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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2021
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _____________________
Commission File Number 1-12434

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

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

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

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

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

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



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common shares, par value $.01 per share: 29,318,130 shares outstanding as of July 26, 2021.



M/I HOMES, INC.
FORM 10-Q
TABLE OF CONTENTS
PART 1.FINANCIAL INFORMATION
Item 1.M/I Homes, Inc. and Subsidiaries Unaudited Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Balance Sheets at June 30, 2021 and December 31, 2020
Unaudited Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2021 and 2020
Unaudited Condensed Consolidated Statement of Shareholders’ Equity for the Three and Six Months Ended June 30, 2021 and 2020
Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020
Notes to Unaudited Condensed Consolidated Financial Statements
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
PART II.OTHER INFORMATION
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits
Signatures


2




M/I HOMES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except par values)June 30,
2021
December 31,
2020
(unaudited)
ASSETS:
Cash, cash equivalents and restricted cash$371,806 $260,810 
Mortgage loans held for sale172,760 234,293 
Inventory2,076,469 1,916,608 
Property and equipment - net23,997 26,612 
Investment in joint venture arrangements32,833 34,673 
Operating lease right-of-use assets
52,085 52,291 
Deferred income tax asset
6,183 6,183 
Goodwill16,400 16,400 
Other assets108,879 95,175 
TOTAL ASSETS$2,861,412 $2,643,045 
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Accounts payable$221,909 $185,669 
Customer deposits109,739 72,635 
Operating lease liabilities52,450 52,474 
Other liabilities167,420 183,583 
Community development district obligations16,807 8,196 
Obligation for consolidated inventory not owned12,481 9,914 
Notes payable bank - financial services operations167,119 225,634 
Notes payable - other4,126 4,072 
Senior notes due 2025 - net247,873 247,613 
Senior notes due 2028 - net394,944 394,557 
TOTAL LIABILITIES$1,394,868 $1,384,347 
Commitments and contingencies (Note 6)
  
SHAREHOLDERS’ EQUITY:
Common shares - $0.01 par value; authorized 58,000,000 shares at both June 30, 2021 and December 31, 2020;
   issued 30,137,141 shares at both June 30, 2021 and December 31, 2020
301 301 
Additional paid-in capital343,301 339,001 
Retained earnings1,140,926 948,453 
Treasury shares - at cost - 819,011 and 1,323,292 shares at June 30, 2021 and December 31, 2020, respectively
(17,984)(29,057)
TOTAL SHAREHOLDERS’ EQUITY$1,466,544 $1,258,698 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$2,861,412 $2,643,045 

See Notes to Unaudited Condensed Consolidated Financial Statements.
3


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

Three Months Ended June 30,Six Months Ended June 30,
(In thousands, except per share amounts)2021202020212020
Revenue$961,040 $714,194 $1,789,816 $1,291,797 
Costs and expenses:
Land and housing719,672 557,791 1,346,257 1,018,715 
General and administrative49,078 41,037 94,283 74,884 
Selling50,576 41,127 96,265 77,955 
Equity in income from joint venture arrangements(35)(3)(195)(55)
Interest452 2,515 1,628 7,215 
Total costs and expenses$819,743 $642,467 $1,538,238 $1,178,714 
Income before income taxes141,297 71,727 251,578 113,083 
Provision for income taxes33,690 17,219 59,105 26,829 
Net income$107,607 $54,508 $192,473 $86,254 
Earnings per common share:
Basic$3.68 $1.91 $6.60 $3.03 
Diluted$3.58 $1.89 $6.43 $2.98 
Weighted average shares outstanding:
Basic29,271 28,531 29,144 28,504 
Diluted30,093 28,836 29,935 28,920 

See Notes to Unaudited Condensed Consolidated Financial Statements.
4


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

Three Months Ended June 30, 2021
Common Shares
Shares OutstandingAdditional Paid-in CapitalRetained EarningsTreasury SharesTotal Shareholders’ Equity
(Dollars in thousands)Amount
Balance at March 31, 2021
29,185,630 $301 $340,696 $1,033,319 $(20,894)$1,353,422 
Net income   107,607  107,607 
Stock options exercised132,500  464  2,910 3,374 
Stock-based compensation expense  2,141   2,141 
Balance at June 30, 2021
29,318,130 $301 $343,301 $1,140,926 $(17,984)$1,466,544 

Six Months Ended June 30, 2021
Common Shares
Shares OutstandingAdditional Paid-in CapitalRetained EarningsTreasury SharesTotal Shareholders’ Equity
(Dollars in thousands)Amount
Balance at December 31, 2020
28,813,849 $301 $339,001 $948,453 $(29,057)$1,258,698 
Net income   192,473  192,473 
Stock options exercised428,100  1,230  9,400 10,630 
Stock-based compensation expense  4,405   4,405 
Deferral of executive and director compensation  338   338 
Executive and director deferred compensation distributions76,181  (1,673) 1,673  
Balance at June 30, 2021
29,318,130 $301 $343,301 $1,140,926 $(17,984)$1,466,544 


Three Months Ended June 30, 2020
Common Shares
Shares OutstandingAdditional Paid-in CapitalRetained EarningsTreasury SharesTotal Shareholders’ Equity
(Dollars in thousands)Amount
Balance at March 31, 2020
28,523,329 $301 $332,490 $740,325 $(35,435)$1,037,681 
Net income— — — 54,508 — 54,508 
Stock options exercised20,300 — 18 — 445 463 
Stock-based compensation expense— — 1,753 — — 1,753 
Balance at June 30, 2020
28,543,629 $301 $334,261 $794,833 $(34,990)$1,094,405 

Six Months Ended June 30, 2020
Common Shares
Shares OutstandingAdditional Paid-in CapitalRetained EarningsTreasury SharesTotal Shareholders’ Equity
(Dollars in thousands)Amount
Balance at December 31, 2019
28,386,456 $301 $332,861 $708,579 $(38,264)$1,003,477 
Net income— — — 86,254 — 86,254 
Stock options exercised152,600 — 308 — 3,337 3,645 
Stock-based compensation expense— — 2,726 — — 2,726 
Repurchase of common shares(80,000)— — — (1,912)(1,912)
Deferral of executive and director compensation— — 215 — — 215 
Executive and director deferred compensation distributions84,573 — (1,849)— 1,849  
Balance at June 30, 2020
28,543,629 $301 $334,261 $794,833 $(34,990)$1,094,405 

See Notes to Unaudited Condensed Consolidated Financial Statements.
5


M/I HOMES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
(Dollars in thousands)20212020
OPERATING ACTIVITIES:
Net income$192,473 $86,254 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Equity in income from joint venture arrangements(195)(55)
Mortgage loan originations(1,088,033)(773,970)
Proceeds from the sale of mortgage loans1,149,308 766,105 
Fair value adjustment of mortgage loans held for sale258 (427)
Fair value adjustment of mortgage servicing rights(162)422 
Capitalization of originated mortgage servicing rights(9,784)(2,233)
Amortization of mortgage servicing rights583 1,159 
Depreciation6,357 6,037 
Amortization of debt issue costs1,294 1,228 
Loss on sale of mortgage servicing rights177  
Loss on early extinguishment of debt 950 
Stock-based compensation expense4,405 2,726 
Deferred income tax expense 253 
Change in assets and liabilities:
Inventory(133,286)(51,603)
Other assets(3,277)(20,753)
Accounts payable36,241 44,062 
Customer deposits37,104 15,067 
Accrued compensation(11,882)(16,699)
Other liabilities(7,780)24,303 
Net cash provided by operating activities173,801 82,826 
INVESTING ACTIVITIES:
Purchase of property and equipment(1,036)(1,976)
Return of capital from joint venture arrangements1,050 363 
Investment in joint venture arrangements(17,101)(19,089)
Proceeds from sale of mortgage servicing rights4,324  
Net cash used in investing activities(12,763)(20,702)
FINANCING ACTIVITIES:
Repayment of senior notes due 2021 (300,000)
Net proceeds from issuance of senior notes due 2028 400,000 
Proceeds from bank borrowings - homebuilding operations 306,800 
Repayment of bank borrowings - homebuilding operations (372,800)
Net repayments of bank borrowings - financial services operations(58,515)(2,720)
Principal repayments of notes payable - other and community development district bond obligations54 1,213 
Repurchase of common shares (1,912)
Debt issue costs(2,211)(8,410)
Proceeds from exercise of stock options10,630 3,645 
Net cash (used in) provided by financing activities(50,042)25,816 
Net increase in cash, cash equivalents and restricted cash110,996 87,940 
Cash, cash equivalents and restricted cash balance at beginning of period260,810 6,083 
Cash, cash equivalents and restricted cash balance at end of period$371,806 $94,023 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest — net of amount capitalized$420 $6,114 
Income taxes$60,523 $1,862 
NON-CASH TRANSACTIONS DURING THE PERIOD:
Community development district infrastructure$8,611 $(1,971)
Consolidated inventory not owned$2,567 $3,101 
Distribution of single-family lots from joint venture arrangements$18,086 $11,522 

See Notes to Unaudited Condensed Consolidated Financial Statements.
6


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

NOTE 1. Basis of Presentation

The accompanying Unaudited Condensed Consolidated Financial Statements (the “financial statements”) of M/I Homes, Inc. and its subsidiaries (the “Company”) and notes thereto have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. The financial statements include the accounts of the Company. All intercompany transactions have been eliminated. Results for the interim period are not necessarily indicative of results for a full year. In the opinion of management, the accompanying financial statements reflect all adjustments (all of which are normal and recurring in nature) necessary for a fair presentation of financial results for the interim periods presented. These financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”).

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during that period. Actual results could differ from these estimates and have a significant impact on the financial condition and results of operations and cash flows. With regard to the Company, estimates and assumptions are inherent in calculations relating to valuation of inventory and investment in unconsolidated joint ventures, property and equipment depreciation, valuation of derivative financial instruments, accounts payable on inventory, accruals for costs to complete inventory, accruals for warranty claims, accruals for self-insured general liability claims, litigation, accruals for health care and workers’ compensation, accruals for guaranteed or indemnified loans, stock-based compensation expense, income taxes, and contingencies. Items that could have a significant impact on these estimates and assumptions include the risks and uncertainties listed in “Item 1A. Risk Factors” in Part I of our 2020 Form 10-K, as the same may be updated from time to time in our subsequent filings with the SEC.

Recently Adopted Accounting Standards

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for the Company beginning January 1, 2021. The adoption of this ASU did not have a material impact on our Consolidated Financial Statements and disclosures.

Significant Accounting Policies

There have been no significant changes to our significant accounting policies during the quarter ended June 30, 2021 as compared to those disclosed in our 2020 Form 10-K.
NOTE 2. Inventory and Capitalized Interest
Inventory
Inventory is recorded at cost, unless events and circumstances indicate that the carrying value of the inventory is impaired, at which point the inventory is written down to fair value (see Note 4 to our financial statements for additional details relating to our procedures for evaluating our inventories for impairment). Inventory includes the costs of land acquisition, land development and home construction, capitalized interest, real estate taxes, direct overhead costs incurred during development and home construction, and common costs that benefit the entire community, less impairments, if any.
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A summary of the Company’s inventory as of June 30, 2021 and December 31, 2020 is as follows:
(In thousands)June 30, 2021December 31, 2020
Single-family lots, land and land development costs$833,665 $868,288 
Land held for sale3,840 4,623 
Homes under construction1,095,585 898,966 
Model homes and furnishings - at cost (less accumulated depreciation: June 30, 2021 - $13,376;
   December 31, 2020 - $12,909)
70,054 81,264 
Community development district infrastructure16,807 8,196 
Land purchase deposits44,037 45,357 
Consolidated inventory not owned12,481 9,914 
Total inventory$2,076,469 $1,916,608 

Single-family lots, land and land development costs include raw land that the Company has purchased to develop into lots, costs incurred to develop the raw land into lots, and lots for which development has been completed, but which have not yet been used to start construction of a home.
Homes under construction include homes that are in various stages of construction. As of June 30, 2021 and December 31, 2020, we had 869 homes (with a carrying value of $115.4 million) and 1,131 homes (with a carrying value of $186.9 million), respectively, included in homes under construction that were not subject to a sales contract.
Model homes and furnishings include homes that are under construction or have been completed and are being used as sales models. The amount also includes the net book value of furnishings included in our model homes. Depreciation on model home furnishings is recorded using an accelerated method over the estimated useful life of the assets, which is typically three years.
We own lots in certain communities in Florida that have Community Development Districts (“CDDs”). The Company records a liability for the estimated developer obligations that are probable and estimable and user fees that are required to be paid or transferred at the time the parcel or unit is sold to an end user.  The Company reduces this liability at the time of closing and the transfer of the property.  The Company recorded a $16.8 million liability and a $8.2 million liability related to these CDD bond obligations as of June 30, 2021 and December 31, 2020, respectively, along with the related inventory infrastructure.

Land purchase deposits include both refundable and non-refundable amounts paid to third party sellers relating to the purchase of land. On an ongoing basis, the Company evaluates the land option agreements relating to the land purchase deposits. The Company expenses any deposits and accumulated pre-acquisition costs relating to such agreements in the period when the Company makes the decision not to proceed with the purchase of land under an agreement.
Capitalized Interest
The Company capitalizes interest during land development and home construction.  Capitalized interest is charged to land and housing costs and expensed as the related inventory is delivered to a third party.  The summary of capitalized interest for the three and six months ended June 30, 2021 and 2020 is as follows:
Three Months Ended June 30,Six Months Ended June 30,
(In thousands)2021202020212020
Capitalized interest, beginning of period$22,119 $22,199 $21,329 $21,607 
Interest capitalized to inventory9,623 7,758 18,618 14,920 
Capitalized interest charged to land and housing costs and expenses(9,438)(7,754)(17,643)(14,324)
Capitalized interest, end of period$22,304 $22,203 $22,304 $22,203 
Interest incurred$10,075 $10,273 $20,246 $22,135 
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NOTE 3. Investment in Joint Venture Arrangements
Investment in Joint Venture Arrangements
In order to minimize our investment and risk of land exposure in a single location, we have periodically partnered with other land developers or homebuilders to share in the land investment and development of a property through joint ownership and development agreements, joint ventures, and other similar arrangements. As of June 30, 2021 and December 31, 2020, our investment in such joint venture arrangements totaled $32.8 million and $34.7 million, respectively, and was reported as Investment in Joint Venture Arrangements on our Unaudited Condensed Consolidated Balance Sheets. The $1.9 million decrease during the six-month period ended June 30, 2021 was driven primarily by lot distributions from our joint venture arrangements of $18.1 million and return of capital from joint venture arrangements of $1.1 million, offset, in part, by our cash contributions to our joint venture arrangements during the first half of 2021 of $17.1 million.
The majority of our investment in joint venture arrangements for both June 30, 2021 and December 31, 2020 consisted of joint ownership and development agreements for which a special purpose entity was not established (“JODAs”). In these JODAs, we own the property jointly with partners which are typically other builders, and land development activities are funded jointly until the developed lots are subdivided for separate ownership by the partners in accordance with the JODA and the approved site plan. As of June 30, 2021 and December 31, 2020, the Company had $32.6 million and $33.9 million, respectively, invested in JODAs.
The remainder of our investment in joint venture arrangements was comprised of joint venture arrangements where a special purpose entity was established to own and develop the property. For these joint venture arrangements, we generally enter into limited liability company or similar arrangements (“LLCs”) with the other partners. These entities typically engage in land development activities for the purpose of distributing or selling developed lots to the Company and its partners in the LLC. As of June 30, 2021 and December 31, 2020, the Company had $0.2 million and $0.8 million, respectively, of equity invested in LLCs. The Company’s percentage of ownership in these LLCs as of June 30, 2021 ranged from 25% to 50% and as of December 31, 2020 ranged from 25% to 74%.
We use the equity method of accounting for investments in LLCs and other joint venture arrangements, including JODAs, over which we exercise significant influence but do not have a controlling interest. Under the equity method, our share of the LLCs’ earnings or loss, if any, is included in our Unaudited Condensed Consolidated Statements of Income. The Company’s equity in income relating to earnings from its LLCs was less than $0.1 million for both the three months ended June 30, 2021 and 2020, respectively, and $0.2 million and less than $0.1 million for the six months ended June 30, 2021 and 2020. Our share of the profit relating to lots we purchase from our LLCs is deferred until homes are delivered by us and title passes to a homebuyer.
We believe that the Company’s maximum exposure related to its investment in these joint venture arrangements as of June 30, 2021 was the amount invested of $32.8 million, which is reported as Investment in Joint Venture Arrangements on our Unaudited Condensed Consolidated Balance Sheets. We expect to invest further amounts in these joint venture arrangements as development of the properties progresses.
The Company assesses its investments in unconsolidated LLCs for recoverability on a quarterly basis. See Note 4 to our financial statements for additional details relating to our procedures for evaluating our investments for impairment.
Variable Interest Entities
With respect to our investments in these LLCs, we are required, under ASC 810-10, Consolidation (“ASC 810”), to evaluate whether or not such entities should be consolidated into our consolidated financial statements. We initially perform these evaluations when each new entity is created and upon any events that require reconsideration of the entity. See Note 1, “Summary of Significant Accounting Policies - Variable Interest Entities” in the Company’s 2020 Form 10-K for additional information regarding the Company’s methodology for evaluating entities for consolidation.
Land Option Agreements
In the ordinary course of business, the Company enters into land option or purchase agreements for which we generally pay non-refundable deposits. Pursuant to these land option agreements, the Company provides a deposit to the seller as consideration for the right to purchase land at different times in the future, usually at predetermined prices.  In accordance with ASC 810, we analyze our land option or purchase agreements to determine whether the corresponding land sellers are variable interest entities (“VIEs”) and, if so, whether we are the primary beneficiary, as further described in Note 1, “Summary of Significant Accounting Policies - Land Option Agreements” in the 2020 Form 10-K. If we are deemed to be the primary beneficiary of the VIE, we will consolidate the VIE in our consolidated financial statements and reflect such assets and
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liabilities in our Consolidated Inventory Not Owned in our Unaudited Condensed Consolidated Balance Sheets. At both June 30, 2021 and December 31, 2020, we concluded that we were not the primary beneficiary of any VIEs from which we are purchasing land under option or purchase agreements.
NOTE 4. Fair Value Measurements
There are three measurement input levels for determining fair value: Level 1, Level 2, and Level 3. Fair values determined by Level 1 inputs utilize quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Fair values determined by Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.
Assets Measured on a Recurring Basis
The Company measures both mortgage loans held for sale and interest rate lock commitments (“IRLCs”) at fair value. Fair value measurement results in a better presentation of the changes in fair values of the loans and the derivative instruments used to economically hedge them.
In the normal course of business, our financial services segment enters into contractual commitments to extend credit to buyers of single-family homes with fixed expiration dates.  The commitments become effective when the borrowers “lock-in” a specified interest rate within established time frames.  Market risk arises if interest rates move adversely between the time of the “lock-in” of rates by the borrower and the sale date of the loan to an investor.  To mitigate the effect of the interest rate risk inherent in providing rate lock commitments to borrowers, the Company enters into optional or mandatory delivery forward sale contracts to sell whole loans and mortgage-backed securities to broker/dealers.  The forward sale contracts lock in an interest rate and price for the sale of loans similar to the specific rate lock commitments.  The Company does not engage in speculative trading or derivative activities.  Both the rate lock commitments to borrowers and the forward sale contracts to broker/dealers or investors are undesignated derivatives, and accordingly, are marked to fair value through earnings.  Changes in fair value measurements are included in earnings in the accompanying statements of income.
The fair value of mortgage loans held for sale is estimated based primarily on published prices for mortgage-backed securities with similar characteristics.  To calculate the effects of interest rate movements, the Company utilizes applicable published mortgage-backed security prices, and multiplies the price movement between the rate lock date and the balance sheet date by the notional loan commitment amount.  The Company applies a fallout rate to IRLCs when measuring the fair value of rate lock commitments.  Fallout is defined as locked loan commitments for which the Company does not close a mortgage loan and is based on management’s judgment and company experience.
The Company sells loans on a servicing released or servicing retained basis and receives servicing compensation.  Thus, the value of the servicing rights included in the fair value measurement is based upon contractual terms with investors and depends on the loan type. Mortgage servicing rights (Level 3 financial instruments as they are measured using significant unobservable inputs such as mortgage prepayment rates, discount rates and delinquency rates) are periodically evaluated for impairment. The amount of impairment is the amount by which the mortgage servicing rights, net of accumulated amortization, exceed their fair value, which is calculated using third-party valuations. Impairment, if any, is recognized through a valuation allowance and a reduction of revenue. The carrying value and fair value of mortgage servicing rights was $13.7 million at June 30, 2021. At December 31, 2020, the carrying value and fair value of our mortgage servicing rights were $9.4 million and $9.2 million, respectively. This $0.2 million decrease in the value of our mortgage servicing rights was caused by the disruption in the mortgage industry as a result of the COVID-19 pandemic, and was recorded as a decrease in revenue to bring the carrying value down to the fair value, for a net valuation allowance and impairment of $0.2 million for the year ended December 31, 2020.
The fair value of the Company’s forward sales contracts to broker/dealers solely considers the market price movement of the same type of security between the trade date and the balance sheet date.  The market price changes are multiplied by the notional amount of the forward sales contracts to measure the fair value.
Interest Rate Lock Commitments. IRLCs are extended to certain homebuying customers who have applied for a mortgage loan and meet certain defined credit and underwriting criteria. Typically, the IRLCs will have a term of less than six months; however, in certain markets, the term could extend to nine months.
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Some IRLCs are committed to a specific third-party investor through the use of whole loan delivery commitments matching the exact terms of the IRLC loan. Uncommitted IRLCs are considered derivative instruments and are fair value adjusted, with the resulting gain or loss recorded in current earnings.
Forward Sales of Mortgage-Backed Securities. Forward sales of mortgage-backed securities (“FMBSs”) are used to protect uncommitted IRLC loans against the risk of changes in interest rates between the lock date and the funding date. FMBSs related to uncommitted IRLCs and FMBSs related to mortgage loans held for sale are classified and accounted for as non-designated derivative instruments and are recorded at fair value, with gains and losses recorded in current earnings.

Mortgage Loans Held for Sale. Mortgage loans held for sale consists primarily of single-family residential loans collateralized by the underlying property.  Generally, all of the mortgage loans and related servicing rights are sold to third-party investors shortly after origination.  During the period between when a loan is closed and when it is sold to an investor, the interest rate risk is covered through the use of a whole loan contract or by FMBSs.
The table below shows the notional amounts of our financial instruments at June 30, 2021 and December 31, 2020:
Description of Financial Instrument (in thousands)June 30, 2021December 31, 2020
Whole loan contracts and related committed IRLCs$2,418 $2,354 
Uncommitted IRLCs302,394 208,500 
FMBSs related to uncommitted IRLCs279,000 183,000 
Whole loan contracts and related mortgage loans held for sale4,689 78,142 
FMBSs related to mortgage loans held for sale164,000 131,000 
Mortgage loans held for sale covered by FMBSs160,826 148,331 

The following table sets forth the amount of gain (loss) recognized, within our revenue in the Unaudited Condensed Consolidated Statements of Income, on assets and liabilities measured on a recurring basis for the three and six months ended June 30, 2021 and 2020:
Three Months Ended June 30,Six Months Ended June 30,
Description (in thousands)2021202020212020
Mortgage loans held for sale$6,682 $(3,312)$(258)$427 
Forward sales of mortgage-backed securities(8,329)5,417 1,017 (1,163)
Interest rate lock commitments3,128 (826)510 1,557 
Whole loan contracts(60)(102)353 (48)
Total gain recognized$1,421 $1,177 $1,622 $773 
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The following tables set forth the fair value of the Company’s derivative instruments and their location within the Unaudited Condensed Consolidated Balance Sheets for the periods indicated (except for mortgage loans held for sale which are disclosed as a separate line item):
Asset DerivativesLiability Derivatives
June 30, 2021June 30, 2021
Description of DerivativesBalance Sheet
Location
Fair Value
(in thousands)
Balance Sheet LocationFair Value
(in thousands)
Forward sales of mortgage-backed securitiesOther assets$ Other liabilities$624 
Interest rate lock commitmentsOther assets2,153 Other liabilities 
Whole loan contractsOther assets Other liabilities47 
Total fair value measurements$2,153 $671 

Asset DerivativesLiability Derivatives
December 31, 2020December 31, 2020
Description of DerivativesBalance Sheet
Location
Fair Value
(in thousands)
Balance Sheet LocationFair Value
(in thousands)
Forward sales of mortgage-backed securitiesOther assets$ Other liabilities$1,640 
Interest rate lock commitmentsOther assets1,664 Other liabilities 
Whole loan contractsOther assets Other liabilities422 
Total fair value measurements$1,664 $2,062 
Assets Measured on a Non-Recurring Basis
Inventory. The Company assesses inventory for recoverability on a quarterly basis based on the difference in the carrying value of the inventory and its fair value at the time of the evaluation. Determining the fair value of a community’s inventory involves a number of variables, estimates and projections, which are Level 3 measurement inputs. See Note 1, “Summary of Significant Accounting Policies - Inventory” in the 2020 Form 10-K for additional information regarding the Company’s methodology for determining fair value.
The Company uses significant assumptions to evaluate the recoverability of its inventory, such as estimated average selling price, construction and development costs, absorption rate (reflecting any product mix change strategies implemented or to be implemented), selling strategies, alternative land uses (including disposition of all or a portion of the land owned), or discount rates. Changes in these assumptions could materially impact future cash flow and fair value estimates and may lead the Company to incur additional impairment charges in the future. Our analysis is conducted only if indicators of a decline in value of our inventory exist, which include, among other things, declines in gross margin on sales contracts in backlog or homes that have been delivered, slower than anticipated absorption pace, declines in average sales price or high incentive offers by management to improve absorptions, declines in margins regarding future land sales, or declines in the value of the land itself as a result of third party appraisals. If communities are not recoverable based on the estimated future undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. During the three and six months ended June 30, 2021 and 2020, the Company did not record any impairment charges on its inventory.
Investment in Unconsolidated Joint Ventures.  We evaluate our investments in unconsolidated joint ventures for impairment on a quarterly basis based on the difference in the investment’s carrying value and its fair value at the time of the evaluation. If the Company has determined that the decline in value is other than temporary, the Company would write down the value of the investment to its estimated fair value. Determining the fair value of investments in unconsolidated joint ventures involves a number of variables, estimates and assumptions, which are Level 3 measurement inputs. See Note 1, “Summary of Significant Accounting Policies - Investment in Unconsolidated Joint Ventures,” in the 2020 Form 10-K for additional information regarding the Company’s methodology for determining fair value. Because of the high degree of judgment involved in developing these assumptions, it is possible that changes in these assumptions could materially impact future cash flow and fair value estimates of the investments which may lead the Company to incur additional impairment charges in the future. During the three and six months ended June 30, 2021 and 2020, the Company did not record any impairment charges on its investments in unconsolidated joint ventures.
Financial Instruments
Counterparty Credit Risk. To reduce the risk associated with losses that would be recognized if counterparties failed to perform as contracted, the Company limits the entities with whom management can enter into commitments. This risk of accounting loss is the difference between the market rate at the time of non-performance by the counterparty and the rate to which the Company committed.
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The following table presents the carrying amounts and fair values of the Company’s financial instruments at June 30, 2021 and December 31, 2020. The objective of the fair value measurement is to estimate the price at which an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions.
June 30, 2021December 31, 2020
(In thousands)Fair Value HierarchyCarrying AmountFair ValueCarrying AmountFair Value
Assets:
Cash, cash equivalents and restricted cashLevel 1$371,806 $371,806 $260,810 $260,810 
Mortgage loans held for saleLevel 2172,760 172,760 234,293 234,293 
Interest rate lock commitmentsLevel 22,153 2,153 1,664 1,664 
Liabilities:
Notes payable - financial services operationsLevel 2167,119 167,119 225,634 225,634 
Notes payable - otherLevel 24,126 5,021 4,072 3,647 
Senior notes due 2025 (a)
Level 2250,000 258,125 250,000 259,375 
Senior notes due 2028 (a)
Level 2400,000 419,000 400,000 421,000 
Whole loan contracts for committed IRLCs and mortgage loans held for saleLevel 247 47 422 422 
Forward sales of mortgage-backed securitiesLevel 2624 624 1,640 1,640 
(a)Our senior notes are stated at the principal amount outstanding which does not include the impact of premiums, discounts, and debt issuance costs that are amortized to interest cost over the respective terms of the notes.
The following methods and assumptions were used by the Company in estimating its fair value disclosures of financial instruments at June 30, 2021 and December 31, 2020:
Cash, Cash Equivalents and Restricted Cash. The carrying amounts of these items approximate fair value because they are short-term by nature.
Mortgage Loans Held for Sale, Forward Sales of Mortgage-Backed Securities, Interest Rate Lock Commitments, Whole loan Contracts for Committed IRLCs and Mortgage Loans Held for Sale, Senior Notes due 2025 and  Senior Notes due 2028. The fair value of these financial instruments was determined based upon market quotes at June 30, 2021 and December 31, 2020. The market quotes used were quoted prices for similar assets or liabilities along with inputs taken from observable market data by correlation. The inputs were adjusted to account for the condition of the asset or liability.
Notes Payable - Homebuilding Operations. The interest rate available to the Company during the quarter ended June 30, 2021 under the Company’s $550 million unsecured revolving credit facility, dated July 18, 2013, as amended most recently on June 10, 2021 (the “Credit Facility”), fluctuated daily with the one-month LIBOR rate plus a margin of 175 basis points, and thus the carrying value is a reasonable estimate of fair value. See Note 8 to our financial statements for additional information regarding the Credit Facility.
Notes Payable - Financial Services Operations. M/I Financial, LLC, a 100%-owned subsidiary of M/I Homes, Inc. (“M/I Financial”), is a party to two credit agreements: (1) a $175 million secured mortgage warehousing agreement, dated June 24, 2016, as amended (the “MIF Mortgage Warehousing Agreement”); and (2) a $90 million mortgage repurchase agreement, dated October 30, 2017, as amended (the “MIF Mortgage Repurchase Facility”). For each of these credit facilities, the interest rate is based on a variable rate index, and thus their carrying value is a reasonable estimate of fair value. The interest rate available to M/I Financial during the second quarter of 2021 fluctuated with LIBOR. See Note 8 to our financial statements for additional information regarding the MIF Mortgage Warehousing Agreement and the MIF Mortgage Repurchase Facility.

Notes Payable - Other. The estimated fair value was determined by calculating the present value of the future cash flows using the Company’s current incremental borrowing rate.
NOTE 5. Guarantees and Indemnifications
In the ordinary course of business, M/I Financial enters into agreements that provide a limited-life guarantee on loans sold to certain third-party purchasers of its mortgage loans that M/I Financial will repurchase a loan if certain conditions occur, primarily if the mortgagor does not meet the terms of the loan within the first six months after the sale of the loan. Loans totaling approximately $66.8 million and $21.1 million were covered under these guarantees as of June 30, 2021 and December 31, 2020, respectively.  The increase in loans covered by these guarantees from December 31, 2020 is a result of a change in the mix of investors and their related purchase terms.  A portion of the revenue paid to M/I Financial for providing the guarantees on these loans was deferred at June 30, 2021, and will be recognized in income as M/I Financial is released from
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its obligation under the guarantees. The risk associated with the guarantees above is offset by the value of the underlying assets.
M/I Financial has received inquiries concerning underwriting matters from purchasers of its loans regarding certain loans totaling approximately $1.7 million and $0.6 million at June 30, 2021 and December 31, 2020, respectively.
M/I Financial has also guaranteed the collectability of certain loans to third party insurers (U.S. Department of Housing and Urban Development and U.S. Veterans Administration) of those loans for periods ranging from five to thirty years. The maximum potential amount of future payments is equal to the outstanding loan value less the value of the underlying asset plus administrative costs incurred related to foreclosure on the loans, should this event occur.
The Company recorded a liability relating to the guarantees described above totaling $0.6 million and $0.4 million at June 30, 2021 and December 31, 2020, respectively, which is management’s best estimate of the Company’s liability with respect to such guarantees.
NOTE 6. Commitments and Contingencies
Warranty
We use subcontractors for nearly all aspects of home construction. Although our subcontractors are generally required to repair and replace any product or labor defects, we are, during applicable warranty periods, ultimately responsible to the homeowner for making such repairs. As such, we record warranty reserves to cover our exposure to the costs for materials and labor not expected to be covered by our subcontractors to the extent they relate to warranty-type claims. Warranty reserves are established by charging cost of sales and crediting a warranty reserve for each home delivered.  The amounts charged are estimated by management to be adequate to cover expected warranty-related costs under the Company’s warranty programs. Warranty reserves are recorded for warranties under our Home Builder’s Limited Warranty (“HBLW”) and our transferable structural warranty in Other Liabilities on the Company’s Unaudited Condensed Consolidated Balance Sheets.
The warranty reserves for the HBLW are established as a percentage of average sales price and adjusted based on historical payment patterns determined, generally, by geographic area and recent trends. Factors that are given consideration in determining the HBLW reserves include: (1) the historical range of amounts paid per average sales price on a home; (2) type and mix of amenity packages added to the home; (3) any warranty expenditures not considered to be normal and recurring; (4) timing of payments; (5) improvements in quality of construction expected to impact future warranty expenditures; and (6) conditions that may affect certain projects and require a different percentage of average sales price for those specific projects. Changes in estimates for warranties occur due to changes in the historical payment experience and differences between the actual payment pattern experienced during the period and the historical payment pattern used in our evaluation of the warranty reserve balance at the end of each quarter. Actual future warranty costs could differ from our current estimated amount.
Our warranty reserves for our transferable structural warranty programs are established on a per-unit basis. While the structural warranty reserve is recorded as each house is delivered, the sufficiency of the structural warranty per unit charge and total reserve is reevaluated on an annual basis, with the assistance of an actuary, using our own historical data and trends, industry-wide historical data and trends, and other project specific factors. The reserves are also evaluated quarterly and adjusted if we encounter activity that is inconsistent with the historical experience used in the annual analysis. These reserves are subject to variability due to uncertainties regarding structural defect claims for products we build, the markets in which we build, claim settlement history, insurance and legal interpretations, among other factors.
Our warranty reserve amounts are based upon historical experience and geographic location. While we believe that our warranty reserves are sufficient to cover our projected costs, there can be no assurances that historical data and trends will accurately predict our actual warranty costs.
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A summary of warranty activity for the three and six months ended June 30, 2021 and 2020 is as follows:
Three Months Ended June 30,Six Months Ended June 30,
(In thousands)2021202020212020
Warranty reserves, beginning of period$29,426 $26,040 $29,012 $26,420 
Warranty expense on homes delivered during the period5,586 4,242 10,412 7,663 
Changes in estimates for pre-existing warranties248 (623)611 (644)
Charges related to stucco-related claims  
(a)
  
(a)
Settlements made during the period(5,380)(3,484)(10,155)(7,264)
Warranty reserves, end of period$29,880 $26,175 $29,880 $26,175 
(a) Represents charges for stucco-related repair costs, net of recoveries during the period.

We have received claims related to stucco installation from homeowners in certain of our communities in our Tampa and Orlando, Florida markets and have been named as a defendant in legal proceedings initiated by certain of such homeowners. These claims primarily relate to homes built prior to 2014 which have second story elevations with frame construction.

During the three and six month periods ended June 30, 2021, we did not record any additional warranty charges or receive any additional recoveries for stucco-related repair costs. At June 30, 2021, the remaining reserve for (1) homes in our Florida communities that we have identified as needing repair but have not yet completed the repair and (2) estimated repair costs for homes in our Florida communities that we have not yet identified as needing repair but that may require repair in the future included within our warranty reserve was $3.7 million. We believe that this amount is sufficient to cover both known and estimated future repair costs as of June 30, 2021. Our remaining stucco-related reserve is gross of any recoveries. Stucco-related recoveries are recorded in the period the reimbursement is received.
Our review of the stucco-related issues in our Florida communities is ongoing. Our estimate of future costs of stucco-related repairs is based on our judgment, various assumptions and internal data. Due to the degree of judgment and the potential for variability in our underlying assumptions and data, as we obtain additional information, we may revise our estimate, including to reflect additional estimated future stucco-related repairs costs, which revision could be material.
We continue to investigate the extent to which we may be able to further recover a portion of our stucco repair and claims handling costs from other sources, including our direct insurers, the subcontractors involved with the construction of the homes and their insurers. As of June 30, 2021, we are unable to estimate any additional amount that we believe is probable of recovery from these sources and, as noted above, we have not recorded a receivable for recoveries nor included an estimated amount of recoveries in determining our stucco-related warranty reserve.

Performance Bonds and Letters of Credit

At June 30, 2021, the Company had outstanding approximately $318.3 million of completion bonds and standby letters of credit, some of which were issued to various local governmental entities that expire at various times through November 2027. Included in this total are: (1) $230.2 million of performance and maintenance bonds and $72.5 million of performance letters of credit that serve as completion bonds for land development work in progress; (2) $8.6 million of financial letters of credit, of which $8.2 million represent deposits on land and lot purchase agreements; and (3) $7.0 million of financial bonds.

Land Option Contracts and Other Similar Contracts

At June 30, 2021, the Company also had options and contingent purchase agreements to acquire land and developed lots with an aggregate purchase price of approximately $993.0 million. Purchase of properties under these agreements is contingent upon satisfaction of certain requirements by the Company and the sellers.
Legal Matters
In addition to the legal proceedings related to stucco, the Company and certain of its subsidiaries have been named as defendants in certain other legal proceedings which are incidental to our business. While management currently believes that the ultimate resolution of these other legal proceedings, individually and in the aggregate, will not have a material effect on the Company’s financial position, results of operations and cash flows, such legal proceedings are subject to inherent uncertainties. The Company has recorded a liability to provide for the anticipated costs, including legal defense costs, associated with the resolution of these other legal proceedings. However, the possibility exists that the costs to resolve these legal proceedings could differ from the recorded estimates and, therefore, have a material effect on the Company’s net income for the periods in which they are resolved. At June 30, 2021 and December 31, 2020, we had $1.7 million and $0.8 million reserved for legal expenses, respectively.
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NOTE 7. Goodwill
Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired and liabilities assumed in business combinations. In connection with the Company’s acquisition of the homebuilding assets and operations of Pinnacle Homes in Detroit, Michigan in March of 2018, the Company recorded goodwill of $16.4 million, which is included as Goodwill in our Consolidated Balance Sheets. This amount was based on the estimated fair values of the acquired assets and liabilities at the date of the acquisition in accordance with ASC 350.

In accordance with ASC 350, the Company analyzes goodwill for impairment on an annual basis (or more often if indicators of impairment exist). The Company performs a qualitative assessment to determine whether the existence of events or circumstances leads to a determination that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment indicates that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount, then a quantitative assessment is performed to determine the reporting unit’s fair value. If the reporting unit’s carrying value exceeds its fair value, then an impairment loss is recognized for the amount of the excess of the carrying amount over the reporting unit’s fair value. The Company performed its annual goodwill impairment analysis during the fourth quarter of 2020, and no impairment was recorded at December 31, 2020. At June 30, 2021, no indicators for impairment existed and therefore no impairment was recorded. However, we will continue to monitor the fair value of the reporting unit in future periods if conditions worsen or other events occur that could impact the fair value of the reporting unit.
NOTE 8. Debt
Notes Payable - Homebuilding
On June 10, 2021, the Company entered into an amendment to the Credit Facility which, among other things (1) increased the commitments from lenders to $550 million from $500 million, (2) extended the maturity to July 18, 2025, (3) increased the required minimum level of Consolidated Tangible Net Worth from $848.2 million to $946.2 million (subject to increase over time based on earnings and proceeds from equity offerings), (4) increased the accordion feature pursuant to which the maximum borrowing availability may be increased to an aggregate of $700 million, subject to obtaining additional commitments from lenders, (5) reduced the floor on one-month LIBOR to 0.25% from 0.75% and decreased the LIBOR margin by 75 basis points to 175 basis points (subject to adjustment in subsequent quarterly periods based on the Company’s leverage ratio), (6) decreased the fee paid quarterly on the remaining available commitment amount by 15 basis points, to 30 basis points (which is also subject to adjustment in subsequent quarterly periods based on the Company’s leverage ratio), (7) increased the sub-facility for letters of credit included in the Credit Facility to $150 million from $125 million, and (8) increased the borrowing base advance rates for certain categories of inventory used to calculate the available amount under the Credit Facility.
At June 30, 2021, the Company was in compliance with all financial covenants of the Credit Facility.
The available amount under the Credit Facility is computed in accordance with a borrowing base, which is calculated by applying various advance rates for different categories of inventory, and totaled $1.14 billion of availability for additional senior debt at June 30, 2021. As a result, the full $550 million commitment amount of the Credit Facility was available, less any borrowings and letters of credit outstanding. At June 30, 2021, there were no borrowings outstanding and $81.1 million of letters of credit outstanding, leaving a net remaining borrowing availability of $468.9 million. The Credit Facility includes a $150 million sub-facility for letters of credit.
The Company’s obligations under the Credit Facility are guaranteed by all of the Company’s subsidiaries, with the exception of subsidiaries that are primarily engaged in the business of mortgage financing, title insurance or similar financial businesses relating to the homebuilding and home sales business, certain subsidiaries that are not 100%-owned by the Company or another subsidiary, and other subsidiaries designated by the Company as Unrestricted Subsidiaries (as defined in the Credit Facility), subject to limitations on the aggregate amount invested in such Unrestricted Subsidiaries in accordance with the terms of the Credit Facility and the indentures governing the Company’s $400.0 million aggregate principal amount of 4.95% Senior Notes due 2028 (the “2028 Senior Notes”) and the Company’s $250.0 million aggregate principal amount of 5.625% Senior Notes due 2025 (the “2025 Senior Notes”). The guarantors for the Credit Facility (the “Subsidiary Guarantors”) are the same subsidiaries that guarantee the 2028 Senior Notes and the 2025 Senior Notes.
The Company’s obligations under the Credit Facility are general, unsecured senior obligations of the Company and the Subsidiary Guarantors and rank equally in right of payment with all our and the Subsidiary Guarantors’ existing and future unsecured senior indebtedness. Our obligations under the Credit Facility are effectively subordinated to our and the Subsidiary Guarantors’ existing and future secured indebtedness with respect to any assets comprising security or collateral for such indebtedness.
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Notes Payable - Financial Services
The MIF Mortgage Warehousing Agreement is used to finance eligible residential mortgage loans originated by M/I Financial. In May 2021, M/I Financial entered into an amendment to the MIF Mortgage Warehousing Agreement, which, among other things, extended the expiration date to May 27, 2022, increased the base maximum borrowing availability to $175 million from $125 million, allows the maximum borrowing availability to increase to $210 million from September 25, 2021 to October 15, 2021 and to $235 million from November 15, 2021 to February 4, 2022, which are periods of increased volume of mortgage originations, reduced the floor on one-month LIBOR from 1.0% to 0.5%, reduced the LIBOR margin from 2.0% to 1.9%, increased the required minimum level of Minimum Tangible Net Worth from $12.5 million to $15.0 million, and increased the required minimum level of liquidity from $6.25 million to $7.0 million. The MIF Mortgage Warehousing Agreement also contains certain financial covenants. At June 30, 2021, M/I Financial was in compliance with all financial covenants of the MIF Mortgage Warehousing Agreement.
The MIF Mortgage Repurchase Facility is used to finance eligible residential mortgage loans originated by M/I Financial. The MIF Mortgage Repurchase Facility provides for a mortgage repurchase facility with a maximum borrowing availability of $90 million. The MIF Mortgage Repurchase Facility expires on October 25, 2021. M/I Financial pays interest on each advance under the MIF Mortgage Repurchase Facility at a per annum rate equal to the one-month LIBOR rate (subject to a floor of 1.0%) plus 175 or 200 basis points depending on the loan type. The MIF Mortgage Repurchase Facility also contains certain financial covenants. At June 30, 2021, M/I Financial was in compliance with all financial covenants of the MIF Mortgage Repurchase Facility.
At June 30, 2021 and December 31, 2020, M/I Financial’s total combined maximum borrowing availability under the two credit facilities was $265.0 million and $275.0 million, respectively. At June 30, 2021 and December 31, 2020, M/I Financial had $167.1 million and $225.6 million outstanding on a combined basis under its credit facilities, respectively.
Senior Notes
As of both June 30, 2021 and December 31, 2020, we had $400.0 million of our 2028 Senior Notes outstanding. The 2028 Senior Notes bear interest at a rate of 4.95% per year, payable semiannually in arrears on February 1 and August 1 of each year and mature on February 1, 2028. We may redeem all or any portion of the 2028 Senior Notes on or after February 1, 2023 at a stated redemption price, together with accrued and unpaid interest thereon. The redemption price will initially be 103.713% of the principal amount outstanding, but will decline to 102.475% of the principal amount outstanding if redeemed during the 12-month period beginning on February 1, 2024, will further decline to 101.238% of the principal amount outstanding if redeemed during the 12-month period beginning on February 1, 2025 and will further decline to 100.000% of the principal amount outstanding if redeemed on or after February 1, 2026, but prior to maturity.
As of both June 30, 2021 and December 31, 2020, we had $250.0 million of our 2025 Senior Notes outstanding. The 2025 Senior Notes bear interest at a rate of 5.625% per year, payable semiannually in arrears on February 1 and August 1 of each year, and mature on August 1, 2025. We may redeem all or any portion of the 2025 Senior Notes on or after August 1, 2020 at a stated redemption price, together with accrued and unpaid interest thereon. The redemption price is initially 104.219% of the principal amount outstanding, but will decline to 102.813% of the principal amount outstanding if redeemed during the 12-month period beginning on August 1, 2021, will further decline to 101.406% of the principal amount outstanding if redeemed during the 12-month period beginning on August 1, 2022 and will further decline to 100.000% of the principal amount outstanding if redeemed on or after August 1, 2023, but prior to maturity.
The 2028 Senior Notes and the 2025 Senior Notes contain certain covenants, as more fully described and defined in the indenture governing the 2028 Senior Notes and the indenture governing the 2025 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 and the indenture governing the 2025 Senior Notes. As of June 30, 2021, the Company was in compliance with all terms, conditions, and covenants under the indentures.
The 2028 Senior Notes and the 2025 Senior Notes are fully and unconditionally guaranteed jointly and severally on a senior unsecured basis by the Subsidiary Guarantors. The 2028 Senior Notes and the 2025 Senior Notes are general, unsecured senior obligations of the Company and the Subsidiary Guarantors and rank equally in right of payment with all our and the Subsidiary Guarantors’ existing and future unsecured senior indebtedness.  The 2028 Senior Notes and the 2025 Senior Notes are effectively subordinated to our and the Subsidiary Guarantors’ existing and future secured indebtedness with respect to any assets comprising security or collateral for such indebtedness.
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The indenture governing our 2028 Senior Notes and the indenture governing the 2025 Senior Notes limit our ability to pay dividends on, and repurchase, our common shares and any of our preferred shares then outstanding to the amount of the positive balance in our “restricted payments basket,” as defined in the indentures. In each case, the “restricted payments basket” is equal to $125.0 million plus (1) 50% of our aggregate consolidated net income (or minus 100% of our aggregate consolidated net loss) from October 1, 2015, excluding income or loss from Unrestricted Subsidiaries (as defined in the indentures), plus (2) 100% of the net cash proceeds from either contributions to the common equity of the Company after December 1, 2015 or the sale of qualified equity interests after December 1, 2015, plus other items and subject to other exceptions. The positive balance in our restricted payments basket was $444.7 million at June 30, 2021 and $363.0 million at December 31, 2020. The determination to pay future dividends on, or make future repurchases of, our common shares will be at the discretion of our board of directors and will depend upon our results of operations, financial condition, capital requirements and compliance with debt covenants, and other factors deemed relevant by our board of directors (see Note 12 to our financial statements for more information).
Notes Payable - Other
The Company had other borrowings, which are reported in Notes Payable - Other in our Unaudited Condensed Consolidated Balance Sheets, totaling $4.1 million as of both June 30, 2021 and December 31, 2020, which are comprised of notes payable acquired in the normal course of business.

NOTE 9. Earnings Per Share
The table below presents a reconciliation between basic and diluted weighted average shares outstanding, net income, and basic and diluted income per share for the three and six months ended June 30, 2021 and 2020:
Three Months EndedSix Months Ended
June 30,June 30,
(In thousands, except per share amounts)2021202020212020
NUMERATOR
Net income$107,607 $54,508 $192,473 $86,254 
DENOMINATOR
Basic weighted average shares outstanding29,271 28,531 29,144 28,504 
Effect of dilutive securities:
Stock option awards512 115 487 210 
Deferred compensation awards310 190 304 206 
Diluted weighted average shares outstanding$30,093 $28,836 $29,935 $28,920 
Earnings per common share:
Basic$3.68 $1.91 $6.60 $3.03 
Diluted$3.58 $1.89 $6.43 $2.98 
Anti-dilutive equity awards not included in the calculation of diluted earnings per common share
6 1,178 3 676 
NOTE 10. Income Taxes
During the three months ended June 30, 2021 and 2020, the Company recorded a tax provision of $33.7 million and $17.2 million, respectively, which reflects income tax expense related to the periods’ income before income taxes. The effective tax rate for the three months ended June 30, 2021 and 2020 was 23.8% and 24.0%, respectively. During the six months ended June 30, 2021 and 2020, the Company recorded a tax provision of $59.1 million and $26.8 million, respectively. The effective tax rate for the six months ended June 30, 2021 and 2020 was 23.5% and 23.7%, respectively.
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NOTE 11. Business Segments
The Company’s chief operating decision makers evaluate the Company’s performance in various ways, including: (1) the results of our individual homebuilding operating segments and the results of our financial services operations; (2) the results of our homebuilding reportable segments; and (3) our consolidated financial results.
In accordance with ASC 280, Segment Reporting (“ASC 280”), we have identified each homebuilding division as an operating segment and have elected to aggregate our operating segments into separate reportable segments as they share similar aggregation characteristics prescribed in ASC 280 in the following regards: (1) long-term economic characteristics; (2) historical and expected future long-term gross margin percentages; (3) housing products, production processes and methods of distribution; and (4) geographical proximity.
The homebuilding operating segments that comprise each of our reportable segments are as follows:
NorthernSouthern
Chicago, IllinoisOrlando, Florida
Cincinnati, OhioSarasota, Florida
Columbus, OhioTampa, Florida
Indianapolis, IndianaAustin, Texas
Minneapolis/St. Paul, MinnesotaDallas/Fort Worth, Texas
Detroit, MichiganHouston, Texas
San Antonio, Texas
Charlotte, North Carolina
Raleigh, North Carolina

The following table shows, by segment, revenue, operating income and interest expense for the three and six months ended June 30, 2021 and 2020, as well as the Company’s income before income taxes for such periods:
Three Months Ended June 30,Six Months Ended June 30,
(In thousands)2021202020212020
Revenue:
Northern homebuilding$417,787 $299,340 $750,785 $539,610 
Southern homebuilding514,618 395,806 980,747 719,672 
Financial services (a)
28,635 19,048 58,284 32,515 
Total revenue$961,040 $714,194 $1,789,816 $1,291,797 
Operating income:
Northern homebuilding$61,982 $32,241 $100,966 $53,122 
Southern homebuilding79,064 44,319 145,279 73,176 
Financial services (a)
18,925 11,457 39,561 17,819 
Less: Corporate selling, general and administrative expense(18,257)(13,778)(32,795)(23,874)
Total operating income$141,714 $74,239 $253,011 $120,243 
Interest expense (income):
Northern homebuilding$ $703 $