M/I Homes Inc.
02/13/2026 | Press release | Distributed by Public on 02/13/2026 12:47
Annual Report for Fiscal Year Ending 12/31, 2025 (Form 10-K)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
M/I Homes, Inc. together with its subsidiaries is one of the nation's leading builders of single-family homes, having sold over 168,200 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; Fort 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:
•Application of Critical Accounting Estimates and Policies;
•Results of Operations;
•Discussion of Our Liquidity and Capital Resources; and
•Impact of Interest Rates and Inflation.
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 "Special Note of Caution Regarding Forward - Looking Statements" above in Part I.
Listed below are those estimates and policies that we believe are critical and require the use of complex judgment in their application. Our critical accounting estimates should be read in conjunction with the Notes to our Consolidated Financial Statements.
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 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 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.
We record sales commissions within Selling expenses in the 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, are 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 primary 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 any other 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. 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.
See Note 1to our Consolidated Financial Statements for additional information related to our revenues disaggregated by geography and revenue source.
Inventory. 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. Land acquisition, land development and common costs (both incurred and estimated to be incurred) are typically allocated to individual lots based on the total number of lots expected to be closed in each community or phase, or based on the relative fair value, the relative sales value or the front footage method of each lot. Any changes to the estimated total development costs of a community or phase are allocated proportionately to the homes remaining in the community or phase and homes previously closed. The cost of individual lots is transferred to homes under construction when home construction begins. Home construction costs are accumulated on a specific identification basis. Costs of home deliveries include the specific construction cost of the home and the allocated lot costs. Such costs are charged to cost of sales simultaneously with revenue recognition, as discussed above. When a home is closed, we typically have not yet paid all incurred costs necessary to complete the home. As homes close, we compare the home construction budget to actual recorded costs to date to estimate the additional costs to be incurred from our subcontractors related to the home. We record a liability and a corresponding charge to cost of sales for the amount we estimate will ultimately be paid related to that home. We monitor the accuracy of such estimates by comparing actual costs incurred in subsequent months to the estimate. Although actual costs to complete a home in the future could differ from our estimates, our method has historically produced consistently accurate estimates of actual costs to complete closed homes.
Inventory is recorded at cost, unless events and circumstances indicate that the carrying value of the land is impaired, at which point the inventory is written down to fair value as required by Accounting Standards Codification ("ASC") 360-10, Property, Plant and Equipment ("ASC 360"). The Company assesses inventory for recoverability on a quarterly basis if events or changes in local or national economic conditions indicate that the carrying amount of an asset may not be recoverable. In conducting our quarterly review for indicators of impairment on a community level, we evaluate, among other things, margins on sales contracts in backlog, the margins on homes that have been delivered, expected changes in margins with regard to future home sales over the life of the community, expected changes in margins with regard to future land sales, the value of the land itself as well as any results from third-party appraisals. From the review of all of these factors, we identify communities whose carrying values may exceed their estimated undiscounted future cash flows and run a test for recoverability. For those communities whose carrying values exceed the estimated undiscounted future cash flows and which are deemed to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the communities exceeds the estimated fair value. Due to the fact that the Company's cash flow models and estimates of fair values are based upon management estimates and assumptions, unexpected changes in market conditions and/or changes in management's intentions with respect to the inventory may lead the Company to incur additional impairment charges in the future. Because each inventory asset is unique, there are numerous inputs and assumptions used in our valuation techniques, including estimated average selling price, construction and development costs, absorption pace (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, which could materially impact future cash flow and fair value estimates.
If communities are not recoverable based on 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. The fair value of a community is estimated by discounting management's cash flow projections using an appropriate risk-adjusted interest rate. As of December 31, 2025, we utilized discount rates ranging from 13% to 16% in our valuations. The discount rate used in determining each asset's estimated fair value reflects the inherent risks associated with the related estimated cash flow stream, as well as current risk-free rates available in the market and estimated market risk premiums.
Our quarterly assessments reflect management's best estimates. Due to the inherent uncertainties in management's estimates and uncertainties related to our operations and our industry as a whole as further discussed in "Item 1A. Risk Factors" in Part I of this Annual Report on Form 10-K, we are unable to determine at this time if and to what extent future impairments will occur. Additionally, due to the volume of possible outcomes that can be generated from changes in the various model inputs for each community, we do not believe it is possible to create a sensitivity analysis that can provide meaningful information for the users of our financial statements.
Warranty Reserves. 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 warranty reserves for the Company's Home Builder's Limited Warranty ("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 30-year (offered on all homes sold after April 25, 1998 and on or before December 1, 2015 in all of our markets except our Texas markets), 15-year (offered on all homes sold after December 1, 2015 and on or before December 31, 2021 in all of our markets except our Texas markets) and 10-year (offered on all homes sold in our Texas markets and in all of our markets beginning January 1, 2022) 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. During 2025, our warranty reserves have been adversely affected by warranty repairs in two of our Florida communities primarily related to attic ventilation issues. See Note 1and Note 8to our Consolidated Financial Statements for additional information related to our warranty reserves.
RESULTS OF OPERATIONS
Overview
In 2025, the housing industry faced headwinds including elevated mortgage interest rates, inflationary pressures, affordability issues and overall economic uncertainty. These conditions softened homebuyer demand and resulted in declines across several financial and operational metrics in 2025 when compared to 2024, including new contracts which decreased 4% compared to 2024. In 2025, our annual gross margin percentage declined 360 basis points to 23.0%. Our revenue decreased 2% due to 1% decreases in both our homes delivered and average sales price in 2025 compared to 2024. Despite the challenging conditions facing the housing industry, we had strong cash flow and liquidity in 2025 and ended the year with low leverage.
Our results for the year ended December 31, 2025 in comparison to the year ended December 31, 2024 were as follows:
•Homes delivered decreased 1% to 8,921
•Revenue decreased 2% to $4.4 billion
•Pre-tax income decreased 28% to $526.6, 11.9% of revenue
•Net income decreased 29% to $402.9 million
•New contracts decreased 4% to 8,199
•Absorption pace of sales per community declined to 3.0 per month compared to 3.3 per month
•Average community count increased 6% with 232 active communities at the end of 2025
•Shareholders' equity increased 8% to $3.2 billion, an all-time record high for our Company
•Book value per common share increased to a record high $123 per share
•Homebuilding debt to capital ratio improved to 18%
In addition to the results described above, our financial services operations recorded a $4.8 million increase in operating income in 2025 compared to 2024 as a result of increases in closings and average loan amount.
Our company-wide absorption pace of sales per community in 2025 declined from 3.3 per month in 2024 to 3.0 per month in 2025 as a result of lower homebuyer demand which resulted in a 4% decrease in new contracts during 2025 compared to prior year. Our average community count did increase from 216 in 2024 to 229 in 2025. We plan to open additional new communities during 2026 and increase our average community count by about 5% compared to 2025.
Income before income taxes for the twelve months ended December 31, 2025 decreased 28% from $733.6 million for the year ended December 31, 2024 to $526.6 million for the year ended December 31, 2025. In 2025, our net income was $402.9 million, or $14.74 per diluted share, compared to net income of $563.7 million, or $19.71 per diluted share in 2024. Our effective tax rate was 23.5% in 2025 compared to 23.2% in 2024.
In 2025, we recorded total revenue of $4.42 billion, of which $4.29 billion was from homebuilding and $125.5 million was from our financial services operations. Revenue from homes delivered decreased 2% from 2024 driven primarily by a 1% decrease in both the number of homes delivered in 2025 (134 units) and the average sales price of homes delivered (decreased $4,000 per home). Our revenue and average sales price reflect a $200.0 million reduction for incentives and closing costs in 2025 compared to a $131.3 million reduction for incentives and closing costs in 2024. Revenue from our financial services segment increased 8% to $125.5 million in 2025 as a result of increases in loans closed and sold during the year and the average loan amount.
Total gross margin (total revenue less total land and housing costs) decreased $181.7 million in 2025 compared to 2024 as a result of a $190.9 million decrease in the gross margin of our homebuilding operations partially offset by a $9.3 million improvement in the gross margin of our financial services operations. Our homebuilding gross margin declined $190.9 million and homebuilding gross margin percentage declined 390 basis points from 24.7% in the prior year to 20.8% in 2025. The decline in gross margin dollars primarily resulted from the decreases in homes delivered and average sales price, which included a $53.3 million increase in mortgage interest rate buydowns offered, $64.9 million increase in lot costs, $47.7 million for inventory charges and $11.2 million in warranty claims in two of our Florida communities primarily relating to attic ventilation issues. The improvement in the gross margin of our financial services operations is attributable to an increase in the number of loan originations, higher margins on loans sold, and an increase in the average loan amount during 2025 compared to prior year.
We opened 81 new communities during 2025. 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 2025, selling, general and administrative expense increased $17.9 million, and increased as a percentage of revenue to 11.6% in 2025 from 10.9% in 2024. Selling expense increased $13.5 million from 2024 and increased as a percentage of revenue to 5.6% from 5.2% in 2024. Realtor commissions contributed $7.7 million to the increase in selling expense in 2025 due to higher realtor commissions paid during the period compared to prior year. In addition to commissions, costs associated with our sales offices, including compensation-related expenses and models, increased $5.8 million in 2025 due to our increased community count. General and administrative expense increased $4.3 million in 2025 compared to 2024 and also increased as a percentage of revenue from 5.7% in 2024 to 5.9% in 2025. The dollar increase in general and administrative expense was primarily due to a $1.2 million increase in compensation-related expenses, a $1.2 million increase in costs associated with information systems, and a $1.9 million increase in miscellaneous expenses.
Outlook
Looking ahead to 2026, we expect housing affordability challenges, elevated mortgage interest rates and tepid homebuyer sentiment to continue to put pressure on homebuyer demand. Although certain industry forecasts are projecting a gradual moderation in mortgage interest rates, we anticipate that affordability challenges are likely to persist until consumer incomes, housing prices, and financing costs are more aligned. In this environment, we may experience further margin pressure as we continue to promote targeted incentives at the community level, including mortgage interest rate buydowns, to stimulate homebuyer demand.
We intend to manage our land spending consistent with our long-term growth objectives and focus on opportunities that meet our operating returns and location requirements. Our inventory home strategy, construction cadence, and efforts to improve overhead efficiency will remain central to our operating approach.
As we enter our 50th year of business, we continue to believe that long-term industry fundamentals-including limited new and resale housing supply, favorable demographic trends, and the belief that consumers want to own a home-remain supportive of future demand. We also believe that our strong balance sheet, prudent execution of our strategies, and diverse product offerings will position us well for growth when market conditions normalize. We will continue to monitor evolving market dynamics, maintain disciplined cost management, and invest strategically in land and development for future growth. However, we recognize that our ability to achieve our strategic objectives and performance goals for 2026 and beyond may be limited if macroeconomic conditions continue to negatively impact homebuyer demand.
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 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 2025, we invested $523.7 million in land acquisitions and $645.6 million in land development. 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 all of 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 2025 with approximately 50,000 lots under control, which represents a 5.6-year supply of lots based on 2025 homes delivered, including certain lots that we anticipate selling to third parties. This represents a 4% decrease from our approximately 52,200 lots under control at the end of 2024.
We opened 81 communities and closed 69 communities in 2025, ending the year with a total of 232 communities, compared to 220 at the end of 2024. Although the timing of opening new communities and closing out existing communities is subject to substantial variation, we expect to grow our 2026 average community count by about 5% compared to 2025.
Segment Reporting
We have determined 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 | Orlando, Florida | ||||
| Cincinnati, Ohio | Sarasota, Florida | ||||
| Columbus, Ohio | Tampa, Florida | ||||
| Indianapolis, Indiana | Fort Myers/Naples, 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 | |||||
The following table shows, by segment: revenue; selling, general and administrative expense; operating income (loss); interest (income) expense; and income before income taxes for the years ended December 31, 2025, 2024 and 2023:
| Year Ended December 31, | |||||||||||||||||
| (In thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Revenue: | |||||||||||||||||
| Northern homebuilding | $ | 1,890,457 | $ | 1,900,013 | $ | 1,523,943 | |||||||||||
| Southern homebuilding | 2,401,861 | 2,488,451 | 2,415,730 | ||||||||||||||
|
Financial services (a)
|
125,463 | 116,206 | 93,829 | ||||||||||||||
| Total revenue | $ | 4,417,781 | $ | 4,504,670 | $ | 4,033,502 | |||||||||||
| Cost of Sales: | |||||||||||||||||
| Northern homebuilding | $ | 1,475,438 | $ | 1,480,326 | $ | 1,228,949 | |||||||||||
| Southern homebuilding | 1,925,144 | 1,825,455 | 1,785,624 | ||||||||||||||
|
Financial services (a)
|
- | - | - | ||||||||||||||
|
Total cost of sales (b)
|
$ | 3,400,582 | $ | 3,305,781 | $ | 3,014,573 | |||||||||||
| General and administrative expense: | |||||||||||||||||
| Northern homebuilding | $ | 41,103 | $ | 42,908 | $ | 36,827 | |||||||||||
|
Southern homebuilding
|
77,291 | 76,200 | 65,078 | ||||||||||||||
|
Financial services (a)
|
57,303 | 52,826 | 45,115 | ||||||||||||||
|
Segment general and administrative expense
|
$ | 175,697 | $ | 171,934 | $ | 147,020 | |||||||||||
|
Corporate and unallocated general and administrative expense
|
87,069 | 86,488 | 75,745 | ||||||||||||||
| Total general and administrative expense | $ | 262,766 | $ | 258,422 | $ | 222,765 | |||||||||||
| Selling expense: | |||||||||||||||||
| Northern homebuilding | $ | 95,860 | $ | 95,680 | $ | 81,847 | |||||||||||
|
Southern homebuilding
|
149,457 | 136,198 | 124,860 | ||||||||||||||
|
Financial services (a)
|
- | - | - | ||||||||||||||
|
Segment selling expense
|
$ | 245,317 | $ | 231,878 | $ | 206,707 | |||||||||||
|
Corporate and unallocated selling expense
|
2,563 | 2,495 | 2,235 | ||||||||||||||
| Total selling expense: | $ | 247,880 | $ | 234,373 | $ | 208,942 | |||||||||||
| Operating income (loss): | |||||||||||||||||
| Northern homebuilding | $ | 278,056 | $ | 281,099 | $ | 176,320 | |||||||||||
|
Southern homebuilding
|
249,969 | 450,598 | 440,168 | ||||||||||||||
|
Financial services (a)
|
68,160 | 63,380 | 48,714 | ||||||||||||||
|
Segment operating income
|
$ | 596,185 | $ | 795,077 | $ | 665,202 | |||||||||||
|
Corporate selling, general and administrative expense
|
(89,632) | (88,983) | (77,980) | ||||||||||||||
|
Total operating income (a) (b)
|
$ | 506,553 | $ | 706,094 | $ | 587,222 | |||||||||||
|
Interest (income) expense - net:
|
|||||||||||||||||
| Northern homebuilding | $ | (70) | $ | (228) | $ | (186) | |||||||||||
| Southern homebuilding | (3,076) | (2,554) | (1,703) | ||||||||||||||
|
Financial services (a)
|
12,504 | 13,698 | 10,360 | ||||||||||||||
|
Segment interest (income) expense - net
|
$ | 9,358 | $ | 10,916 | $ | 8,471 | |||||||||||
|
Corporate interest (income) expense - net
|
(29,393) | (38,430) | (28,493) | ||||||||||||||
|
Total interest (income) expense - net
|
$ | (20,035) | $ | (27,514) | $ | (20,022) | |||||||||||
|
Other income (c)
|
$ | - | $ | - | $ | (33) | |||||||||||
| Income before income taxes | $ | 526,588 | $ | 733,608 | $ | 607,277 | |||||||||||
(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.
(b)For the year ended December 31, 2025, total cost of sales and operating income were reduced by $47.7 million in inventory impairment charges and write-offs of land deposits and pre-acquisition coststaken during the period. $6.7 million and $41.0 million of these charges and write-offs were attributable to the Northern homebuilding operating segment and the Southern homebuilding operating segment, respectively. Additionally, total cost of sales and operating income in the Southern homebuilding operating segment were reduced by $11.2 million for warranty charges in two of our Florida communities primarily relating to attic ventilation issues (See Note 8).
(c)Other income is comprised of the equity in (income) loss from joint venture arrangements.
The following table shows supplemental segment information regarding depreciation and amortization expense for years ended December 31, 2025, 2024 and 2023:
| Year Ended December 31, | |||||||||||||||||
|
(In thousands)
|
2025 | 2024 | 2023 | ||||||||||||||
| Depreciation and amortization: | |||||||||||||||||
| Northern homebuilding | $ | 3,723 | $ | 3,787 | $ | 3,673 | |||||||||||
| Southern homebuilding | 4,616 | 3,636 | 2,965 | ||||||||||||||
| Financial services | 1,177 | 1,130 | 810 | ||||||||||||||
|
Segment depreciation and amortization
|
$ | 9,516 | $ | 8,553 | $ | 7,448 | |||||||||||
| Corporate | 9,382 | 8,833 | 8,343 | ||||||||||||||
| Total depreciation and amortization | $ | 18,898 | $ | 17,386 | $ | 15,791 | |||||||||||
The following tables show total assets by segment at December 31, 2025 and 2024:
| 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 | |||||||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||||||||||||||
| (In thousands) | Northern | Southern |
Financial Services
|
Segment Total | Corporate and unallocated | Total | |||||||||||||||||||||||||||||
| Deposits on real estate under option or contract | $ | 12,209 | $ | 57,274 | $ | - | $ | 69,483 | $ | - | $ | 69,483 | |||||||||||||||||||||||
|
Inventory (a)
|
1,041,713 | 1,980,666 | - | 3,022,379 | - | 3,022,379 | |||||||||||||||||||||||||||||
| Investments in joint venture arrangements | - | 65,334 | - | 65,334 | - | 65,334 | |||||||||||||||||||||||||||||
| Other assets | 37,721 | 132,316 |
(b)
|
370,558 | 540,595 | 852,005 | 1,392,600 | ||||||||||||||||||||||||||||
| Total assets | $ | 1,091,643 | $ | 2,235,590 | $ | 370,558 | $ | 3,697,791 | $ | 852,005 | $ | 4,549,796 | |||||||||||||||||||||||
(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 years ended December 31, 2025, 2024 and 2023:
| Year Ended December 31, | |||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Northern Region | |||||||||||||||||
| Homes delivered | 3,716 | 3,873 | 3,169 | ||||||||||||||
| New contracts, net | 3,416 | 3,761 | 3,361 | ||||||||||||||
| Backlog at end of period | 836 | 1,136 | 1,248 | ||||||||||||||
| Average sales price of homes delivered | $ | 507 | $ | 490 | $ | 479 | |||||||||||
| Average sales price of homes in backlog | $ | 569 | $ | 561 | $ | 531 | |||||||||||
| Aggregate sales value of homes in backlog | $ | 475,950 | $ | 636,862 | $ | 663,180 | |||||||||||
| Housing revenue | $ | 1,882,641 | $ | 1,897,288 | $ | 1,519,488 | |||||||||||
| Land sale revenue | $ | 7,816 | $ | 2,725 | $ | 4,455 | |||||||||||
|
Operating income homes (a)(b)
|
$ | 275,923 | $ | 280,505 | $ | 176,074 | |||||||||||
| Operating income land | $ | 2,133 | $ | 594 | $ | 246 | |||||||||||
| Number of average active communities | 95 | 95 | 101 | ||||||||||||||
| Number of active communities, end of period | 94 | 90 | 102 | ||||||||||||||
| Southern Region | |||||||||||||||||
| Homes delivered | 5,205 | 5,182 | 4,943 | ||||||||||||||
| New contracts, net | 4,783 | 4,823 | 4,616 | ||||||||||||||
| Backlog at end of period | 973 | 1,395 | 1,754 | ||||||||||||||
| Average sales price of homes delivered | $ | 460 | $ | 478 | $ | 485 | |||||||||||
| Average sales price of homes in backlog | $ | 528 | $ | 547 | $ | 520 | |||||||||||
| Aggregate sales value of homes in backlog | $ | 513,980 | $ | 762,821 | $ | 912,463 | |||||||||||
| Housing revenue | $ | 2,392,033 | $ | 2,478,541 | $ | 2,394,884 | |||||||||||
| Land sale revenue | $ | 9,828 | $ | 9,910 | $ | 20,846 | |||||||||||
|
Operating income homes (a)(b)
|
$ | 247,906 | $ | 447,483 | $ | 437,054 | |||||||||||
| Operating income land | $ | 2,063 | $ | 3,115 | $ | 3,114 | |||||||||||
| Number of average active communities | 134 | 121 | 101 | ||||||||||||||
| Number of active communities, end of period | 138 | 130 | 111 | ||||||||||||||
| Total Homebuilding Regions | |||||||||||||||||
| Homes delivered | 8,921 | 9,055 | 8,112 | ||||||||||||||
| New contracts, net | 8,199 | 8,584 | 7,977 | ||||||||||||||
| Backlog at end of period | 1,809 | 2,531 | 3,002 | ||||||||||||||
| Average sales price of homes delivered | $ | 479 | $ | 483 | $ | 483 | |||||||||||
| Average sales price of homes in backlog | $ | 547 | $ | 553 | $ | 525 | |||||||||||
| Aggregate sales value of homes in backlog | $ | 989,930 | $ | 1,399,683 | $ | 1,575,643 | |||||||||||
| Housing revenue | $ | 4,274,674 | $ | 4,375,829 | $ | 3,914,372 | |||||||||||
| Land sale revenue | $ | 17,644 | $ | 12,635 | $ | 25,301 | |||||||||||
|
Operating income homes (a)(b)
|
$ | 523,829 | $ | 727,988 | $ | 613,128 | |||||||||||
| Operating income land | $ | 4,196 | $ | 3,709 | $ | 3,360 | |||||||||||
| Number of average active communities | 229 | 216 | 202 | ||||||||||||||
| Number of active communities, end of period | 232 | 220 | 213 | ||||||||||||||
(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.
(b)Includes $47.7 million of inventory impairment charges and write-offs of land deposits and pre-acquisition coststaken during the year ended December 31, 2025. $6.7 million and $41.0 million of these charges and write-offs were attributed to the Northern homebuilding operating segment and the Southern homebuilding operating segment, respectively. Additionally, total cost of sales and operating income in the Southern homebuilding operating segment were reduced by $11.2 million for warranty charges in two of our Florida communities primarily relating to attic ventilation issues.
| Year Ended December 31, | |||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Financial Services | |||||||||||||||||
| Number of loans originated | 7,117 | 6,731 | 5,395 | ||||||||||||||
| Value of loans originated | $ | 2,897,111 | $ | 2,685,078 | $ | 2,118,884 | |||||||||||
| Revenue | $ | 125,463 | $ | 116,206 | $ | 93,829 | |||||||||||
|
Less: Selling, general and administrative expenses
|
57,303 | 52,826 | 45,115 | ||||||||||||||
| Less: Interest expense | 12,504 | 13,698 | 10,360 | ||||||||||||||
| Income before income taxes | $ | 55,656 | $ | 49,682 | $ | 38,354 | |||||||||||
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 years ended December 31, 2025, 2024 and 2023:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Northern | 10.0 | % | 9.8 | % | 10.5 | % | |||||||||||
| Southern | 12.1 | % | 10.6 | % | 12.1 | % | |||||||||||
| Total cancellation rate | 11.2 | % | 10.3 | % | 11.4 | % | |||||||||||
Year Over Year Comparisons
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
Northern Region. During the twelve months ended December 31, 2025, homebuilding revenue in our Northern region decreased $9.6 million, from $1.90 billion in 2024 to $1.89 billion in 2025. This 1% decrease in homebuilding revenue was the result of a 4% decrease in the number of homes delivered (157 units), offset in part by a 3% increase in the average sales price of homes delivered ($17,000 per home delivered) and a $5.1 million increase in land sales. Operating income in our Northern region decreased $3.0 million, from $281.1 million in 2024 to $278.1 million in 2025. The decrease in operating income was primarily the result of a $4.6 million decrease in our homebuilding gross margin offset in part by a $1.6 million decrease in selling, general, and administrative expense. Our homebuilding gross margin percentage declined 10 basis points from 22.1% in 2024 to 22.0% in 2025. The decline in our homebuilding gross margin was primarily due to fewer home closings offset in part by a 3% increase in the average sales price of homes delivered and a more favorable mix of homes closed. The average sales price in 2025 declined by $6,500 per home when compared to 2024 due to increased in homebuyer incentive costs including mortgage interest rate buydowns when compared to 2024.
Selling, general and administrative expense decreased $1.6 million from $138.6 million in 2024 to $137.0 million in 2025 and decreased as a percentage of revenue to 7.2% in 2025 from 7.3% in 2024. The decrease in selling, general and administrative expense was attributable to a $1.8 million decrease in general and administrative expense that resulted from a $2.3 million decrease in land related expense and a $0.9 million decrease in professional fees offset in part by a $1.3 million increase in compensation-related expenses and $0.1 million increase in miscellaneous expense. The decrease in general and administrative expense was partially offset by a $0.2 million increase in selling expense, due to a $1.4 million increase primarily related to costs associated with compensation-related expenses and models partially offset by a $1.2 million decrease in sales and realtor commissions.
During 2025, we experienced a 9% decrease in new contracts in our Northern region, from 3,761 in 2024 to 3,416 in 2025. Backlog decreased 26% from 1,136 homes at December 31, 2024 to 836 homes at December 31, 2025 as a result of more
inventory homes sold in 2025 and a decrease in new contracts. The decrease in new contracts was primarily due to a decline in homebuyer demand and increased popularity of inventory homes when compared to 2024. Inventory homes that were sold and delivered in the fourth quarter represented 34% and 24% of the total homes delivered in the fourth quarter of 2025 and 2024, respectively. Average sales price in backlog increased to $569,000 at December 31, 2025 compared to $561,000 at December 31, 2024 primarily due to the mix of homes being sold offset in part by increased homebuyer incentives ($6,600 per home) compared to 2024. During the twelve months ended December 31, 2025, we opened 37 new communities in our Northern region compared to 21 during 2024. Our monthly absorption rate in our Northern region declined to 3.0 per community in 2025 compared to 3.3 per community in 2024 as a result of the decrease in the number of new contracts and the increase in the number of average active communities during 2025 compared to 2024.
Southern Region. For the twelve months ended December 31, 2025, homebuilding revenue in our Southern region decreased $86.6 million, from $2.49 billion in 2024 to $2.40 billion in 2025. This 3% decrease in homebuilding revenue was primarily the result of a 4% decrease in the average sales price of homes delivered ($18,000 per home delivered) partially offset by a slight increase in the number of homes delivered (23 units). Operating income in our Southern region decreased $200.6 million from $450.6 million in 2024 to $250.0 million in 2025. This decrease in operating income was the result of a $186.3 million decline in our homebuilding gross margin and a $14.3 million increase in selling, general, and administrative expense. Our homebuilding gross margin percentage declined 680 basis points from 26.6% in 2024 to 19.8% in 2025. The decline in our homebuilding gross margin was primarily due to the decrease in the average sales price of homes delivered, a $49.6 million increase in lot costs and the unfavorable impacts of $30.9 million in inventory impairment charges, $10.0 million in write-offs of land deposits and pre-acquisition costsand $11.2 million in warranty claims in two of our Florida communities primarily relating to attic ventilation issues taken in 2025. Increased homebuyer incentive costs, including mortgage interest rate buydowns, decreased the average sales price of homes delivered by $8,800 per home when compared to 2024.
Selling, general and administrative expense increased $14.3 million from $212.4 million in 2024 to $226.7 million in 2025 and increased as a percentage of revenue to 9.4% in 2025 from 8.5% in 2024. The increase in selling, general and administrative expense was attributable to a $13.3 million increase in selling expense and a $1.1 million increase in general and administrative expense. Selling expense increased $13.3 million due to an $8.9 million increase in realtor commissions and a $4.3 million increase in costs related to our sales offices and models due to our increased community count. General and administrative expense increased $1.1 million due to a $2.4 million increase in land-related expenses and a $0.7 million increase in miscellaneous expenses offset in part by $2.0 million decrease in compensation related expenses due to incentive compensation due to our financial performance during the period.
During 2025, we experienced a 1% decrease in new contracts in our Southern region, from 4,823 in 2024 to 4,783 in 2025, which was primarily due to a decrease in demand compared to prior year. Backlog decreased 30% from 1,395 homes at December 31, 2024 to 973 homes at December 31, 2025. The decrease in backlog was primarily due to a decline in homebuyer demand and increased popularity of inventory homes when compared to 2024. Inventory homes that were sold and delivered in the fourth quarter represented 44% and 32% of the total homes delivered in the fourth quarter of 2025 and 2024, respectively. Average sales price in backlog decreased to $528,000 at December 31, 2025 from $547,000 at December 31, 2024 primarily due to increased homebuyer incentives ($9,500 per home) compared to 2024 and the mix of homes in backlog. During 2025, we opened 44 communities in our Southern region compared to 51 in 2024. The decrease in the number of new communities opened primarily related to delays in 2023 that were pushed to 2024. Our monthly absorption rate in our Southern region declined to 3.0 per community in 2025 from 3.3 per community in 2024 due to the increase in average community count.
Financial Services. Revenue from our mortgage and title operations increased $9.3 million, or 8%, from $116.2 million for the twelve months ended December 31, 2024 to $125.5 million for the twelve months ended December 31, 2025 as a result of an increase in the number of loan originations from 6,731 in 2024 to 7,117 in 2025 and an increase in the average loan amount from $399,000 in 2024 to $407,000 in 2025. The increase in our loan originations primarily resulted from mortgage rate buy down incentives that we offered to our homebuyers via our financial services operation.
The operating income of our financial service operations increased $4.8 million in 2025 compared to 2024, which was primarily due to the increasein revenue discussed above, partially offset by a $4.5 million increase in selling, general and administrative expense compared to 2024. The increase in selling, general and administrative expense was primarily attributable to a $2.5 million increase in compensation related expense, a $0.8 million increase in computer-related costs, and a $1.2 million increase in miscellaneous expenses.
At December 31, 2025, M/I Financial provided financing services in all of our markets. Approximately 93% of our homes delivered during 2025 were financed through M/I Financial, compared to 89% during 2024. Capture rate is influenced by financing availability and can fluctuate from quarter to quarter.
Corporate Selling, General and Administrative Expenses.Corporate selling, general and administrative expense increased $0.6 million, from $89.0 million in 2024 to $89.6 million in 2025. The increase was primarily due to a $0.5 million increase related to costs associated with information systems and a $0.8 million increase in miscellaneous expenses offset in part by a $0.7 million decrease in compensation expense due to our financial performance during the period.
Interest (Income) Expense - net.The Company earned $20.0 million of interest income - net in the twelve months ended December 31, 2025 compared to earning $27.5 million of interest income - net in the twelve months ended December 31, 2024. The reduction in interest income in 2025 was primarily due to a lower average cash balance on hand compared to prior year.
Income Taxes.Our overall effective tax rate was 23.5% for the year ended December 31, 2025 and 23.2% for the year ended December 31, 2024 (see Note 14to our Consolidated Financial Statements for more information).
Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
For a comparison of our results of operations for the fiscal years ended December 31, 2024 and December 31, 2023, see "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 14, 2025.
LIQUIDITY AND CAPITAL RESOURCES
Overview of Capital Resources and Liquidity
At December 31, 2025, we had $689.2 million of cash, cash equivalents and restricted cash (all of which was comprised of unrestricted cash and cash equivalents), which represents a $132.3 million decrease in unrestricted cash and cash equivalents from December 31, 2024. The decrease in cash is primarily due to decreased net income and home deliveries in 2025 and the timing of land spend compared to prior year. Our principal uses of cash during 2025 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 $202.0 million of our outstanding common shares under the 2024 and both 2025 Share Repurchase Programs compared to $177.0 million repurchased under the 2024 and 2021 Share Repurchase Programs in 2024. 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 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 October 21, 2025 (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 December 31, 2025, 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 $977 million, with $277 million payable within 12 months. Future interest payments associated with these notes payable totaled $103 million as of December 31, 2025, with $32 million payable within 12 months.
As of December 31, 2025, there were no borrowings outstanding and $93.2 million of letters of credit outstanding under our Credit Facility, leaving $806.8 million available. We expect to continue managing our balance sheet and liquidity carefully in 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 year ended December 31, 2025, we delivered 8,921 homes, started 8,697 homes, ended the year with approximately 4,500 homes under construction compared to approximately 4,700 at the end of last year, and spent $523.7 million on land purchases and $645.6 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 December 31, 2025, we had a total of 24,329 lots under contract, with an aggregate purchase price of approximately $1.6 billion, to be acquired from 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. See Note 6to our Consolidated Financial Statements for more information regarding these arrangements.
Operating Cash Flow Activities. During 2025, we generated $137.3 million of cash from operating activities, compared to generating $179.7 million of cash from operating activities in 2024. The cash generated by operating activities in 2025 was primarily a result of net income of $402.9 million and a $36.7 million increase in other liabilities, offset partially by a $313.5 million increase in inventory, loan originations that exceeded proceeds from the sale of mortgage loans by $20.7 million, a $16.0 million decrease in other assets and a $35.9 million increase in accounts payable and customer deposits. The cash generated by operating activities in 2024 was primarily a result of net income of $563.7 million and a $23.1 million increase in other liabilities, offset partially by a $297.7 million increase in inventory, loan originations that exceeded proceeds from the sale of mortgage loans by $114.0 million, a $23.8 million increase in other assets and a $21.9 million decrease in accounts payable and customer deposits. Net cash provided by operating activities decreased by $42.4 million compared to 2024 primarily as a result of the $160.8 million decline in net income and the $11.7 million reduction in the fair value adjustment of mortgage loans held for sale partially offset by the $93.3 million reduction in the amount by which the sale of mortgage loans exceeded mortgage loan originations, inventory charges and write-offs of land deposits and pre-acquisition costsof $47.7 million, and a $7.1 million increase in deferred income tax expense.
Investing Cash Flow Activities. During 2025, we used $59.7 million of cash in investing activities, compared to using $54.9 million of cash in investing activities during 2024. This $4.8 million increase in cash usage was primarily due to a $5.1 million increase in cash contributions to our joint venture arrangements compared to prior year.
Financing Cash Flow Activities. During 2025, we used $210.0 million of cash in financing activities, compared to using $36.1 million of cash in financing activities during 2024. The increase in cash used in financing activities in 2025 was primarily due to the repurchase of $202.0 million of our outstanding common shares during 2025, repayments of $9.3 million (net of proceeds from borrowings) under the MIF credit facilities and $7.0 million of debt issue costs offset, in part, by $8.4 million in proceeds from the exercise of stock options during 2025. The cash used in financing activities in 2024 was primarily due to the repurchase of $177.0 million of our outstanding common shares during 2024, offset, in part, by proceeds of $120.3 million (net of repayments of borrowings) under the MIF Mortgage Repurchase Facility and $21.3 million in proceeds from the exercise of stock options during 2024.
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 2025 Share Repurchase Program. During 2025, the Company repurchased 1.6 million outstanding common shares for an aggregate purchase price of $202.0 million under the two 2025 Share Repurchase Programs and the 2024 Share Repurchase Program which was funded with cash on hand. As of December 31, 2025, the Company was authorized to repurchase an additional $220.4 million of outstanding common shares under the Second 2025 Share Repurchase Program (see Note 16to our Consolidated Financial Statements).
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 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 December 31, 2025 and December 31, 2024, our ratio of homebuilding debt to capital was 18% and 19%, 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 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 December 31, 2025:
| (In thousands) |
Expiration Date |
Outstanding Balance |
Available Amount |
||||||||
|
Notes payable - homebuilding (a)
|
(a) | $ | - | $ | 806,815 | ||||||
|
Notes payable - financial services (b)
|
(b) | $ | 276,856 | $ | 1,264 | ||||||
(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 $2.4 billion of availability for additional senior debt at December 31, 2025. 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 $93.2 million of letters of credit outstanding at December 31, 2025, leaving $806.8 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 December 31, 2025, which is $200 million. The MIF Mortgage Repurchase Facility has an expiration date of October 20, 2026. In addition, M/I Financial entered into a new MIF Master Repurchase Facility which provides for 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 $2.2 billion at December 31, 2025 (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 December 31, 2025, 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 December 31, 2025:
| Financial Covenant | Covenant Requirement | Actual | ||||||||||||
| (Dollars in millions) | ||||||||||||||
| Consolidated Tangible Net Worth | ≥ | $ | 2,172.7 | $ | 3,061.4 | |||||||||
| Leverage Ratio | ≤ | 0.60 | 0.02 | |||||||||||
| Interest Coverage Ratio | ≥ | 1.5 to 1.0 | 18.64 to 1.0 | |||||||||||
| Investments in Unrestricted Subsidiaries and Joint Ventures | ≤ | $ | 918.4 | $ | 6.8 | |||||||||
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. On October 21, 2025, M/I Financial entered into an amendment to the MIF Mortgage Repurchase Facility that extends the term of the MIF Mortgage Repurchase Facility for an additional year to October 20, 2026 and decreases the aggregate commitment amount from $300 million to $200 million for the entire remaining term.
The MIF Mortgage Repurchase Facility is used to finance eligible residential mortgage loans originated by M/I Financial. 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 December 31, 2025, there was $198.2 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 December 31, 2025:
| Financial Covenant | Covenant Requirement | Actual | ||||||||||||
| (Dollars in millions) | ||||||||||||||
| Leverage Ratio | ≤ | 12.0 to 1.0 | 8.05 to 1.0 | |||||||||||
| Liquidity | ≥ | $ | 10.0 | $ | 38.2 | |||||||||
| Adjusted Net Income | > | $ | 0.0 | $ | 42.2 | |||||||||
| Tangible Net Worth | ≥ | $ | 25.0 | $ | 40.2 | |||||||||
MIF Master Repurchase Facility.The MIF Master Repurchase Facility which 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. 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.
As of December 31, 2025, there was $78.7 million outstanding under the MIF Master Repurchase Facility and M/I Financial was in compliance with all covenants thereunder.
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 December 31, 2025, 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 December 31,
2025, the Company was in compliance with all terms, conditions, and covenants under the indenture.
See Note 11to our Consolidated Financial Statements for more information regarding the 2030 Senior Notes and the 2028 Senior Notes.
Supplemental Financial Information.
As of December 31, 2025, 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 and are listed on Exhibit 22 to this Form 10-K.
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) | December 31, 2025 | ||||
| Assets: | |||||
| Cash | $ | 648,844 | |||
| Investment in joint venture arrangements | $ | 99,891 | |||
| Amounts due from Non-Guarantor Subsidiaries | $ | 37,529 | |||
| Total assets | $ | 4,388,098 | |||
| Liabilities and Shareholders' Equity: | |||||
| Total liabilities | $ | 1,267,890 | |||
| Shareholders' equity | $ | 3,120,208 | |||
Summarized Statement of Income Data
| Year Ended | |||||
| (In thousands) | December 31, 2025 | ||||
| Revenues | $ | 4,292,318 | |||
| Land and housing costs | $ | 3,352,913 | |||
| Selling, general and administrative expense | $ | 451,586 | |||
| Income before income taxes | $ | 472,689 | |||
| Net income | $ | 368,964 | |||
Weighted Average Borrowings. In 2025 and 2024, our weighted average borrowings outstanding were $725.3 million and $723.4 million, respectively, with a weighted average interest rate of 5.37% and 5.32%, respectively. The increase in our weighted average borrowings related to increased borrowings under our then-outstanding M/I Financial credit facilities during 2025 compared to 2024.
At both December 31, 2025 and December 31, 2024, we had no borrowings outstanding under the Credit Facility. To the extent we elect to borrow under the Credit Facility during 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 $93.2 million of letters of credit issued and outstanding under the Credit Facility at December 31, 2025. During 2025, the average daily amount of letters of credit outstanding under the Credit Facility was $82.8 million and the maximum amount of letters of credit outstanding under the Credit Facility was $94.5 million.
At December 31, 2025, M/I Financial had $198.2 million outstanding under the MIF Mortgage Repurchase Facility. During 2025, the average daily amount outstanding under our MIF Mortgage Repurchase Facility was $18.9 million and the maximum amount outstanding was $286.2 million, which occurred during January. At December 31, 2025, M/I Financial also had $78.7 million outstanding under the MIF Master Repurchase Facility. During 2025, the average daily amount outstanding under our then-outstanding MIF credit facilities was $20.0 million and the maximum amount outstanding was $78.7 million, which occurred during December.
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 2.7% in December 2025, as measured by the Consumer Price Index, down slightly from the prior quarter and from 2.9% in December 2024. 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.
Mortgage interest rates remained elevated since the end of 2023, although slightly lower rates began to appear in the second half of 2025. During 2025, the Federal Reserve reduced interest rates by 75 basis points. High mortgage interest rates have made it more difficult for homebuyers to qualify for mortgages or to obtain mortgages at interest rates that are acceptable to them. We plan to help combat high interest costs 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. However, offering sales incentives, such as mortgage interest rate buydowns, may further reduce our margins.
M/I Homes Inc. published this content on February 13, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 13, 2026 at 18:47 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]