Note 3 - Segment Reporting

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

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 Chief Executive Officer and the Chief Operating Officer.

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 and Washington)

● Mountain (Colorado and Utah)

● East (Virginia, Florida and Maryland, which includes Pennsylvania and New Jersey)

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 our homebuilding operations.

The following table summarizes home and land sale revenues for our homebuilding operations and revenues for our financial services operations.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
	(Dollars in thousands)
Homebuilding
West	$	284,589	$	229,743	$	745,995	$	624,261
Mountain		192,876		147,166		521,034		428,080
East		100,547		78,737		279,238		242,932
Total home and land sale revenues	$	578,012	$	455,646	$	1,546,267	$	1,295,273
Financial Services
Mortgage operations	$	11,294	$	7,999	$	28,866	$	21,752
Other		6,114		4,842		15,382		13,100
Total financial services revenues	$	17,408	$	12,841	$	44,248	$	34,852

The

following table summarizes pretax income (loss) for our homebuilding and financial services operations:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2016			2015			2016			2015
	(Dollars in thousands)
Homebuilding
West	$	18,392		$	16,708		$	43,830		$	40,808
Mountain		18,856			12,849			49,688			35,239
East		(2,267	)		(691	)		3,600			(1,093	)
Corporate		(7,306	)		(13,470	)		(29,381	)		(27,995	)
Total homebuilding pretax income	$	27,675		$	15,396		$	67,737		$	46,959
Financial Services
Mortgage operations	$	6,723		$	5,354		$	16,491		$	12,243
Other		3,654			2,908			8,555			9,664
Total financial services pretax income	$	10,377		$	8,262		$	25,046		$	21,907
Total pretax income	$	38,052		$	23,658		$	92,783		$	68,866

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, marketable securities and deferred tax assets. The assets in our financial services segment consist mostly of cash and cash equivalents, marketable securities and mortgage loans held-for-sale.

	September 30,		December 31,
	2016		2015
	(Dollars in thousands)
Homebuilding assets
West	$	1,083,419	$	991,393
Mountain		588,976		536,831
East		285,528		324,457
Corporate		332,483		393,712
Total homebuilding assets	$	2,290,406	$	2,246,393
Financial services assets
Mortgage operations	$	129,545	$	123,176
Other		54,319		46,330
Total financial services assets	$	183,864	$	169,506
Total assets	$	2,474,270	$	2,415,899