated financial statements included in our 2025 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, 2026 as compared to those disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our 2025 Form 10-K.
RESULTS OF OPERATIONS
Our reportable segments are: Northern homebuilding; Southern homebuilding; and financial services operations. The homebuilding operating segments that comprise each of our reportable segments are as follows:
| Northern | Southern | ||||
| Chicago, Illinois | Ft. Myers/Naples, Florida | ||||
| Cincinnati, Ohio | Orlando, Florida | ||||
| Columbus, Ohio | Sarasota, Florida | ||||
| Indianapolis, Indiana | Tampa, Florida | ||||
| Minneapolis/St. Paul, Minnesota | Austin, Texas | ||||
| Detroit, Michigan | Dallas/Fort Worth, Texas | ||||
| Houston, Texas | |||||
| San Antonio, Texas | |||||
| Charlotte, North Carolina | |||||
| Raleigh, North Carolina | |||||
| Nashville, Tennessee | |||||
Overview
During the first quarter of 2026, the housing market experienced continued pressure due to persistent macroeconomic challenges, including elevated mortgage interest rates, rising lot costs, limited affordable housing, and broader economic and geopolitical uncertainty. Consistent with 2025, we continued to offer sales incentives including mortgage interest rate buydowns to stimulate demand. Our sales incentives increased in the first quarter of 2026 compared to the first quarter of 2025. Our new contracts improved compared to the prior year as a result of the increased sales incentives, and a higher community count, but our closings declined. Our overall profitability compared to the prior year was negatively affected by the increased sales incentives and higher lot costs.
During the first quarter of 2026, the housing market experienced continued pressure due to persistent macroeconomic challenges, including elevated mortgage interest rates, rising lot costs, limited affordable housing, and broader economic and geopolitical uncertainty. Consistent with 2025, we continued to offer sales incentives including mortgage interest rate buydowns to stimulate demand. Our sales incentives increased in the first quarter of 2026 compared to the first quarter of 2025. Our new contracts improved compared to the prior year as a result of the increased sales incentives, and a higher community count, but our closings declined. Our overall profitability compared to the prior year was negatively affected by the increased sales incentives and higher lot costs.
Our performance in the first three months of 2026 remained consistent with our current expectations. Key comparisons between the first quarters of 2026 and 2025 are as follows:
•Number of homes delivered decreased 3% to 1,914 homes
•Revenue decreased 6% to $920.7 million
•Income before income taxes decreased 39% to $89.2 million
•Gross margin decreased 390 basis points to 22.0%
•Net income decreased 39% to $67.8 million
•New contracts increased 3% to 2,350 from 2,292
•Shareholders' equity of $3.2 billion, a 6% increase from a year ago, with book value per common share increasing to a record high $125 per share
•Homebuilding debt to capital was 18%
Additionally, our financial services segment achieved its second highest revenue in a first quarter, improved capture rate and increased loan originations to a first quarter record.
Our company-wide absorption pace of sales per community for the first quarter of 2026 was 3.4 per month consistent with prior year's first quarter. We plan to open additional new communities during the remainder of 2026 and increase our average community count by about 5% from 2025.
Summary of Company Financial Results
Income before income taxes for the first quarter of 2026 decreased $56.9 million from $146.1 million in the first quarter of 2025 to $89.2 million in 2026. Net income was $67.8 million, or $2.55 per diluted share, in 2026's first quarter, compared to $111.2 million, or $3.98 per diluted share, in 2025's first quarter. Our effective tax rate was 23.9% in both the first quarter of 2026 and 2025.
During the quarter ended March 31, 2026, our total revenue was $920.7 million, of which $889.5 million was from homebuilding and $31.2 million was from our financial services operations. Revenue from homebuilding decreased 6% in 2026's first quarter compared to the same period in 2025 driven primarily by a 4% decrease in the average sales price of homes delivered ($17,000 per home delivered) and a 3% decrease in the number of homes delivered (62 units) offset in part by a 1% increase in land sales. Our revenue and average sales price reflect a $52.7 million reduction for sales incentives and closing costs in the first quarter of 2026 compared to a $40.0 million reduction for sales incentives and closing costs in 2025's first quarter. Revenue from our financial services segment decreased 1% to $31.2 million in the first quarter of 2026 as a result of lower margins on loans sold, partially offset by improved capture rate and an increase in loans originated during the period compared to the first quarter of 2025.
Total gross margin (total revenue less total land and housing costs) decreased $50.2 million in the first quarter of 2026 compared to the first quarter of 2025 as a result of a $49.9 million decline in the gross margin of our homebuilding operations and a $0.3 million decrease in the gross margin of our financial services operations. Our homebuilding gross margin percentage declined by 410 basis points to 19.3% in the first quarter of 2026 from 23.4% in the first quarter of 2025. The decline in gross margin dollars primarily resulted from the decrease in average sales price of homes delivered, a $6.2 million increase in lot costs, a $13.4 million increase in mortgage interest rate buydowns offered and a 3% decrease in homes delivered in 2026 compared to 2025. Our homebuilding 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, homes under construction and incentives used to encourage demand due to market conditions. During the first quarter of 2026, margin was compressed primarily due to mix of inventory homes delivered, incentives offered and increased lot costs. The gross margin of our financial services operations decreased $0.3 million in the first quarter of 2026 compared to the first quarter of 2025 as a result of lower margins on loans sold, partially offset by improved capture rate and an increase in the number of loan originations.
We opened 22 new communities during the first quarter of 2026 and closed 24 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, absorption pace and housing gross margin from year to year.
For the three months ended March 31, 2026, selling, general and administrative expense increased $4.6 million, and increased as a percentage of revenue from 11.5% in the first quarter of 2025 to 12.7% in the first quarter of 2026. Selling expense increased $2.5 million from 2025's first quarter and increased as a percentage of revenue to 6.0% in 2026's first quarter from 5.4% for the same period in 2025. The dollar increase in selling expense related to a $1.0 million increase in realtor commissions and a $1.5 million increase in costs associated with our sales offices, including compensation-related expenses in the first quarter of 2026. General and administrative expense increased $2.1 million in the first quarter of 2026 compared to first quarter of 2025 and increased as a percentage of revenue to 6.6% in the first quarter 2026 from 6.1% in the first quarter of 2025. The dollar increase in general and administrative expense was primarily due to a $0.8 million increase in compensation-related expenses due to increased head count, a $0.2 million increase in costs associated with information systems, a $0.6 million increase in land related expenses and a $0.5 million increase in miscellaneous expenses.
Outlook
The housing market continues to be affected by persistent macroeconomic challenges, including elevated mortgage interest rates, affordability constraints, and broader economic uncertainty, including tariffs, inflationary pressures, labor market conditions, recessionary concerns and geopolitical uncertainty. While we remain constructive on the long-term outlook for our business, these market conditions may persist throughout the remainder of the year. In response, we are focused on executing operating strategies designed to mitigate these conditions, including controlling overhead costs, prudently managing land
investments and development spending, maintaining pricing discipline, and selectively offering incentives-including mortgage interest rate buydowns-to enhance affordability, support demand, increase order activity, and minimize cancellations.
We believe the long-term fundamentals of the housing market remain supported by favorable demographic trends, continued household formation, and a sustained undersupply of both new and existing homes. In addition, we are optimistic that mortgage interest rates may decline in the future, which may improve affordability and homebuyer demand. However, the timing and extent of any such improvement remain uncertain and will depend on broader economic, political and capital market conditions beyond our control.
We believe we are well positioned to navigate the current operating environment. Although our backlog at the end of the first quarter of 2026 was lower than in the prior year, it remains solid, with an average sales price approximately 2% lower than at the end of the first quarter of 2025. Our strong balance sheet and liquidity position provide financial flexibility to respond to changing market conditions. Nevertheless, continued success will depend on our ability to remain responsive to evolving economic conditions, and there can be no assurance that our current strategies will be sufficient to offset the risks associated with ongoing market uncertainty.
In 2026, as we celebrate our 50th year of delivering high quality communities and homes, we expect to prioritize the following business strategies:
•Employ incentives to promote sales
•Manage inventory home levels to meet homebuyer demand
•Manage land spend and maintain disciplined cost management
•Open new communities aligned with our long-term growth objectives
•Maintain a strong balance sheet and liquidity levels, and low leverage
•Continue emphasizing product quality, customer service, and premier community locations
During the first three months of 2026, we invested $79.2 million in land acquisitions and $104.4 million in land development compared to $146.0 million and $101.6 million, respectively, during the first three months of 2025. We invested in fewer land acquisitions in the first quarter of 2026 compared to the first quarter of 2025 as a result of the land supply needs of our divisions. 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 acquisition and development spend accordingly.
We ended the first quarter of 2026 with approximately 50,000 lots under control, which represents an approximately five-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 2% decrease from our approximately 51,100 lots under control at the end of last year's first quarter.
We opened 22 communities and closed 24 communities in the first quarter of 2026, ending the first quarter with 230 active communities, compared to 226 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 5% in 2026 compared to 2025.
The following table shows, by segment: revenue; cost of sales; selling, general and administrative expense; operating income; and interest (income) expense - net for the three months ended March 31, 2026 and 2025:
| Three Months Ended March 31, | |||||||||||
| (In thousands) | 2026 | 2025 | |||||||||
| Revenue: | |||||||||||
| Northern homebuilding | $ | 376,906 | $ | 410,377 | |||||||
| Southern homebuilding | 512,570 | 534,196 | |||||||||
|
Financial services (a)
|
31,231 | 31,520 | |||||||||
| Total revenue | $ | 920,707 | $ | 976,093 | |||||||
| Cost of Sales: | |||||||||||
| Northern homebuilding | $ | 303,451 | $ | 319,459 | |||||||
| Southern homebuilding | 414,665 | 403,851 | |||||||||
|
Financial services (a)
|
- | - | |||||||||
| Total cost of sales | $ | 718,116 | $ | 723,310 | |||||||
| General and Administrative Expense: | |||||||||||
| Northern homebuilding | $ | 9,668 | $ | 9,136 | |||||||
| Southern homebuilding | 18,239 | 18,808 | |||||||||
|
Financial services (a)
|
14,507 | 12,753 | |||||||||
| Segment general and administrative expense | $ | 42,414 | $ | 40,697 | |||||||
| Corporate and unallocated general administrative expense | 18,772 | 18,376 | |||||||||
|
Total general and administrative expense
|
$ | 61,186 | $ | 59,073 | |||||||
| Selling Expense | |||||||||||
| Northern homebuilding | $ | 20,864 | $ | 21,190 | |||||||
| Southern homebuilding | 33,775 | 31,106 | |||||||||
|
Financial services (a)
|
- | - | |||||||||
| Segment selling expense | $ | 54,639 | $ | 52,296 | |||||||
| Corporate and unallocated selling expense | 701 | 490 | |||||||||
| Total selling expense: | $ | 55,340 | $ | 52,786 | |||||||
|
Operating income:
|
|||||||||||
| Northern homebuilding | $ | 42,923 | $ | 60,592 | |||||||
| Southern homebuilding | 45,891 | 80,431 | |||||||||
|
Financial services (a)
|
16,724 | 18,767 | |||||||||
| Segment operating income | $ | 105,538 | $ | 159,790 | |||||||
| Corporate selling, general and administrative expense | (19,473) | (18,866) | |||||||||
| Total operating income | $ | 86,065 | $ | 140,924 | |||||||
| Interest (income) expense - net: | |||||||||||
| Northern homebuilding | $ | (10) | $ | (22) | |||||||
| Southern homebuilding | (194) | (2) | |||||||||
|
Financial services (a)
|
2,627 | 2,661 | |||||||||
| Segment Interest (income) expense - net | $ | 2,423 | $ | 2,637 | |||||||
| Corporate Interest (income) expense - net | (5,528) | (7,834) | |||||||||
| Total interest (income) expense - net | $ | (3,105) | $ | (5,197) | |||||||
| Income before income taxes | $ | 89,170 | $ | 146,121 | |||||||
(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.
The following tables show total assets by segment at March 31, 2026 and December 31, 2025:
| At March 31, 2026 | |||||||||||||||||||||||||||||||||||
| (In thousands) | Northern | Southern | Financial Services | Segment Total | Corporate and unallocated | Total | |||||||||||||||||||||||||||||
| Deposits on real estate under option or contract | $ | 23,760 | $ | 60,183 | $ | - | $ | 83,943 | $ | - | $ | 83,943 | |||||||||||||||||||||||
|
Inventory (a)
|
1,119,155 | 2,196,003 | - | 3,315,158 | - | 3,315,158 | |||||||||||||||||||||||||||||
| Investments in joint venture arrangements | - | 68,357 | - | 68,357 | - | 68,357 | |||||||||||||||||||||||||||||
| Other assets | 45,880 | 145,451 |
(b)
|
369,719 | 561,050 | 759,878 | 1,320,928 | ||||||||||||||||||||||||||||
| Total assets | $ | 1,188,795 | $ | 2,469,994 | $ | 369,719 | $ | 4,028,508 | $ | 759,878 | $ | 4,788,386 | |||||||||||||||||||||||
| At December 31, 2025 | |||||||||||||||||||||||||||||||||||
| (In thousands) | Northern | Southern | Financial Services | Segment Total | Corporate and unallocated | Total | |||||||||||||||||||||||||||||
| Deposits on real estate under option or contract | $ | 14,319 | $ | 60,226 | $ | - | $ | 74,545 | $ | - | $ | 74,545 | |||||||||||||||||||||||
|
Inventory (a)
|
1,164,647 | 2,144,748 | - | 3,309,395 | - | 3,309,395 | |||||||||||||||||||||||||||||
| Investments in joint venture arrangements | - | 106,299 | - | 106,299 | - | 106,299 | |||||||||||||||||||||||||||||
| Other assets | 35,087 | 122,223 |
(b)
|
375,682 | 532,992 | 753,894 | 1,286,886 | ||||||||||||||||||||||||||||
| Total assets | $ | 1,214,053 | $ | 2,433,496 | $ | 375,682 | $ | 4,023,231 | $ | 753,894 | $ | 4,777,125 | |||||||||||||||||||||||
(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.
Reportable Segments
The following table presents, by reportable segment, selected operating and financial information as of and for the three months ended March 31, 2026 and 2025:
| Three Months Ended March 31, | |||||||||||
| (Dollars in thousands) | 2026 | 2025 | |||||||||
| Northern Region | |||||||||||
| Homes delivered | 752 | 826 | |||||||||
| New contracts, net | 1,026 | 1,065 | |||||||||
| Backlog at end of period | 1,110 | 1,375 | |||||||||
| Average sales price of homes delivered | $ | 497 | $ | 494 | |||||||
| Average sales price of homes in backlog | $ | 570 | $ | 556 | |||||||
| Aggregate sales value of homes in backlog | $ | 633,121 | $ | 764,630 | |||||||
| Housing revenue | $ | 373,605 | $ | 408,147 | |||||||
| Land sale revenue | $ | 3,301 | $ | 2,230 | |||||||
|
Operating income homes (a)
|
$ | 42,856 | $ | 60,545 | |||||||
|
Operating income land
|
$ | 67 | $ | 47 | |||||||
| Number of average active communities | 93 | 94 | |||||||||
| Number of active communities, end of period | 91 | 98 | |||||||||
| Southern Region | |||||||||||
| Homes delivered | 1,162 | 1,150 | |||||||||
| New contracts, net | 1,324 | 1,227 | |||||||||
| Backlog at end of period | 1,135 | 1,472 | |||||||||
| Average sales price of homes delivered | $ | 435 | $ | 463 | |||||||
| Average sales price of homes in backlog | $ | 503 | $ | 540 | |||||||
| Aggregate sales value of homes in backlog | $ | 571,051 | $ | 794,621 | |||||||
| Housing revenue | $ | 505,005 | $ | 531,884 | |||||||
| Land sale revenue | $ | 7,565 | $ | 2,312 | |||||||
|
Operating income homes (a)
|
$ | 43,759 | $ | 79,693 | |||||||
|
Operating income land
|
$ | 2,132 | $ | 738 | |||||||
| Number of average active communities | 138 | 129 | |||||||||
| Number of active communities, end of period | 139 | 128 | |||||||||
| Total Homebuilding Regions | |||||||||||
| Homes delivered | 1,914 | 1,976 | |||||||||
| New contracts, net | 2,350 | 2,292 | |||||||||
| Backlog at end of period | 2,245 | 2,847 | |||||||||
| Average sales price of homes delivered | $ | 459 | $ | 476 | |||||||
| Average sales price of homes in backlog | $ | 536 | $ | 548 | |||||||
| Aggregate sales value of homes in backlog | $ | 1,204,172 | $ | 1,559,251 | |||||||
| Housing revenue | $ | 878,610 | $ | 940,031 | |||||||
| Land sale revenue | $ | 10,866 | $ | 4,542 | |||||||
|
Operating income homes (a)
|
$ | 86,615 | $ | 140,238 | |||||||
|
Operating income land
|
$ | 2,199 | $ | 785 | |||||||
| Number of average active communities | 231 | 223 | |||||||||
| Number of active communities, end of period | 230 | 226 | |||||||||
(a)Includes the effect of total homebuilding general and administrative expense and selling expense for the region as disclosed in the first table set forth in this "Outlook" section.
| Three Months Ended March 31, | |||||||||||
| (Dollars in thousands) | 2026 | 2025 | |||||||||
| Financial Services | |||||||||||
| Number of loans originated | 1,579 | 1,530 | |||||||||
| Value of loans originated | $ | 633,686 | $ | 620,968 | |||||||
| Revenue | $ | 31,231 | $ | 31,520 | |||||||
|
Less: General and administrative expenses
|
14,507 | 12,753 | |||||||||
| Less: Interest expense | 2,627 | 2,661 | |||||||||
| Income before income taxes | $ | 14,097 | $ | 16,106 | |||||||
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 of communities 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, 2026 and 2025:
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Northern | 6.4 | % | 7.8 | % | |||||||
| Southern | 9.9 | % | 11.7 | % | |||||||
| Total cancellation rate | 8.4 | % | 9.9 | % | |||||||
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. Additionally, seasonality may, from time to time, be affected by short-term volatility in the homebuilding industry and in the overall economy.
Year Over Year Comparison
Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025
Northern Region. During the three months ended March 31, 2026, revenue in our Northern region decreased $33.5 million, from $410.4 million in the first quarter of 2025 to $376.9 million in the first quarter of 2026. This decrease in revenue was primarily the result of a 9% decrease in number of homes delivered, partially offset by a 1% increase in the average sales price of homes delivered. Operating income in our Northern region decreased $17.7 million from $60.6 million in the first quarter of 2025 to $42.9 million during the quarter ended March 31, 2026. This decrease in operating income was the result of a $17.5 million decline in our gross margin and a $0.2 million increase in selling, general and administrative expense. Our gross margin percentage declined 270 basis points to 19.5% from 22.2% in the prior year's first quarter primarily due to an increase in homebuyer incentives and a $2.1 million increase in lot costs compared to prior year. The average sales price in 2026 reflects a reduction of $8,600 per home when compared to 2025 due to increased homebuyer incentive costs including mortgage interest rate buydowns when compared to 2025.
Selling, general and administrative expense increased $0.2 million, from $30.3 million for the quarter ended March 31, 2025 to $30.5 million for the quarter ended March 31, 2026 and increased 70 basis points as a percentage of revenue to 8.1% in 2026's first quarter from 7.4% in 2025's first quarter. The increase in selling, general and administrative expense was attributable to a $0.5 million increase in general and administrative expense partially offset by a $0.3 million decrease in selling expense. The increase in general and administrative expense was due to a $0.3 million increase related to land expenses and a $0.2 million increase in compensation related expenses. The decrease in selling expense was due to a $0.5 million decrease in sales and realtor commissions produced by the lower number of homes delivered offset in part by a $0.2 million increase in costs associated with our model homes and sales offices, including compensation.
During the three months ended March 31, 2026, we experienced a 4% decrease in new contracts in our Northern region from 1,065 in the first quarter of 2025 to 1,026 in the first quarter of 2026. Homes in backlog decreased 19% from 1,375 homes at March 31, 2025 to 1,110 homes at March 31, 2026 as a result of more inventory homes sold in 2026 first quarter compared to prior year. The average sales price in backlog increased approximately 3% to $570,000 at March 31, 2026 compared to
$556,000 at March 31, 2025 primarily due to the mix of homes being sold. During the three months ended March 31, 2026, we opened eight new communities in our Northern region compared to opening sixteen during 2025's first quarter. Our monthly absorption rate in our Northern region was 3.7 per community in the first quarter of 2026 compared to 3.8 in the first quarter of 2025 due to a decrease in new contracts.
Southern Region. During the three month period ended March 31, 2026, revenue in our Southern region decreased $21.6 million, from $534.2 million in the first quarter of 2025 to $512.6 million in the first quarter of 2026. This 4% decrease in revenue was the result of a 6% decrease in the average sales price of homes delivered ($28,000 per home delivered), offset in part by a 1% increase in the number of homes delivered (12 units) and a $5.3 million increase in land sale revenue. Operating income in our Southern region decreased $34.5 million from $80.4 million in the first quarter of 2025 to $45.9 million in the first quarter of 2026. This decrease in operating income was the result of a $32.4 million decline in our gross margin and a $2.1 million increase in selling, general, and administrative expense. Our gross margin percentage declined 530 basis points from 24.4% in prior year's first quarter to 19.1% in the first quarter of 2026. The decline in our homebuilding gross margin was primarily due to the decrease in the average sales price of homes delivered and a $4.2 million increase in lot costs. Increased homebuyer incentive costs, including mortgage interest rate buydowns, decreased the average sales price of homes delivered by $6,200 per home when compared to 2025.
Selling, general and administrative expense increased $2.1 million from $49.9 million in the first quarter of 2025 to $52.0 million in the first quarter of 2026 and increased 80 basis points as a percentage of revenue to 10.1% in the first quarter of 2026 from 9.3% in the first quarter of 2025. Selling expense increased $2.7 million due to a $1.5 million increase in realtor and sales commissions and a $1.2 million increase in costs related to our sales office, including compensation and advertising. General and administrative expense decreased $0.6 million due to a reduction in compensation-related expenses.
During the three months ended March 31, 2026, our new contracts in our Southern region increased from 1,227 in the first quarter of 2025 to 1,324 in the first quarter of 2026, which was primarily due to new communities. Homes in backlog decreased by 23% from 1,472 homes at March 31, 2025 to 1,135 homes at March 31, 2026, primarily as a result of weakened demand and a shift in demand to inventory homes which offer incentives compared to last year. Average sales price in backlog decreased to $503,000 at March 31, 2026 from $540,000 at March 31, 2025 primarily due to the mix of homes being sold. During the three months ended March 31, 2026, we opened 14 new communities in our Southern region compared to opening 11 communities during 2025's first quarter. Our monthly absorption rate in our Southern region remained at 3.2 per community in the first quarter of 2026 from the first quarter of 2025.
Financial Services. Revenue from our mortgage and title operations decreased 1% to $31.2 million in the first quarter of 2026 from $31.5 million in the first quarter of 2025 due to lower margins on loans sold and a decrease in the average loan amount from $406,000 in the quarter ended March 31, 2025 to $401,000 in the quarter ended March 31, 2026, partially offset by higher capture rate during the period compared to prior year's first quarter and a 3% increase in the number of loan originations from 1,530 in 2025's first quarter to 1,579 in the first quarter of 2026.
Our financial services segment experienced a $2.0 million decrease in operating income in the first quarter of 2026 compared to 2025's first quarter, which was primarily due a $1.7 million increase in general and administrative expense, which was primarily the result of an increase in compensation-related expenses, and the decrease in revenue compared to the first quarter of 2025 described above.
At March 31, 2026, M/I Financial provided financing services in all of our markets. Approximately 96% of our homes delivered during the first quarter of 2026 were financed through M/I Financial, compared to approximately 92% in the first quarter of 2025. 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 $18.9 million for the first quarter of 2025 to $19.5 million for the first quarter of 2026. This increase resulted from a $0.3 million increase in advertising expenses and a $0.6 million increase in miscellaneous expenses offset in part by a $0.3 million decrease in compensation-related expenses.
Interest Income, net of Interest Expense. The Company earned $3.1 million of interest income - net for the three months ended March 31, 2026 compared to $5.2 million for the three months ended March 31, 2025. This decrease was primarily due to a lower average cash balance on hand compared to prior year.
Income Taxes. Our overall effective tax rate was 23.9% for both the three months ended March 31, 2026 and the three months ended March 31, 2025.
LIQUIDITY AND CAPITAL RESOURCES
Overview of Capital Resources and Liquidity.
At March 31, 2026, we had $767.4 million of cash, cash equivalents and restricted cash (all of which was comprised of unrestricted cash and cash equivalents), which represents a $78.2 million increase in unrestricted cash and cash equivalents from December 31, 2025. This increase in cash was primarily due to the timing of land spend, lower inventory investment and the proceeds from mortgage loan sales exceeding originations, partially offset by a decline in home deliveries compared to prior year. Our principal uses of cash for the three months ended March 31, 2026 were investment in land and land development, construction of homes, mortgage loan originations, investment in joint ventures, operating expenses, short-term working capital, debt service requirements, including the repayment of amounts outstanding under our credit facilities, and the repurchase of $50.1 million of our outstanding common shares under our share repurchase program. 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 MIF Mortgage Repurchase Facility and MIF Master Repurchase Facility (as defined below), and other sources of liquidity.
The Company is a party to three primary credit agreements: (1) a $900 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; (2) a $200 million mortgage repurchase agreement, dated October 24, 2023, as amended most recently on April 16, 2026 (the "MIF Mortgage Repurchase Facility"), with M/I Financial as borrower; and (3) an uncommitted $100 million mortgage repurchase agreement dated October 21, 2025 (the "MIF Master Repurchase Facility"),with M/I Financial as borrower.
As of March 31, 2026, 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 $960.2 million, with $260.2 million payable within 12 months. Future interest payments associated with these notes payable totaled $87.2 million as of March 31, 2026, with $31.9 million payable within 12 months.
As of March 31, 2026, there were no borrowings outstanding and $88.1 million of letters of credit outstanding under our Credit Facility, leaving $811.9 million available. We expect to continue to manage our balance sheet and liquidity carefully during the remainder of 2026 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 2026 from cash receipts, excess cash balances and availability under our credit facilities.
During the first quarter of 2026, we delivered 1,914 homes, started 2,031 homes, ended the quarter with approximately 4,600 homes under construction compared to approximately 4,800 at the end of last year's first quarter, and spent $79.2 million on land purchases and $104.4 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, 2026, we had a total of 25,785 lots under contract, with an aggregate purchase price of approximately $1.70 billion, to be acquired during the remainder of 2026 through 2031.
Our off-balance sheet arrangements relating to our homebuilding operations include joint venture arrangements, land option agreements, guarantees and indemnifications associated with acquiring and developing land, and the issuance of letters of credit and completion bonds. We use these arrangements to secure the most desirable lots on which to build homes for our homebuyers in a manner that we believe reduces the overall risk to the Company.
Operating Cash Flow Activities. During the three-month period ended March 31, 2026, we generated $135.7 million of cash from operating activities, compared to $64.9 million during the first quarter of 2025. The cash provided by operating activities in the first quarter of 2026 was primarily a result of net income of $67.8 million, a $29.8 million increase in accounts payable, customer deposits and other liabilities, proceeds from the sale of mortgage loans exceeding mortgage loan originations by $43.8 million, a $41.8 million decrease in inventory, a decrease in other assets of $12.5 million, offset, in part, by a $44.2 million decrease in accrued compensation. The cash provided by operating activities during the first quarter of 2025 was primarily a result of net income of $111.2 million, a $72.4 million increase in accounts payable, customer deposits and other liabilities, and proceeds from the sale of mortgage loans exceeding mortgage loan originations by $50.5 million, offset, in part, by a $107.3 million increase in inventory, a $12.5 million increase in other assets and a $48.9 million decrease in accrued compensation.
Investing Cash Flow Activities. During the first quarter of 2026, we generated $5.1 million of cash in investing activities, compared to using $2.9 million of cash in investing activities during the first quarter of 2025. The cash provided by investing activities in the first quarter of 2026 was primarily a result of $9.1 million of proceeds from the sale of a portion of our mortgage servicing rights, offset, in part, by a $3.8 million contribution in our investment in joint venture arrangements and a $0.2 million increase in property and equipment. The cash used in investing activities during the first quarter of 2025 was primarily a result of a $8.3 million increase in our investment in joint venture arrangements and a $1.3 million increase in property and equipment, offset, in part, by $6.7 million of proceeds from the sale of a portion of our mortgage servicing rights.
Financing Cash Flow Activities. During the three months ended March 31, 2026, we used $62.6 million of cash in financing activities, compared to using $107.2 million of cash in financing activities during the first three months of 2025. The cash used in financing activities in 2026 was primarily due to the repurchase of $50.1 million of our outstanding common shares during the first quarter of 2026, and repayments (net of borrowings) under our MIF Mortgage Repurchase Facility and MIF Master Repurchase Facility of $16.7 million offset partially by $4.1 million in proceeds from the exercise of stock options during the first quarter of 2026. The cash used in financing activities in 2025 was primarily due to the repurchase of $50.1 million of our outstanding common shares during the first quarter of 2025, and repayments (net of borrowings) under our MIF Mortgage Repurchase Facility of $58.2 million offset partially by $1.1 million in proceeds from the exercise of stock options during the first quarter of 2025.
On November 12, 2025, the Company announced that its Board of Directors authorized a new share repurchase program pursuant to which the Company may purchase up to $250 million of its outstanding common shares (the "Second 2025 Share Repurchase Program"), which replaced the Company's previous share repurchase program. During the first quarter of 2026, the Company repurchased 0.4 million outstanding common shares for an aggregate purchase price of $50.1 million under the Second 2025 Share Repurchase Program which was funded with cash on hand. As of March 31, 2026, the Company was authorized to repurchase an additional $170.4 million of outstanding common shares under the Second 2025 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 common shares during the remainder of 2026. The timing and amount of any future purchases under the Second 2025 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 both March 31, 2026 and December 31, 2025, our ratio of homebuilding debt to capital was 18%, 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 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, 2026:
| (In thousands) |
Expiration Date |
Outstanding Balance |
Available Amount |
||||||||
|
Notes payable - homebuilding (a)
|
(a) | $ | - | $ | 811,868 | ||||||
|
Notes payable - financial services (b)
|
(b) | $ | 260,201 | $ | 870 | ||||||
(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 $2.42 billion of availability for additional senior debt at March 31, 2026. As a result, the full $900 million commitment amount of the facility was available, less any borrowings and letters of credit outstanding. There were no borrowings outstanding and $88.1 million of letters of credit outstanding at March 31, 2026, leaving $811.9 million available. The Credit Facility has an expiration date of September 18, 2030.
(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 the MIF Mortgage Repurchase Facility as of March 31, 2026, which is $200 million. The MIF Mortgage Repurchase Facility has an expiration of October 20, 2026. In addition, the MIF Master Repurchase Facility provides an uncommitted maximum borrowing availability of $100 million to expire on October 20, 2026 .
Notes Payable - Homebuilding.
Homebuilding Credit Facility. The Credit Facility provides for an aggregate commitment amount of $900 million and also includes an accordion feature pursuant to which the maximum borrowing availability may be increased to an aggregate of $1.05 billion, subject to obtaining additional commitments from lenders. The Credit Facility matures on September 18, 2030. Interest on amounts borrowed under the Credit Facility is payable at an adjusted term SOFR margin of 150 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 $2.20 billion at March 31, 2026 (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 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.
As of March 31, 2026, 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, 2026:
| Financial Covenant | Covenant Requirement | Actual | ||||||||||||
| (Dollars in millions) | ||||||||||||||
| Consolidated Tangible Net Worth | ≥ | $ | 2,201.2 | $ | 3,080.0 | |||||||||
| Leverage Ratio | ≤ | 0.60 | 0.01 | |||||||||||
| Interest Coverage Ratio | ≥ | 1.5 to 1.0 | 17.07 to 1.0 | |||||||||||
| Investments in Unrestricted Subsidiaries and Joint Ventures | ≤ | $ | 924.0 | $ | 9.5 | |||||||||
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 $200 million and expires on October 20, 2026.
M/I Financial pays interest on each advance under the MIF Mortgage Repurchase Facility at a per annum rate based on Daily Simple SOFR plus a margin as defined in the MIF Mortgage Repurchase Facility. 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 MIF Mortgage Repurchase Facility. There are no guarantors of the MIF Mortgage Repurchase Facility.
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 20, 2026, but we cannot provide any assurance that we will be able to obtain such an extension.
As of March 31, 2026, there was approximately $165.3 million outstanding under the MIF Mortgage Repurchase Facility 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, 2026:
| Financial Covenant | Covenant Requirement | Actual | ||||||||||||
| (Dollars in millions) | ||||||||||||||
| Leverage Ratio | ≤ | 12.0 to 1.0 | 6.74 to 1.0 | |||||||||||
| Liquidity | ≥ | $ | 10.0 | $ | 71.7 | |||||||||
| Adjusted Net Income | > | $ | 0.0 | $ | 47.6 | |||||||||
| Tangible Net Worth | ≥ | $ | 25.0 | $ | 45.6 | |||||||||
MIF Master Repurchase Facility. The MIF Master Repurchase Facility provides for an uncommitted maximum borrowing availability of $100 million and expires on October 20, 2026 or upon agent demand with a 30 day notice. The MIF Master Repurchase Facility is used to finance eligible residential mortgage loans originated by M/I Financial. As of March 31, 2026, there was approximately $94.9 million outstanding under the MIF Master Repurchase Agreement. M/I Financial pays interest on each advance under the MIF Master Repurchase Facility at a per annum rate based on Daily Simple SOFR plus a margin as defined in the MIF Master Repurchase Facility. The MIF Master Repurchase Facility contains the same financial covenants as the MIF Mortgage Repurchase Facility and, as of March 31, 2026, M/I Financial was in compliance with all such covenants.
Senior Notes.
3.95% Senior Notes. On August 23, 2021, the Company issued $300 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, 2026, 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 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, 2026, 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, 2026, M/I Homes, Inc. had $300 million aggregate principal amount of its 2030 Senior Notes and $400 million aggregate principal amount of its 2028 Senior Notes outstanding.
The 2030 Senior Notes and the 2028 Senior Notes are fully and unconditionally guaranteed, on a joint and several basis, by all of M/I Homes, Inc.'s subsidiaries (the "Subsidiary Guarantors") with the exception of subsidiaries that are primarily engaged in the business of mortgage financing, title insurance or similar financial businesses relating to the homebuilding and home sales business, certain subsidiaries that are not 100%-owned by M/I Homes, Inc. or another subsidiary, and other subsidiaries designated as Unrestricted Subsidiaries (as defined in the indentures governing the 2030 Senior Notes and the 2028 Senior Notes), subject to limitations on the aggregate amount invested in such Unrestricted Subsidiaries in accordance with the terms of the Credit Facility and the indentures governing the 2030 Senior Notes and the 2028 Senior Notes (the "Non-Guarantor Subsidiaries"). The Subsidiary Guarantors of the 2030 Senior Notes, the 2028 Senior Notes and the Credit Facility are the same.
Each Subsidiary Guarantor is a direct or indirect 100%-owned subsidiary of M/I Homes, Inc. The guarantees are senior unsecured obligations of each Subsidiary Guarantor and rank equally in right of payment with all existing and future unsecured senior indebtedness of such Subsidiary Guarantor. The guarantees are effectively subordinated to any existing and future secured indebtedness of such Subsidiary Guarantor with respect to any assets comprising security or collateral for such indebtedness.
The guarantees are "full and unconditional," as those terms are used in Regulation S-X, Rule 3-10(b)(3), except that the indentures governing the 2030 Senior Notes and the 2028 Senior Notes provide that a Subsidiary Guarantor's guarantee will be released if: (1) all of the assets of such Subsidiary Guarantor have been sold or otherwise disposed of in a transaction in compliance with the terms of the applicable indenture; (2) all of the Equity Interests (as defined in the applicable indenture) held by M/I Homes, Inc. and the Restricted Subsidiaries (as defined in the applicable Indenture) of such Subsidiary Guarantor have been sold or otherwise disposed of to any person other than M/I Homes, Inc. or a Restricted Subsidiary in a transaction in compliance with the terms of the applicable indenture; (3) the Subsidiary Guarantor is designated an Unrestricted Subsidiary (or otherwise ceases to be a Restricted Subsidiary (including by way of liquidation or merger)) in compliance with the terms of the applicable indenture; (4) M/I Homes, Inc. exercises its legal defeasance option or covenant defeasance option under the applicable indenture; or (5) all obligations under the applicable indenture are discharged in accordance with the terms of the applicable indenture.
The enforceability of the obligations of the Subsidiary Guarantors under their guarantees may be subject to review under applicable federal or state laws relating to fraudulent conveyance or transfer, voidable preference and similar laws affecting the rights of creditors generally. In certain circumstances, a court could void the guarantees, subordinate amounts owing under the guarantees or order other relief detrimental to the holders of the 2030 Senior Notes and the 2028 Senior Notes.
The following tables present summarized financial information on a combined basis for M/I Homes, Inc. and the Subsidiary Guarantors. Transactions between M/I Homes, Inc. and the Subsidiary Guarantors have been eliminated and the summarized financial information does not reflect M/I Homes, Inc.'s or the Subsidiary Guarantors' investment in, and equity in earnings from, the Non-Guarantor Subsidiaries.
Summarized Balance Sheet Data
| (In thousands) | As of March 31, 2026 | As of December 31, 2025 | ||||||
| Assets: | ||||||||
| Cash | $ | 691,755 | $ | 648,844 | ||||
| Investment in joint venture arrangements | $ | 59,194 | $ | 99,891 | ||||
| Amounts due from Non-Guarantor Subsidiaries | $ | 38,536 | $ | 37,529 | ||||
| Total assets | $ | 4,407,626 | $ | 4,388,098 | ||||
|
Liabilities and Shareholders' Equity:
|
||||||||
| Total liabilities | $ | 1,271,249 | $ | 1,267,890 | ||||
| Shareholders' equity | $ | 3,136,377 | $ | 3,120,208 | ||||
Summarized Statement of Income Data
| Three Months Ended | |||||
| (In thousands) | March 31, 2026 | ||||
| Revenues | $ | 889,476 | |||
| Land and housing costs | $ | 718,116 | |||
| Selling, general and administrative expense | $ | 101,539 | |||
| Income before income taxes | $ | 75,553 | |||
| Net income | $ | 56,978 | |||
Weighted Average Borrowings. For the three months ended March 31, 2026 and 2025, our weighted average borrowings outstanding were $726.7 million and $726.8 million, respectively, with a weighted average interest rate of 5.41% and 5.29%, respectively. The increase in weighted average interest rate is primarily due to the amendments to the Credit Facility implemented in the third quarter of 2025.
At both March 31, 2026 and December 31, 2025, we had no borrowings outstanding under the Credit Facility. To the extent we elect to borrow under the Credit Facility during the remainder of 2026, 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 Second 2025 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 $88.1 million of letters of credit issued and outstanding under the Credit Facility at March 31, 2026. During the three months ended March 31, 2026, the average daily amount of letters of credit outstanding under the Credit Facility was $88.5 million and the maximum amount of letters of credit outstanding under the Credit Facility was $93.2 million.
At March 31, 2026, M/I Financial had $165.3 million outstanding under the MIF Mortgage Repurchase Facility. During the three months ended March 31, 2026, the average daily amount outstanding under the MIF Mortgage Repurchase Facility was $16.3 million and the maximum amount outstanding was $198.2 million, which occurred during January. At March 31, 2026, M/I Financial also had $94.9 million outstanding under the MIF Master Repurchase Facility. During the three months ended March 31, 2026 average daily amount outstanding under our then-outstanding MIF Master Repurchase Facility was $10.4 million and the maximum amount outstanding was $94.9 million, which occurred during March.
INTEREST RATES AND INFLATION
Our business is significantly affected by general economic conditions within the United States and, particularly, by the impacts of interest rates and inflation. These macroeconomic trends have pressured housing affordability, negatively impacted homebuyer sentiment and increased the costs of financing land development activities and housing construction.
The annual rate of inflation in the United States was 3.3% in March 2026, as measured by the Consumer Price Index, up from the prior quarter and from 2.4% in March 2025. However, continued increases in inflation rates could impact our costs, reduce our gross margins, reduce the purchasing power of potential homebuyers, and negatively impact their ability and desire to buy a home.
Elevated mortgage interest rates have also made it more difficult for homebuyers to qualify for mortgages or obtain financing on terms that are acceptable to them. Although mortgage interest rates reached a three-year low during the first quarter, they began to rise in March and remain unpredictable. We plan to continue to address these elevated rates in 2026 by offering mortgage interest rate buydowns to potential homebuyers. We believe that offering mortgage interest rate buydown incentives may cause otherwise hesitant potential homebuyers to decide to enter the homebuying market due to the improved affordability of obtaining a mortgage, and we believe we are well prepared to address increased demand in our markets with our current land position and open communities.
M/I Homes Inc. published this content on April 24, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on April 24, 2026 at 15:13 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]