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 nine months ended September 30, 2017 and 2016:



	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2017			2016			2017			2016
Revenue:
Midwest homebuilding	$	180,488		$	166,928		$	495,379		$	438,016
Southern homebuilding	176,502			143,315			504,647			414,974
Mid-Atlantic homebuilding	107,670			121,659			302,305			284,527
Financial services ^(a)	11,763			10,562			37,938			30,564
Total revenue	$	476,423		$	442,464		$	1,340,269		$	1,168,081

Operating income:
Midwest homebuilding	$	20,887		$	20,628		$	53,730		$	48,943
Southern homebuilding ^(b)	13,082			(5,249		)	26,503			8,380
Mid-Atlantic homebuilding	9,969			11,359			26,810			22,827
Financial services^(a)	5,887			5,944			21,977			17,581
Less: Corporate selling, general and administrative expense	(10,548		)	(10,676		)	(29,178		)	(26,876		)
Total operating income ^(b)	$	39,277		$	22,006		$	99,842		$	70,855

Interest expense:
Midwest homebuilding	$	1,319		$	647		$	3,559		$	2,539
Southern homebuilding	2,143			1,788			6,311			6,118
Mid-Atlantic homebuilding	557			601			1,988			3,058
Financial services ^(a)	656			551			1,989			1,445
Total interest expense	$	4,675		$	3,587		$	13,847		$	13,160

Equity in income of joint venture arrangements	(71		)	(24		)	(198		)	(413		)

Income before income taxes	$	34,673		$	18,443		$	86,193		$	58,108


(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 a $14.5 million charge for stucco-related repair costs in certain of our Florida communities taken during the three months ended September 30, 2016, and an $8.5 million and a $19.4 million charge for stucco-related repair costs in certain of our Florida communities taken during the nine months ended September 30, 2017 and 2016, respectively (as more fully discussed in Note 6).

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



	September 30, 2017
(In thousands)	Midwest		Southern			Mid-Atlantic		Corporate, Financial Services and Unallocated		Total
Deposits on real estate under option or contract	$	5,078	$	20,094		$	6,202	$	—	$	31,374
Inventory ^(a)	514,949		623,815			285,671		—		1,424,435
Investments in joint venture arrangements	3,798		10,493			8,690		—		22,981
Other assets	13,106		24,624		^(b)	11,600		256,575		305,905
Total assets	$	536,931	$	679,026		$	312,163	$	256,575	$	1,784,695



	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.