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Table of Contents
City
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-8951
M.D.C. HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
Delaware84-0622967
(State or other jurisdiction
of incorporation or organization)
(I.R.S. employer
identification no.)
4350 South Monaco Street, Suite 50080237
Denver, Colorado
(Zip code)
(Address of principal executive offices)
(303) 773-1100
(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 Stock, $.01 par value552676108New York Stock Exchange
6% Senior Notes due January 2043552676AQ1New 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 definition 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 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.
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes    No  
As of April 27, 2021, 70,267,325 shares of M.D.C. Holdings, Inc. common stock were outstanding.


Table of Contents
M.D.C. HOLDINGS, INC.
FORM 10-Q
FOR THE QUARTER ENDED March 31, 2021
INDEX
Page
No. 


(i)

Table of Contents
PART I
Item 1.    Unaudited Consolidated Financial Statements
M.D.C. HOLDINGS, INC.
Consolidated Balance Sheets
March 31,
2021
December 31,
2020
(Dollars in thousands, except
per share amounts)
ASSETS
Homebuilding:
Cash and cash equivalents$678,194 $411,362 
Restricted cash17,314 15,343 
Trade and other receivables107,823 72,466 
Inventories:
Housing completed or under construction1,705,424 1,486,587 
Land and land under development1,310,721 1,345,643 
Total inventories3,016,145 2,832,230 
Property and equipment, net60,394 61,880 
Deferred tax asset, net12,802 11,454 
Prepaids and other assets107,428 101,685 
Total homebuilding assets4,000,100 3,506,420 
Financial Services:
Cash and cash equivalents81,100 77,267 
Mortgage loans held-for-sale, net230,789 232,556 
Other assets70,941 48,677 
Total financial services assets382,830 358,500 
Total Assets$4,382,930 $3,864,920 
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable$120,496 $98,862 
Accrued and other liabilities333,880 300,735 
Revolving credit facility10,000 10,000 
Senior notes, net1,384,475 1,037,391 
Total homebuilding liabilities1,848,851 1,446,988 
Financial Services:
Accounts payable and accrued liabilities101,725 95,630 
Mortgage repurchase facility217,482 202,390 
Total financial services liabilities319,207 298,020 
Total Liabilities2,168,058 1,745,008 
Stockholders' Equity
Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued or outstanding
  
Common stock, $0.01 par value; 250,000,000 shares authorized; 70,265,205 and 64,851,126 issued and outstanding at March 31, 2021 and December 31, 2020, respectively
703 649 
Additional paid-in-capital1,698,109 1,407,597 
Retained earnings516,060 711,666 
Total Stockholders' Equity2,214,872 2,119,912 
Total Liabilities and Stockholders' Equity$4,382,930 $3,864,920 
The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.
-1-

Table of Contents
M.D.C. HOLDINGS, INC.
Consolidated Statements of Operations and Comprehensive Income
Three Months Ended
March 31,
20212020
(Dollars in thousands, except per share amounts)
Homebuilding:
Home sale revenues
$1,041,858 $697,085 
Home cost of sales
(813,888)(558,647)
Gross profit
227,970 138,438 
Selling, general and administrative expenses
(114,993)(89,321)
Interest and other income
967 1,889 
Other expense
(437)(1,337)
Homebuilding pretax income
113,507 49,669 
Financial Services:
Revenues
45,023 21,886 
Expenses
(15,105)(10,929)
Other income (expense), net887 (12,064)
Financial services pretax income (loss)30,805 (1,107)
Income before income taxes
144,312 48,562 
Provision for income taxes
(33,622)(11,802)
Net income
$110,690 $36,760 
Comprehensive income
$110,690 $36,760 
Earnings per share:
Basic
$1.58 $0.54 
Diluted
$1.51 $0.52 
Weighted average common shares outstanding:
Basic
69,790,927 67,490,537 
Diluted
72,788,177 70,125,723 
Dividends declared per share
$0.37 $0.31 
The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.
-2-

Table of Contents
M.D.C. HOLDINGS, INC.
Consolidated Statements of Changes in Stockholders’ Equity
(Dollars in thousands, except share amounts)
Three Months Ended March 31, 2021
Common Stock
Additional
Paid-in
Capital
Retained
Earnings
Total
Shares
Amount
Balance at December 31, 202064,851,126 $649 $1,407,597 $711,666 $2,119,912 
Net Income
— — — 110,690 110,690 
Shares issued under stock-based compensation programs, net
221,303 2 1,007 — 1,009 
Cash dividends declared
— — — (25,978)(25,978)
Stock dividend declared5,192,776 52 279,579 (280,318)(687)
Stock-based compensation expense
— — 9,926 — 9,926 
Balance at March 31, 202170,265,205 $703 $1,698,109 $516,060 $2,214,872 
Three Months Ended March 31, 2020
Common Stock
Additional
Paid-in
Capital
Retained
Earnings
Total
Shares
Amount
Balance at December 31, 201962,574,961 $626 $1,348,733 $433,126 $1,782,485 
Cumulative effect of newly adopted accounting standards
— — — (34)(34)
Balance at January 1, 202062,574,961 626 1,348,733 433,092 1,782,451 
Net Income
— — — 36,760 36,760 
Shares issued under stock-based compensation programs, net
477,582 5 8,189 — 8,194 
Cash dividends declared
— — — (20,768)(20,768)
Stock-based compensation expense
— — 4,440 — 4,440 
Forfeiture of restricted stock
(48)— — — — 
Balance at March 31, 202063,052,495 $631 $1,361,362 $449,084 $1,811,077 
The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.
-3-

Table of Contents
M.D.C. HOLDINGS, INC.
Consolidated Statements of Cash Flows
Three Months Ended
March 31,
20212020
(Dollars in thousands)
Operating Activities:
Net income$110,690 $36,760 
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense9,926 4,440 
Depreciation and amortization7,003 5,152 
Net (gain) loss on marketable equity securities 13,268 
Deferred income tax expense(1,348)1,131 
Net changes in assets and liabilities:
Trade and other receivables(40,282)(1,611)
Mortgage loans held-for-sale, net1,767 63,100 
Housing completed or under construction(218,655)(178,873)
Land and land under development34,978 29,051 
Prepaids and other assets(23,594)(8,460)
Accounts payable and accrued and other liabilities61,558 (1,131)
Net cash used in operating activities(57,957)(37,173)
Investing Activities:
Purchases of marketable securities (9,782)
Sales of marketable securities 9,276 
Purchases of property and equipment(5,749)(6,512)
Net cash used in investing activities(5,749)(7,018)
Financing Activities:
Payments on mortgage repurchase facility, net15,092 (40,872)
Repayment of senior notes (250,000)
Proceeds from issuance of senior notes347,725 298,050 
Dividend payments(26,665)(20,768)
Payments of deferred financing costs(819) 
Issuance of shares under stock-based compensation programs, net1,009 8,194 
Net cash provided by (used in) financing activities336,342 (5,396)
Net increase (decrease) in cash, cash equivalents and restricted cash272,636 (49,587)
Cash, cash equivalents and restricted cash:
Beginning of period503,972 474,212 
End of period$776,608 $424,625 
Reconciliation of cash, cash equivalents and restricted cash:
Homebuilding:
Cash and cash equivalents$678,194 $386,704 
Restricted cash17,314 15,762 
Financial Services:
Cash and cash equivalents81,100 22,159 
Total cash, cash equivalents and restricted cash$776,608 $424,625 
The accompanying Notes are an integral part of these Unaudited Consolidated Financial Statements.
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1.    Basis of Presentation
The Unaudited Consolidated Financial Statements of M.D.C. Holdings, Inc. ("MDC," “the Company," “we,” “us,” or “our,” which refers to M.D.C. Holdings, Inc. and its subsidiaries) have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Accordingly, they do not include all information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. These statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows of MDC at March 31, 2021 and for all periods presented. These statements should be read in conjunction with MDC’s Consolidated Financial Statements and Notes thereto included in MDC’s Annual Report on Form 10-K for the year ended December 31, 2020.
On January 25, 2021, MDC's board of directors declared an 8% stock dividend that was distributed on March 17, 2021 to shareholders of record on March 3, 2021. In accordance with Accounting Standards Codification ("ASC") Topic 260, Earnings Per Share ("ASC 260"), basic and diluted earnings per share amounts, share amounts and dividends declared per share have been restated for any period or dates prior to the stock dividend record date.
Included in these footnotes are certain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our business, financial condition, results of operations, cash flows, strategies and prospects. These forward-looking statements may be identified by terminology such as “likely,” “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained in this section are reasonable, we cannot guarantee future results. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in subsequent reports on Forms 10-K, 10-Q and 8-K should be considered.
Where necessary, reclassifications have been made to our prior period financial information to conform to the current year presentation.
2.    Recently Issued Accounting Standards
Adoption of New Accounting Standards
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires measurement and recognition of expected credit losses for financial assets held. The amendments in ASU 2016-13 eliminate the probable threshold for initial recognition of a credit loss in current GAAP and reflect an entity’s current estimate of all expected credit losses. On January 1, 2020, we adopted ASU 2016-13 using the modified retrospective transition method, resulting in a cumulative effect adjustment that decreased the opening balance of retained earnings by less than $0.1 million. The standard did not materially impact our consolidated statements of operations and comprehensive income or consolidated cash flows.
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3.    Segment Reporting
An operating segment is defined as a component of an enterprise for which discrete financial information is available and is reviewed regularly by the Chief Operating Decision Maker (“CODM”), or decision-making group, to evaluate performance and make operating decisions. We have identified our CODM as two key executives—the Executive Chairman and the Chief Executive Officer (“CEO”).
We have identified each homebuilding division as an operating segment. Our homebuilding operating segments have been aggregated into the reportable segments noted below because they are similar in the following regards: (1) economic characteristics; (2) housing products; (3) class of homebuyer; (4) regulatory environments; and (5) methods used to construct and sell homes. Our homebuilding reportable segments are as follows
West (Arizona, California, Nevada, Oregon and Washington)
Mountain (Colorado, Idaho and Utah)
East (mid-Atlantic, which includes Maryland and Virginia, and Florida)
Our financial services business consists of the operations of the following operating segments: (1) HomeAmerican Mortgage Corporation (“HomeAmerican”); (2) Allegiant Insurance Company, Inc., A Risk Retention Group (“Allegiant”); (3) StarAmerican Insurance Ltd. (“StarAmerican”); (4) American Home Insurance Agency, Inc.; and (5) American Home Title and Escrow Company. Due to its contributions to consolidated pretax income, we consider HomeAmerican to be a reportable segment (“mortgage operations”). The remaining operating segments have been aggregated into one reportable segment (“other”) because they do not individually exceed 10 percent of: (1) consolidated revenue; (2) the greater of (a) the combined reported profit of all operating segments that did not report a loss or (b) the positive value of the combined reported loss of all operating segments that reported losses; or (3) consolidated assets.
Corporate is a non-operating segment that develops and implements strategic initiatives and supports our operating divisions by centralizing key administrative functions such as finance, treasury, information technology, insurance, risk management, litigation and human resources. Corporate also provides the necessary administrative functions to support MDC as a publicly traded company. A portion of the expenses incurred by Corporate are allocated to the homebuilding operating segments based on their respective percentages of assets, and to a lesser degree, a portion of Corporate expenses are allocated to the financial services segments. A majority of Corporate’s personnel and resources are primarily dedicated to activities relating to the homebuilding segments, and, therefore, the balance of any unallocated Corporate expenses is included in the homebuilding operations section of our consolidated statements of operations and comprehensive income.
The following table summarizes revenues for our homebuilding and financial services operations:
Three Months Ended
March 31,
20212020
(Dollars in thousands)
Homebuilding
West
$616,611 $405,498 
Mountain
324,717 222,858 
East
100,530 68,729 
Total homebuilding revenues
$1,041,858 $697,085 
Financial Services
Mortgage operations
$35,165 $14,625 
Other
9,858 7,261 
Total financial services revenues
$45,023 $21,886 
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The following table summarizes pretax income (loss) for our homebuilding and financial services operations:
Three Months Ended
March 31,
20212020
(Dollars in thousands)
Homebuilding
West
$77,187 $36,576 
Mountain
45,858 21,512 
East
7,835 900 
Corporate
(17,373)(9,319)
Total homebuilding pretax income$113,507 $49,669 
Financial Services
Mortgage operations
$26,039 $8,243 
Other
4,766 (9,350)
Total financial services pretax income$30,805 $(1,107)
Total pretax income$144,312 $48,562 
The following table summarizes total assets for our homebuilding and financial services operations. The assets in our West, Mountain and East segments consist primarily of inventory while the assets in our Corporate segment primarily include our cash and cash equivalents and deferred tax assets. The assets in our financial services segment consist mostly of cash and cash equivalents and mortgage loans held-for-sale.
March 31,
2021
December 31,
2020
(Dollars in thousands)
Homebuilding assets
West
$1,968,336 $1,855,567 
Mountain
983,488 905,007 
East
309,571 274,937 
Corporate
738,705 470,909 
Total homebuilding assets$4,000,100 $3,506,420 
Financial services assets
Mortgage operations
$297,801 $279,649 
Other
85,029 78,851 
Total financial services assets$382,830 $358,500 
Total assets$4,382,930 $3,864,920 

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4.     Earnings Per Share
Accounting Standards Codification ("ASC") Topic 260, Earnings per Share ("ASC 260") requires a company that has participating security holders (for example, holders of unvested restricted stock that have non-forfeitable dividend rights) to utilize the two-class method for calculating earnings per share (“EPS”) unless the treasury stock method results in lower EPS. The two-class method is an allocation of earnings/(loss) between the holders of common stock and a company’s participating security holders. Under the two-class method, earnings/(loss) for the reporting period are allocated between common shareholders and other security holders based on their respective rights to receive distributed earnings (i.e., dividends) and undistributed earnings (i.e., net income/(loss)). Our common shares outstanding are comprised of shareholder owned common stock and shares of unvested restricted stock held by participating security holders. Basic EPS is calculated by dividing income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding, excluding participating shares in accordance with ASC 260. To calculate diluted EPS, basic EPS is adjusted to include the effect of potentially dilutive stock options outstanding. The table below shows our basic and diluted EPS calculations.
Three Months Ended
March 31,
20212020
(Dollars in thousands, except per share amounts)
Numerator
Net income$110,690 $36,760 
Less: distributed earnings allocated to participating securities(158)(135)
Less: undistributed earnings allocated to participating securities(463)(96)
Net income attributable to common stockholders (numerator for basic earnings per share)110,069 36,529 
Add back: undistributed earnings allocated to participating securities463 96 
Less: undistributed earnings reallocated to participating securities(447)(93)
Numerator for diluted earnings per share under two class method$110,085 $36,532 
Denominator
Weighted-average common shares outstanding69,790,927 67,490,537 
Add: dilutive effect of stock options2,367,394 2,011,629 
Add: dilutive effect of performance share units629,856 623,557 
Denominator for diluted earnings per share under two class method72,788,177 70,125,723 
Basic Earnings Per Common Share$1.58 $0.54 
Diluted Earnings Per Common Share$1.51 $0.52 
Diluted EPS for the three months ended March 31, 2021 and 2020 excluded options to purchase zero and 0.4 million shares of common stock, respectively, because the effect of their inclusion would be anti-dilutive.
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5.    Fair Value Measurements
ASC Topic 820, Fair Value Measurements (“ASC 820”), defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs, other than quoted prices in active markets, that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.
The following table sets forth the fair values and methods used for measuring the fair values of financial instruments on a recurring basis:
Fair Value
Financial Instrument
Hierarchy
March 31,
2021
December 31,
2020
(Dollars in thousands)
Mortgage loans held-for-sale, net
Level 2
$230,789 $232,556 
The following methods and assumptions were used to estimate the fair value of each class of financial instruments as of March 31, 2021 and December 31, 2020.
Cash and cash equivalents (excluding debt securities with an original maturity of three months or less), restricted cash, trade and other receivables, prepaids and other assets, accounts payable, accrued and other liabilities and borrowings on our revolving credit facility. Fair value approximates carrying value.
Equity securities. Our equity securities consisted of holdings in common stock and exchange traded funds and were recorded at fair value with all changes in fair value recorded to other income (expense), net in the financial services section of our consolidated statements of operations and comprehensive income.
The following table reconciles the net gain recognized during the three months ended March 31, 2021 and 2020 on equity securities to the unrealized gain recognized during the periods on equity securities still held at the reporting date.
Three Months Ended
March 31,
20212020
(Dollars in thousands)
Net loss recognized during the period on equity securities$ $(13,268)
Less: Net gain recognized during the period on equity securities sold during the period 609 
Unrealized loss recognized during the reporting period on equity securities still held at the reporting date$ $(13,877)
Mortgage loans held-for-sale, net.  Our mortgage loans held-for-sale, which are measured at fair value on a recurring basis, include (1) mortgage loans held-for-sale that are under commitments to sell and (2) mortgage loans held-for-sale that are not under commitments to sell. At March 31, 2021 and December 31, 2020, we had $164.3 million and $137.3 million, respectively, of mortgage loans held-for-sale under commitments to sell. The fair value for those loans was based on quoted market prices for those mortgage loans, which are Level 2 fair value inputs. At March 31, 2021 and December 31, 2020, we had $66.5 million and $95.3 million, respectively, of mortgage loans held-for-sale that were not under commitments to sell. The fair value for those loans was primarily based upon the estimated market price received from an outside party, which is a Level 2 fair value input.
Gains on sales of mortgage loans, net, are included as a component of revenues in the financial services section of our consolidated statements of operations and comprehensive income. For the three months ended March 31, 2021, we recorded net gains on the sales of mortgage loans of $23.5 million , compared to $16.7 million for the same period in the prior year.
Mortgage Repurchase Facility. The debt associated with our mortgage repurchase facility (see Note 18 for further discussion) is at floating rates that approximate current market rates and have relatively short-term maturities, generally within 30 days. The fair value approximates carrying value and is based on Level 2 inputs.
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Senior Notes. The estimated values of the senior notes in the following table are based on Level 2 inputs, which primarily reflect estimated prices for our senior notes that were provided by multiple sources.
March 31, 2021December 31, 2020
Carrying
Amount
Fair ValueCarrying
Amount
Fair Value
(Dollars in thousands)
$250 million 5.500% Senior Notes due January 2024, net
$249,292 $275,306 $249,233 $275,463 
$300 million 3.850% Senior Notes due January 2030, net
297,518 314,825 297,458 331,384 
$350 million 2.500% Senior Notes due January 2031, net
346,916 332,168   
$500 million 6.000% Senior Notes due January 2043, net
490,749 628,353 490,700 667,288 
Total$1,384,475 $1,550,652 $1,037,391 $1,274,135 

6.    Inventories
The following table sets forth, by reportable segment, information relating to our homebuilding inventories:
March 31,
2021
December 31,
2020
(Dollars in thousands)
Housing completed or under construction:
West
$1,018,436 $902,842 
Mountain
547,831 464,501 
East
139,157 119,244 
Subtotal
1,705,424 1,486,587 
Land and land under development:
West
788,753 822,504 
Mountain
380,923 391,054 
East
141,045 132,085 
Subtotal
1,310,721 1,345,643 
Total inventories
$3,016,145 $2,832,230 
Our inventories are primarily associated with communities where we intend to construct and sell homes, including models and unsold homes. Costs capitalized to land and land under development primarily include: (1) land costs; (2) land development costs; (3) entitlement costs; (4) capitalized interest; (5) engineering fees; and (6) title insurance, real property taxes and closing costs directly related to the purchase of the land parcel. Components of housing completed or under construction primarily include: (1) land costs transferred from land and land under development; (2) direct construction costs associated with a house; (3) real property taxes, engineering fees, permits and other fees; (4) capitalized interest; and (5) indirect construction costs, which include field construction management salaries and benefits, utilities and other construction related costs. Land costs are transferred from land and land under development to housing completed or under construction at the point in time that construction of a home on an owned lot begins.

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In accordance with ASC Topic 360, Property, Plant, and Equipment (“ASC 360”), homebuilding inventories, excluding those classified as held for sale, are carried at cost unless events and circumstances indicate that the carrying value of the underlying subdivision may not be recoverable.  We evaluate inventories for impairment at each quarter end on a subdivision level basis as each such subdivision represents the lowest level of identifiable cash flows. In making this determination, we review, among other things, the following for each subdivision:
actual and trending “Operating Margin” (which is defined as home sale revenues less home cost of sales and all incremental costs associated directly with the subdivision, including sales commissions and marketing costs);
estimated future undiscounted cash flows and Operating Margin;
forecasted Operating Margin for homes in backlog;
actual and trending net home orders;
homes available for sale;
market information for each sub-market, including competition levels, home foreclosure levels, the size and style of homes currently being offered for sale and lot size; and
known or probable events indicating that the carrying value may not be recoverable.
If events or circumstances indicate that the carrying value of our inventory may not be recoverable, assets are reviewed for impairment by comparing the undiscounted estimated future cash flows from an individual subdivision (including capitalized interest) to its carrying value. If the undiscounted future cash flows are less than the subdivision’s carrying value, the carrying value of the subdivision is written down to its then estimated fair value. We generally determine the estimated fair value of each subdivision by determining the present value of the estimated future cash flows at discount rates, which are Level 3 inputs, that are commensurate with the risk of the subdivision under evaluation. The evaluation for the recoverability of the carrying value of the assets for each individual subdivision can be impacted significantly by our estimates of future home sale revenues, home construction costs, and development costs per home, all of which are Level 3 inputs.
If land is classified as held for sale, we measure it in accordance with ASC 360 at the lower of the carrying value or fair value less estimated costs to sell. In determining fair value, we primarily rely upon the most recent negotiated price, which is a Level 2 input. If a negotiated price is not available, we will consider several factors including, but not limited to, current market conditions, recent comparable sales transactions and market analysis studies, which are considered Level 3 inputs. If the fair value less estimated costs to sell is lower than the current carrying value, the land is impaired down to its estimated fair value less costs to sell.


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7.    Capitalization of Interest
We capitalize interest to inventories during the period of development in accordance with ASC Topic 835, Interest (“ASC 835”). Homebuilding interest capitalized as a cost of inventories is included in cost of sales during the period that related units or lots are delivered. To the extent our homebuilding debt exceeds our qualified assets as defined in ASC 835, we expense a portion of the interest incurred. Qualified homebuilding assets consist of all lots and homes, excluding finished unsold homes or finished models, within projects that are actively selling or under development. The table set forth below summarizes homebuilding interest activity. For all periods presented below, our qualified assets exceeded our homebuilding debt and as such, all interest incurred has been capitalized.
Three Months Ended
March 31,
20212020
(Dollars in thousands)
Homebuilding interest incurred$17,332 $16,534 
Less: Interest capitalized(17,332)(16,534)
Homebuilding interest expensed$ $ 
Interest capitalized, beginning of period$52,777 $55,310 
Plus: Interest capitalized during period17,332 16,534 
Less: Previously capitalized interest included in home cost of sales(14,841)(12,767)
Interest capitalized, end of period$55,268 $59,077 

8.    Leases
We lease certain property, land and equipment, the majority of which comprise property related leases to provide office space where we operate our business. Leases with an initial term of 12 months or less are not recorded on the balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term.
Our property related leases typically have terms of between three and five years, with the exception of the lease governing the Company’s headquarters. All of our property related leases are classified as operating leases. These leases do not contain any residual value guarantees or restrictive covenants and do not include variable lease payments, except for the payment of common area maintenance and real estate taxes. Many of our property related leases give us the option to extend the lease term for a period of time, generally consistent with the initial lease term. These options are excluded from our calculation of the right-of-use asset and lease liability until such time as we determine it is reasonably certain that the option will be exercised.
The property related lease for the Company’s headquarters in Denver, Colorado is ten years in length with an expiration date of October 31, 2026 and contains a ten year option to extend the term of the lease through 2036. This option has been excluded from our calculation of the right-of-use asset and lease liability as it is not currently considered reasonably certain that the option will be exercised.
Operating lease expense is included as a component of selling, general and administrative expenses in the homebuilding and expenses in the financial services sections of our consolidated statements of operations and comprehensive income, respectively. Components of operating lease expense were as follows:
Three Months Ended
March 31,
20212020
(Dollars in thousands)
Operating lease cost 1
$1,977 $2,046 
Less: Sublease income (Note 19)(39)(38)
Net lease cost$1,938 $2,008 
1Includes variable lease costs, which are immaterial.
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Supplemental cash flow information related to leases was as follows:
Three Months Ended
March 31,
20212020
(Dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$1,858 $1,906 
Leased assets obtained in exchange for new operating lease liabilities$830 $2,645 
Weighted-average remaining lease term and discount rate for operating leases were as follows:
March 31, 2021
Weighted-average remaining lease term (in years)5.1
Weighted-average discount rate5.5 %
Maturities of operating lease liabilities were as follows:
Year Ended December 31,
(Dollars in thousands)
2021 (excluding the three months ended March 31, 2021)$5,051 
20227,387 
20236,416 
20245,717 
20255,493 
Thereafter4,869 
Total operating lease payments$34,933 
Less: Interest4,561 
Present value of operating lease liabilities 1
$30,372 
_______________________________________________________________

1Homebuilding and financial services operating lease liabilities of $29.7 million and $0.6 million, respectively, are included as a component of accrued and other liabilities and accounts payable and accrued liabilities, respectively, in the homebuilding and financial services section of our consolidated balance sheet at March 31, 2021.

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9.    Homebuilding Prepaids and Other Assets
The following table sets forth the components of homebuilding prepaids and other assets:
March 31,
2021
December 31,
2020
(Dollars in thousands)
Operating lease right-of-use asset (Note 8)$28,737 $29,226 
Land option deposits37,138 29,987 
Prepaids26,505 26,929 
Goodwill6,008 6,008 
Deferred debt issuance costs on revolving credit facility, net8,529 9,043 
Other511 492 
Total prepaids and other assets$107,428 $101,685 

10.    Homebuilding Accrued and Other Liabilities and Financial Services Accounts Payable and Accrued Liabilities
The following table sets forth information relating to homebuilding accrued and other liabilities:
March 31,
2021
December 31, 2020
(Dollars in thousands)
Customer and escrow deposits
$82,824 $67,022 
Income taxes payable43,057 8,285 
Accrued compensation and related expenses
41,541 56,682 
Warranty accrual
33,873 33,664 
Lease liability (Note 8)29,734 30,221 
Accrued interest
16,110 27,650 
Land development and home construction accruals
12,258 10,824 
Construction defect claim reserves
8,744 8,479 
Other accrued liabilities65,739 57,908 
Total accrued and other liabilities$333,880 $300,735 
The following table sets forth information relating to financial services accounts payable and accrued liabilities:
March 31,
2021
December 31, 2020
(Dollars in thousands)
Insurance reserves
$65,259 $61,575 
Accounts payable and other accrued liabilities
36,466 34,055 
Total accounts payable and accrued liabilities
$101,725 $95,630 

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11.    Warranty Accrual
Our homes are sold with limited third-party warranties and, under our agreement with the issuer of the third-party warranties, we are responsible for performing all of the work for the first two years of the warranty coverage and paying for substantially all of the work required to be performed during years three through ten of the warranties. We record accruals for general and structural warranty claims, as well as accruals for known, unusual warranty-related expenditures. Our warranty accrual is recorded based upon historical payment experience in an amount estimated to be adequate to cover expected costs of materials and outside labor during warranty periods. The determination of the warranty accrual rate for closed homes and the evaluation of our warranty accrual balance at period end are based on an internally developed analysis that includes known facts and interpretations of circumstances, including, among other things, our trends in historical warranty payment levels and warranty payments for claims not considered to be normal and recurring.
Our warranty accrual is included in accrued and other liabilities in the homebuilding section of our consolidated balance sheets and adjustments to our warranty accrual are recorded as an increase or reduction to home cost of sales in the homebuilding section of our consolidated statements of operations and comprehensive income.
The table set forth below summarizes accrual, adjustment and payment activity related to our warranty accrual for the three months ended March 31, 2021 and 2020. The warranty accrual increased due to the increase in the number of home closings.
Three Months Ended
March 31,
20212020
(Dollars in thousands)
Balance at beginning of period$33,664 $31,386 
Expense provisions4,385 3,165 
Cash payments(4,176)(3,664)
Balance at end of period$33,873 $30,887 

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12.    Insurance and Construction Defect Claim Reserves
The establishment of reserves for estimated losses associated with insurance policies issued by Allegiant and re-insurance agreements issued by StarAmerican are based on actuarial studies that include known facts and interpretations of circumstances, including our experience with similar cases and historical trends involving claim payment patterns, pending levels of unpaid claims, product mix or concentration, claim severity, frequency patterns depending on the business conducted, and changing regulatory and legal environments. It is possible that changes in the insurance payment experience used in estimating our ultimate insurance losses could have a material impact on our insurance reserves.
The establishment of reserves for estimated losses to be incurred by our homebuilding subsidiaries associated with: (1) the self-insured retention (“SIR”) portion of construction defect claims that are expected to be covered under insurance policies with Allegiant and (2) the entire cost of any construction defect claims that are not expected to be covered by insurance policies with Allegiant, are based on actuarial studies that include known facts similar to those for our insurance reserves. It is possible that changes in the payment experience used in estimating our ultimate losses for construction defect claims could have a material impact on our reserves.
The table set forth below summarizes our insurance and construction defect claim reserves activity for the three months ended March 31, 2021 and 2020. These reserves are included as a component of accounts payable and accrued liabilities and accrued and other liabilities in the financial services and homebuilding sections, respectively, of the consolidated balance sheets.
Three Months Ended
March 31,
20212020
(Dollars in thousands)
Balance at beginning of period$70,054 $60,415 
Expense provisions4,283 2,918 
Cash payments, net of recoveries(334)(1,883)
Balance at end of period$74,003 $61,450 
In the ordinary course of business, we make payments from our insurance and construction defect claim reserves to settle litigation claims arising from our homebuilding activities. These payments are irregular in both their timing and their magnitude. As a result, the cash payments, net of recoveries shown for the three months ended March 31, 2021 and 2020 are not necessarily indicative of what future cash payments will be for subsequent periods.
13.    Income Taxes

Our overall effective income tax rates were 23.3% and 24.3% for the three months ended March 31, 2021 and 2020, respectively, resulting in income tax expense of $33.6 million and $11.8 million for the same periods, respectively. The year-over-year decrease in our effective tax rate for the three months ended March 31, 2021 was primarily due to an increase in the estimated amount of energy tax credits to be recognized during the year. This benefit was partially offset by a decrease in the windfall on non-qualifying stock options exercised and lapsed restricted stock awards and a decrease in the amount of executive compensation that is deductible under Internal Revenue Code Section 162(m) during the period.
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14.    Senior Notes
The carrying values of our senior notes as of March 31, 2021 and December 31, 2020, net of any unamortized debt issuance costs or discount, were as follows:
March 31,
2021
December 31, 2020
(Dollars in thousands)
5.500% Senior Notes due January 2024, net
$249,292 $249,233 
3.850% Senior Notes due January 2030, net
297,518 297,458 
2.500% Senior Notes due January 2031, net
346,916  
6.000% Senior Notes due January 2043, net
490,749 490,700 
Total$1,384,475 $1,037,391 
Our senior notes are not secured and, while the senior note indentures contain some restrictions on secured debt and other transactions, they do not contain financial covenants. Our senior notes are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by most of our homebuilding segment subsidiaries.
15.    Stock-Based Compensation
We account for share-based awards in accordance with ASC Topic 718 Compensation–Stock Compensation (“ASC 718”), which requires the fair value of stock-based compensation awards to be amortized as an expense over the vesting period. Stock-based compensation awards are valued at fair value on the date of grant. The following table sets forth share-based award expense activity for the three months ended March 31, 2021 and 2020, which is included as a component of selling, general and administrative expenses and expenses in the homebuilding and financial services sections of our consolidated statements of operations and comprehensive income, respectively:
Three Months Ended
March 31,
20212020
(Dollars in thousands)
Stock option grants expense$864 $495 
Restricted stock awards expense2,469 1,517 
Performance share units expense6,593 2,428 
Total stock-based compensation$9,926 $4,440 
On August 20, 2020, August 5, 2019, May 23, 2018 and June 20, 2017, the Company granted long term performance share unit awards (“PSUs”) to each of the Executive Chairman, the CEO, and the Chief Financial Officer (“CFO”) under the Company’s 2011 Equity Incentive Plan. The PSUs are earned based upon the Company’s performance over a period of three years (the “Performance Period”), measured by increasing home sale revenues over a “Base Period.” Each award is conditioned upon the Company achieving an average gross margin from home sales (excluding impairments) of at least fifteen percent (15%) over the Performance Period. Target goals will be earned if the Company’s three year average home sale revenues over the Performance Period (“Performance Revenues”) exceed the home sale revenues over the Base Period (“Base Revenues”) by at least 10% but less than 20%. If Performance Revenues exceed the Base Revenues by at least 5% but less than 10%, 50% of the Target Goals will be earned (“Threshold Goals”). If Performance Revenues exceed the Base Revenues by at least 20%, 200% of the Target Goals will be earned (“Maximum Goals”).  For the PSUs granted in 2017, 2018, 2019 and 2020, the number of PSUs earned shall be adjusted to be proportional to the partial performance between the Threshold Goals, Target Goals and Maximum Goals. Details for each defined term above for each grant has been provided in the table below.
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Threshold GoalTarget GoalMaximum Goal
Maximum Potential Expense to be Recognized *
Maximum Remaining Expense to be Recognized *
Date of AwardPerformance PeriodBase PeriodBase Period RevenuesPSUsHome Sale RevenuesPSUsHome Sale RevenuesPSUsHome Sale RevenuesFair Value per Share
Jun 20, 2017April 1, 2017 - March 31, 2020April 1, 2016 - March 31, 2017$2.426 billion155,889 $2.547 billion311,779 $2.669 billion623,557 $2.911 billion$25.77 $16,070 $ 
May 23, 2018April 1, 2018 - March 31, 2021 April 1, 2017 - March 31, 2018$2.543 billion157,464 $2.670 billion314,928 $2.797 billion629,856 $3.052 billion$23.68 $14,915 $ 
Aug 5, 2019January 1, 2019 - December 31, 2021January 1, 2018 - December 31, 2018$2.982 billion145,800 $3.131 billion291,600 $3.280 billion583,200 $3.578 billion$30.19 $17,604 $5,505 
Aug 20, 2020January 1, 2020 - December 31, 2022January 1, 2019 - December 31, 2019$3.205 billion145,800 $3.366 billion291,600 $3.526 billion583,200 $3.846 billion$39.79 $23,205 $19,755 
_______________________
* Dollars in thousands
In accordance with ASC 718, the PSUs were valued on the date of grant at their fair value. The fair value of these grants was equal to the closing price of MDC stock on the date of grant less the discounted cash flows of expected future dividends over the respective vesting period (as these PSUs do not participate in dividends). The grant date fair value and maximum potential expense if the Maximum Goals were met for these awards has been provided in the table above. ASC 718 does not permit recognition of expense associated with performance-based stock awards until achievement of the performance targets are probable of occurring.
2017 PSU Grants. The 2017 PSU awards vested on May 5, 2020 at the Maximum Goal following the achievement of the Maximum Goals and certification by the Compensation Committee that the Maximum Goals had been achieved. For the three months ended March 31, 2020, the Company recorded share-based award expense of $1.4 million related to these awards.
2018 PSU Grants. As of March 31, 2021, the Company determined that achievement of the Maximum Goals for these awards was probable and, as such, the Company recorded share-based award expense related to the awards of $1.3 million for the three months ended March 31, 2021. As of March 31, 2020, the Company determined that achievement between the Target and Maximum Goals for these awards was probable and as such, the Company recorded share-based award expense related to the awards of $1.0 million for the three months ended March 31, 2020.
2019 PSU Grants. As of March 31, 2021, the Company determined that achievement of the Maximum Goals for these awards was probable and as such, the Company recorded share-based award expense related to the awards of $1.8 million for the three months ended March 31, 2021. As of March 31, 2020, the Company concluded that achievement of any of the performance metrics had not met the level of probability required to record compensation expense and as such, no expense related to these awards was recognized.
2020 PSU Grants. As of March 31, 2021, the Company determined that achievement between the Target and Maximum Goals for these awards was probable and as such, the Company recorded share-based award expense related to the awards of $3.5 million for the three months ended March 31, 2021.

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16.    Commitments and Contingencies
Surety Bonds and Letters of Credit. We are required to obtain surety bonds and letters of credit in support of our obligations for land development and subdivision improvements, homeowner association dues, warranty work, contractor license fees and earnest money deposits. At March 31, 2021, we had outstanding surety bonds and letters of credit totaling $306.7 million and $145.3 million, respectively, including $108.0 million in letters of credit issued by HomeAmerican. The estimated cost to complete obligations related to these bonds and letters of credit were approximately $122.4 million and $86.2 million, respectively. All letters of credit as of March 31, 2021, excluding those issued by HomeAmerican, were issued under our unsecured revolving credit facility (see Note 18 for further discussion of the revolving credit facility). We expect that the obligations secured by these performance bonds and letters of credit generally will be performed in the ordinary course of business and in accordance with the applicable contractual terms. To the extent that the obligations are performed, the related performance bonds and letters of credit should be released and we should not have any continuing obligations. However, in the event any such performance bonds or letters of credit are called, our indemnity obligations could require us to reimburse the issuer of the performance bond or letter of credit.
We have made no material guarantees with respect to third-party obligations.
Litigation. Due to the nature of the homebuilding business, we have been named as defendants in various claims, complaints and other legal actions arising in the ordinary course of business, including product liability claims and claims associated with the sale and financing of homes. In the opinion of management, the outcome of these ordinary course matters will not have a material adverse effect upon our financial condition, results of operations or cash flows.
Lot Option Contracts. In the ordinary course of business, we enter into lot option purchase contracts (“Option Contracts”), generally through a deposit of cash or a letter of credit, for the right to purchase land or lots at a future point in time with predetermined terms. The use of such land option and other contracts generally allow us to reduce the risks associated with direct land ownership and development, reduces our capital and financial commitments, and minimizes the amount of land inventories on our consolidated balance sheets. In certain cases, these contracts will be settled shortly following the end of the period. Our obligation with respect to Option Contracts is generally limited to forfeiture of the related deposits. At March 31, 2021, we had cash deposits and letters of credit totaling $33.6 million and $9.6 million, respectively, at risk associated with the option to purchase 9,487 lots.

Coronavirus/COVID-19 Pandemic. In response to the pandemic, many state and local governments instituted restrictions that substantially limited the operations of non-essential businesses and the activities of individuals. While many of these restrictions have been or are in the process of being eased, there is still significant uncertainty as a result of the pandemic and its potential to continue to negatively impact the U.S. economy and consumer confidence. We continue to construct, market and sell homes in all markets in which we operate, but increased restrictions could have a negative impact on traffic at our sales centers and model homes, cancellation rates and our ability to physically construct homes. While the extent to which the pandemic will impact our financial results in the coming periods depends on future developments, including whether there are additional outbreaks of COVID-19 and the actions taken to contain or address the virus, the pandemic and its associated impact on the U.S. economy and consumer confidence could have a material impact to the Company’s future results of operations, financial condition and cash flows.
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17.    Derivative Financial Instruments
The derivative instruments we utilize in the normal course of business are interest rate lock commitments and forward sales of mortgage-backed securities, both of which typically are short-term in nature. Forward sales of mortgage-backed securities are utilized to hedge changes in fair value of our interest rate lock commitments as well as mortgage loans held-for-sale not under commitments to sell. For forward sales of mortgage-backed securities, as well as interest rate lock commitments that are still outstanding at the end of a reporting period, we record the changes in fair value of the derivatives in revenues in the financial services section of our consolidated statements of operations and comprehensive income with an offset to other assets or accounts payable and accrued liabilities in the financial services section of our consolidated balance sheets, depending on the nature of the change.
At March 31, 2021, we had interest rate lock commitments with an aggregate principal balance of $490.0 million. Additionally, we had $65.1 million of mortgage loans held-for-sale at March 31, 2021 that had not yet been committed to a mortgage purchaser. In order to hedge the changes in fair value of our interest rate lock commitments and mortgage loans held-for-sale that had not yet been committed to a mortgage purchaser, we had forward sales of securities totaling $320.5 million at March 31, 2021.
For the three months ended March 31, 2021 and 2020, we recorded net gains on derivatives of $9.0 million and $1.0 million, respectively, in revenues in the financial services section of our consolidated statements of operations and comprehensive income.
18.    Lines of Credit
Revolving Credit Facility. We have an unsecured revolving credit agreement (“Revolving Credit Facility”) with a group of lenders which may be used for general corporate purposes. This agreement was amended on December 28, 2020 to (1) increase the aggregate commitment from $1.0 billion to $1.2 billion (the “Commitment”), (2) extend the Revolving Credit Facility maturity of $1.125 billion of the Commitments to December 18, 2025 with the remaining Commitment continuing to termination on December 18, 2023 and (3) provide that the aggregate amount of the commitments may increase to an amount not to exceed $1.7 billion upon our request, subject to receipt of additional commitments from existing or additional lenders and, in the case of additional lenders, the consent of the co-administrative agents. As defined in the Revolving Credit Facility, interest rates on base rate borrowings are equal to the highest of (1) 0.0%, (2) a prime rate, (3) a federal funds effective rate plus 1.50%, and (4) a specified eurocurrency rate plus 1.00% and, in each case, plus a margin that is determined based on our credit ratings and leverage ratio. Interest rates on eurocurrency borrowings are equal to a specified eurocurrency rate plus a margin that is determined based on our credit ratings and leverage ratio. At any time at which our leverage ratio, as of the last day of the most recent calendar quarter, exceeds 55%, the aggregate principal amount of all consolidated senior debt borrowings outstanding may not exceed the borrowing base. There is no borrowing base requirement if our leverage ratio, as of the last day of the most recent calendar quarter, is 55% or less.
The Revolving Credit Facility is fully and unconditionally guaranteed, jointly and severally, by most of our homebuilding segment subsidiaries. The facility contains various representations, warranties and covenants that we believe are customary for agreements of this type. The financial covenants include a consolidated tangible net worth test and a leverage test, along with a consolidated tangible net worth covenant, all as defined in the Revolving Credit Facility. A failure to satisfy the foregoing tests does not constitute an event of default, but can trigger a “term-out” of the facility. A breach of the consolidated tangible net worth covenant (but not the consolidated tangible net worth test) or a violation of anti-corruption or sanctions laws would result in an event of default.
The Revolving Credit Facility is subject to acceleration upon certain specified events of default, including breach of the consolidated tangible net worth covenant, a violation of anti-corruption or sanctions laws, failure to make timely payments, breaches of certain representations or covenants, failure to pay other material indebtedness, or another person becoming beneficial owner of 50% or more of our outstanding common stock. We believe we were in compliance with the representations, warranties and covenants included in the Revolving Credit Facility as of March 31, 2021.
We incur costs associated with unused commitment fees pursuant to the terms of the Revolving Credit Facility. At March 31, 2021 and December 31, 2020, there were $37.3 million and $25.1 million, respectively, in letters of credit outstanding, which reduced the amounts available to be borrowed under the Revolving Credit Facility. At March 31, 2021 and December 31, 2020, we had $10.0 million and $10.0 million, respectively, outstanding under the Revolving Credit Facility. As of March 31, 2021, availability under the Revolving Credit Facility was approximately $1.15 billion.

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Mortgage Repurchase Facility. HomeAmerican has a Master Repurchase Agreement (the “Mortgage Repurchase Facility”) with U.S. Bank National Association (“USBNA”). The Mortgage Repurchase Facility provides liquidity to HomeAmerican by providing for the sale of up to an aggregate of $75 million (subject to increase by up to $75 million under certain conditions) of eligible mortgage loans to USBNA with an agreement by HomeAmerican to repurchase the mortgage loans at a future date. Until such mortgage loans are transferred back to HomeAmerican, the documents relating to such loans are held by USBNA, as custodian, pursuant to the Custody Agreement (“Custody Agreement”), dated as of November 12, 2008, by and between HomeAmerican and USBNA. In the event that an eligible mortgage loan becomes ineligible, as defined under the Mortgage Repurchase Facility, HomeAmerican may be required to repurchase the ineligible mortgage loan immediately. The Mortgage Repurchase Facility terminates on May 20, 2021. The Mortgage Repurchase Facility was amended on September 24, 2020 and again on March 25, 2021 to adjust the commitments to purchase for specific time periods. As part of the amendments, the commitments to purchase were increased to $200 million for the period December 22, 2020 through February 4, 2021 and $175 million for the period March 25, 2021 through April 22, 2021.

The maximum aggregate commitment of the Mortgage Repurchase Facility was temporarily increased by $75 million on March 29, 2021 effective through April 26, 2021. The maximum aggregate commitment of the Mortgage Repurchase Facility was temporarily increased by $50 million on December 28, 2020 effective through January 27, 2021. At March 31, 2021 and December 31, 2020 HomeAmerican had $217.5 million and $202.4 million, respectively, of mortgage loans that HomeAmerican was obligated to repurchase under the Mortgage Repurchase Facility. Mortgage loans that HomeAmerican is obligated to repurchase under the Mortgage Repurchase Facility are accounted for as a debt financing arrangement and are reported as mortgage repurchase facility in the consolidated balance sheets. Advances under the Mortgage Repurchase Facility carry a price range that is based on a LIBOR rate or successor benchmark rate.
The Mortgage Repurchase Facility contains various representations, warranties and affirmative and negative covenants that we believe are customary for agreements of this type. The negative covenants include, among others, (i) a minimum Adjusted Tangible Net Worth requirement, (ii) a maximum Adjusted Tangible Net Worth ratio, (iii) a minimum adjusted net income requirement, and (iv) a minimum Liquidity requirement. The foregoing capitalized terms are defined in the Mortgage Repurchase Facility. We believe HomeAmerican was in compliance with the representations, warranties and covenants included in the Mortgage Repurchase Facility as of March 31, 2021.
19.    Related Party Transactions
We contributed $2.2 million in cash to the MDC/Richmond American Homes Foundation (the “Foundation”) during the three months ended March 31, 2021. The Foundation is a non-profit organization operated exclusively for charitable, educational and other purposes beneficial to social welfare within the meaning of Section 501(c)(3) of the Internal Revenue Code. The following Directors and/or officers of the Company served as directors of the Foundation at March 31, 2021, all of whom serve without compensation: