Business Segments

The Company’s chief operating decision makers evaluate the Company’s performance in various ways, including: (1) the results of our 15 individual homebuilding operating segments and the results of our financial services operations; (2) the results of our three homebuilding reportable segments; and (3) our consolidated financial results.

In accordance with ASC 280, Segment Reporting (“ASC 280”), we have identified each homebuilding division as an operating segment as each homebuilding division engages in business activities from which it earns revenue, primarily from the sale and construction of single-family attached and detached homes, acquisition and development of land, and the occasional sale of lots to third parties. Our financial services operations generate revenue primarily from the origination, sale and servicing of mortgage loans and title services primarily for purchasers of the Company’s homes and are included in our financial services reportable segment. In accordance with the aggregation criteria defined in ASC 280, we have determined our reportable segments are as follows: Midwest homebuilding; Southern homebuilding; Mid-Atlantic homebuilding; and financial services operations. The homebuilding operating segments that are included within each reportable segment have been aggregated because they share similar aggregation characteristics as prescribed in ASC 280 in the following regards: (1) long-term economic characteristics; (2) historical and expected future long-term gross margin percentages; (3) housing products, production processes and methods of distribution; and (4) geographical proximity.

The homebuilding operating segments that comprise each of our reportable segments are as follows:



Midwest	Southern	Mid-Atlantic
Chicago, Illinois	Orlando, Florida	Charlotte, North Carolina
Cincinnati, Ohio	Sarasota, Florida	Raleigh, North Carolina
Columbus, Ohio	Tampa, Florida	Washington, D.C.
Indianapolis, Indiana	Austin, Texas
Minneapolis/St. Paul, Minnesota	Dallas/Fort Worth, Texas
	Houston, Texas
	San Antonio, Texas

The following table shows, by segment: revenue, operating income and interest expense for the three and six months ended June 30, 2017 and 2016:



	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2017			2016			2017			2016
Revenue:
Midwest homebuilding	$	168,469		$	152,918		$	314,891		$	271,088
Southern homebuilding	178,780			148,965			328,145			271,659
Mid-Atlantic homebuilding	97,749			89,415			194,635			162,868
Financial services ^(a)	11,868			9,949			26,175			20,002
Total revenue	$	456,866		$	401,247		$	863,846		$	725,617

Operating income:
Midwest homebuilding	$	17,984		$	17,987		$	32,843		$	28,315
Southern homebuilding ^(b)	4,709			7,199			13,421			13,629
Mid-Atlantic homebuilding	9,588			7,584			16,841			11,468
Financial services^(a)	6,860			5,362			16,090			11,637
Less: Corporate selling, general and administrative expense	(10,232		)	(8,956		)	(18,630		)	(16,200		)
Total operating income ^(b)	$	28,909		$	29,176		$	60,565		$	48,849

Interest expense:
Midwest homebuilding	$	863		$	613		$	2,240		$	1,892
Southern homebuilding	1,791			2,136			4,168			4,330
Mid-Atlantic homebuilding	515			1,049			1,431			2,457
Financial services ^(a)	665			510			1,333			894
Total interest expense	$	3,834		$	4,308		$	9,172		$	9,573

Equity in income of joint venture arrangements	(110		)	(82		)	(127		)	(389		)

Income before income taxes	$	25,185		$	24,950		$	51,520		$	39,665


(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)

Includes an $8.5 million and a $2.8 million charge for stucco-related repair costs in certain of our Florida communities taken during the three months ended June 30, 2017 and 2016, respectively, and an $8.5 million and a $4.9 million charge for stucco-related repair costs in certain of our Florida communities taken during the six months ended June 30, 2017 and 2016, respectively (as more fully discussed in Note 6).

The following tables show total assets by segment at June 30, 2017 and December 31, 2016:



	June 30, 2017
(In thousands)	Midwest		Southern			Mid-Atlantic		Corporate, Financial Services and Unallocated		Total
Deposits on real estate under option or contract	$	6,035	$	19,272		$	4,580	$	—	$	29,887
Inventory ^(a)	464,186		582,405			303,066		—		1,349,657
Investments in joint venture arrangements	4,649		10,333			7,895		—		22,877
Other assets	13,301		35,136		^(b)	8,546		171,982		228,965
Total assets	$	488,171	$	647,146		$	324,087	$	171,982	$	1,631,386



	December 31, 2016
(In thousands)	Midwest		Southern			Mid-Atlantic		Corporate, Financial Services and Unallocated		Total
Deposits on real estate under option or contract	$	3,989	$	22,607		$	3,260	$	—	$	29,856
Inventory ^(a)	399,814		484,038			302,226		—		1,186,078
Investments in joint venture arrangements	10,155		10,630			7,231		—		28,016
Other assets	25,747		35,622		^(b)	13,912		229,280		304,561
Total assets	$	439,705	$	552,897		$	326,629	$	229,280	$	1,548,511


(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.