Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2018

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

. The 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) include the accounts of MDC and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain prior year balances have been reclassified to conform to the current year’s presentation.

Business Description, Policy [Policy Text Block]

Description of Business

. We have homebuilding operations in Arizona, California, Colorado, Florida, Maryland, Nevada, Utah, Virginia, Washington and Oregon. The primary functions of our homebuilding operations include land acquisition and development, home construction, purchasing, marketing, merchandising, sales and customer service. We build and sell primarily single-family detached homes, which are designed and built to meet local customer preferences. We are the general contractor for all of our projects and retain subcontractors for site development and home construction.

Our financial services operations consist of HomeAmerican Mortgage Corporation (“HomeAmerican”), which originates mortgage loans, primarily for our homebuyers, American Home Insurance Agency, Inc. (“American Home Insurance”), which offers

third

-party insurance products to our homebuyers, and American Home Title and Escrow Company (“American Home Title”), which provides title agency services to the Company and our homebuyers in Colorado, Florida, Maryland, Nevada and Virginia. The financial services operations also include Allegiant Insurance Company, Inc., A Risk Retention Group (“Allegiant”), which provides insurance coverage primarily to our homebuilding subsidiaries on homes that have been delivered and most of our subcontractors for completed work on those delivered homes, and StarAmerican Insurance Ltd. (“StarAmerican”), a wholly owned subsidiary of MDC, which is a re-insurer of Allegiant claims.

Basis of Accounting, Policy [Policy Text Block]

Presentation

. Our balance sheet presentation is unclassified due to the fact that certain assets and liabilities have both short and long-term characteristics.

Use of Estimates, Policy [Policy Text Block]

Use of Accounting Estimates

. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

. The Company periodically invests funds in highly liquid investments with an original maturity of

three

months or less, such as U.S. government securities, commercial bank deposits, commercial paper, certificates of deposit, money market funds and time deposits, which are included in cash and cash equivalents in the consolidated balance sheets and consolidated statements of cash flows.

Investment, Policy [Policy Text Block]

Equity

securities

. Our equity securities consist of holdings in common stock, preferred stock and exchange traded funds. As of

December 31, 2018,

all of our equity securities were recorded at fair value with all changes in fair value recorded to net gain or loss on marketable equity securities in the financial services section of our consolidated statements of operations and comprehensive income. As of

December 31, 2017,

all of our equity securities were treated as available-for-sale investments and as such, were recorded at fair value with all changes in fair value initially recorded through accumulated other comprehensive income (“AOCI”), subject to an assessment to determine if an unrealized loss, if applicable, was other-than-temporary. See Note

for further discussion of adoption of new accounting standards.

Debt

securities

. Our debt securities consist of U.S. government securities. As of

December 31, 2018

and

December 31, 2017,

all of our debt securities were treated as available-for-sale investments and, as such, are recorded at fair value with all changes in fair value initially recorded through AOCI, subject to an assessment to determine if any unrealized loss, if applicable, is other-than-temporary.

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block]

Restricted Cash

. We receive cash earnest money deposits from our customers who enter into home sale contracts. In certain states we are restricted from using such deposits for general purposes, unless we take measures to release state imposed restrictions on such deposits received from homebuyers, which

may

include posting blanket surety bonds. We had

$6.4

million and

$8.8

million in restricted cash related to homebuyer deposits at

December 31, 2018

and

2017,

respectively.

Receivables, Policy [Policy Text Block]

Trade and Other

Receivables

. Trade and other receivables primarily includes home sale receivables, which reflects cash to be received from title companies or outside brokers associated with closed homes. Generally, we will receive cash from title companies and outside brokers within a few days of the home being closed. At

January 1, 2018

and

December 31, 2018,

receivables from contracts with customers were

$32.6

million and

$34.8

million, respectively, and are included in trade and other receivables on the accompanying consolidated balance sheets.

Finance, Loan and Lease Receivables, Held-for-sale, Policy [Policy Text Block]

Mortgage Loans Held-for-Sale, net

. Mortgage loans held-for-sale are recorded at fair value based on quoted market prices and estimated market prices received from a

third

-party. Using fair value allows an offset of the changes in fair values of the mortgage loans and the derivative instruments used to hedge them without having to comply with the requirements for hedge accounting.

Inventory, Real Estate, Policy [Policy Text Block]

Inventories

. 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: (

) land costs; (

) land development costs; (

) entitlement costs; (

) capitalized interest; (

) engineering fees; and (

) 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: (

) land costs transferred from land and land under development; (

) direct construction costs associated with a house; (

) real property taxes, engineering fees, permits and other fees; (

) capitalized interest; and (

) 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.

In accordance with Accounting Standards Codification (“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

inputs (see Note

Fair Value Measurements,

in the notes to the financial statements for definitions of fair value 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

inputs.

If land is classified as held for sale, in accordance with ASC

360,

we measure it 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

input (see Note

Fair Value

Measurements

, for definitions of fair value inputs). 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. 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.

Costs Related to Sales Facilities.

Subsequent to the adoption of ASC

340

40,

Other Assets and Deferred Costs – Contracts with Customers

, on

January 1, 2018,

certain marketing costs related to model homes or on-site sales facilities are either recorded as inventory, capitalized as property and equipment, or expensed as incurred. See Note

for further discussion of adoption of new accounting standards. Costs related to interior and exterior upgrades to the home that will be sold as part of the home, such as wall treatments and additional upgraded landscaping, are recorded as housing completed or under construction. Costs to furnish and ready the model home or on-site sales facility that will

not

be sold as part of the model home, such as furniture, construction of the sales facility parking lot or construction of the sales center, are capitalized as property and equipment, net. Other costs incurred related to the marketing of the community and readying the model home for sale are expensed as incurred.

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment, net

. Property and equipment is carried at cost less accumulated depreciation. For property and equipment related to on-site sales facilities, depreciation is recorded using the units of production method as homes are delivered. For all other property and equipment, depreciation is recorded using a straight-line method over the estimated useful lives of the related assets, which range from

years. Depreciation and amortization expense for property and equipment was

$20.5

million,

$4.5

million and

$4.6

million for the years ended

December 31, 2018,

2017

and

2016,

respectively which is recorded in selling, general and administrative expenses in the homebuilding or financial services sections of our consolidated statements of operations and comprehensive income.

The following table sets forth the cost and carrying value of our homebuilding property and equipment by major asset category.

			Accumulated
			Depreciation and			Carrying
	Cost		Amortization			Value
December 31, 2018:	(Dollars in thousands)
Sales facilities (Note 2)	$	59,374	$	(26,920	)	$	32,454
Airplane		31,013		(9,488	)		21,525
Computer software and equipment		21,507		(19,374	)		2,133
Leasehold improvements		6,827		(5,188	)		1,639
Other		1,577		(1,161	)		416
Total	$	120,298	$	(62,131	)	$	58,167

December 31, 2017:
Airplane	$	30,423	$	(8,866	)	$	21,557
Computer software and equipment		20,287		(17,611	)		2,676
Leasehold improvements		6,600		(4,765	)		1,835
Other		1,361		(990	)		371
Total	$	58,671	$	(32,232	)	$	26,439

Income Tax, Policy [Policy Text Block]

Deferred Tax Asset

, net

. Deferred income taxes reflect the net tax effects of temporary differences between (

) the carrying amounts of the assets and liabilities for financial reporting purposes and (

) the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using current enacted tax rates in effect in the years in which those temporary differences are expected to reverse. A valuation allowance is recorded against a deferred tax asset if, based on the weight of available evidence, it is more-likely-than-

not

(a likelihood of more than

50%

) that some portion, or all, of the deferred tax asset will

not

be realized.

Consolidation, Variable Interest Entity, Policy [Policy Text Block]

Variable Interest Entities

. In accordance with ASC Topic

810,

Consolidation

(“ASC

810”

), we analyze our land option contracts and other contractual arrangements to determine whether the corresponding land sellers are variable interest entities (“VIEs”) and, if so, whether we are the primary beneficiary. Although we do

not

have legal title to the optioned land, ASC

810

requires a company to consolidate a VIE if the company is determined to be the primary beneficiary. In determining whether we are the primary beneficiary, we consider, among other things, whether we have the power to direct the activities of the VIE that most significantly impact VIE’s economic performance, including, but

not

limited to, determining or limiting the scope or purpose of the VIE, selling or transferring property owned or controlled by the VIE, or arranging financing for the VIE. We also consider whether we have the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. We have concluded that, as of

December 31, 2018

and

2017,

we were

not

the primary beneficiary of any VIEs from which we are purchasing land under land option contracts.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

Goodwill.

In accordance with ASC Topic

350,

Intangibles–Goodwill and Other

(“ASC

350”

)

, we evaluate goodwill for possible impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount of such assets

may

not

be recoverable. We use a

three

-step process to assess the realizability of goodwill. The

first

step is a qualitative assessment that analyzes current economic indicators associated with a particular reporting unit. For example, we analyze changes in economic, market and industry conditions, business strategy, cost factors, and financial performance, among others, to determine if there are indicators of a significant decline in the fair value of a particular reporting unit. If the qualitative assessment indicates a stable or improved fair value,

further testing is required.

If a qualitative assessment indicates it is more likely than

not

that the fair value of a reporting unit is less than its carrying amount, we will proceed to the

second

step where we calculate the fair value of a reporting unit based on discounted future probability-weighted cash flows. If this step indicates that the carrying value of a reporting unit is in excess of its fair value, we will proceed to the

third

step where the fair value of the reporting unit will be allocated to assets and liabilities as they would in a business combination. Impairment occurs when the carrying amount of goodwill exceeds its estimated fair value calculated in the

third

step.

Based on our analysis, we have concluded that as of

December 31, 2018

and

2017,

our goodwill was

not

impaired.

Income Tax Uncertainties, Policy [Policy Text Block]

Liability for Unrecognized Tax Benefits.

ASC Topic

740,

Income Taxes

, regarding liabilities for unrecognized tax benefits provides guidance for the recognition and measurement in financial statements of uncertain tax positions taken or expected to be taken in a tax return.

The evaluation of a tax position is a

two

-step process, the

first

step being recognition. We determine whether it is more-likely-than-

not

that a tax position will be sustained upon tax examination, including resolution of any related appeals or litigation, based on the technical merits of the position. The technical merits of a tax position derive from both statutory and judicial authority (legislation and statutes, legislative intent, regulations, rulings, and case law) and their applicability to the facts and circumstances of the tax position. If a tax position does

not

meet the more-likely-than-

not

recognition threshold, the benefit of that position is

not

recognized in the financial statements.

The

second

step is measurement. A tax position that meets the more-likely-than-

not

recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than

percent likely of being realized upon ultimate resolution with a taxing authority. Once the gross unrecognized tax benefit is determined, we also accrue for any interest and penalties, as well as any offsets expected from resultant amendments to federal or state tax returns. We record the aggregate effect of these items in income tax expense in the consolidated statements of operations and comprehensive income. To the extent this tax position would be offset against a similar deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed, the liability is treated as a reduction to the related deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward. Otherwise, we record the corresponding liability in accrued liabilities in our consolidated balance sheets.

Standard Product Warranty, Policy [Policy Text Block]

Warranty Accrual

. Our homes are sold with limited

third

-party warranties. 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.

Warranty payments are recorded against the warranty accrual. Additional reserves

may

be established for known, unusual warranty-related expenditures

not

covered through the independent warranty accrual analysis performed by us. Warranty payments incurred for an individual house

may

differ from the related reserve established for the home at the time it was closed. The actual disbursements for warranty claims are evaluated in the aggregate to determine if an adjustment to the historical warranty accrual should be recorded.

We assess the reasonableness and adequacy of the reserve and the per-unit reserve amount originally included in home cost of sales, as well as the timing of the reversal of any excess reserve on a quarterly basis, using historical payment data and other relevant information. Our warranty accrual is included in accrued 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.

Liability Reserve Estimate, Policy [Policy Text Block]

Insurance 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. See Note

to the Consolidated Financial Statements.

Self Insurance Reserve [Policy Text Block]

Reserves for Construction Defect Claims.

The establishment of reserves for estimated losses to be incurred by our homebuilding subsidiaries associated with (

) the self-insured retention (“SIR”) portion of construction defect claims that are expected to be covered under insurance policies with Allegiant and (

) 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 established 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. See Note

to the Consolidated Financial Statements.

Commitments and Contingencies, Policy [Policy Text Block]

Litigation Reserves.

We and certain of our subsidiaries have been named as defendants in various cases. We reserve for estimated exposure with respect to these cases based upon currently available information on each case. See Note

to the Consolidated Financial Statements.

Derivatives, Policy [Policy Text Block]

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 that are

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.

December 31, 2018

and

2017,

we had interest rate lock commitments with aggregate principal balances of

$101.1

million and

$66.6

million, respectively, at average interest rates of

4.78%

and

4.15%,

respectively. In addition, we had

$17.8

million and

$33.4

million of mortgage loans held-for-sale at

December 31, 2018

and

2017,

respectively, that had

not

yet been committed to a mortgage purchaser. In order to economically hedge the changes in fair value of our interest rate lock commitments and mortgage loans held-for-sale which had

not

yet been committed to a mortgage purchaser, we had forward sales of securities totaling

$65.5

million and

$73.0

million at

December 31, 2018

and

2017,

respectively.

For the years ended

December 31, 2018,

2017

and

2016,

we recorded net gains (losses) on our derivatives of

$0.4

million, $(

1.7

) million and

$1.5

million, respectively. For further discussion of our policies regarding interest rate lock commitments, see our “Revenue Recognition for HomeAmerican” accounting policy section below.

Revenue from Contract with Customer [Policy Text Block]

Revenue Recognition for Homebuilding Segments.

We recognize home sale revenues from home deliveries when we have satisfied the performance obligations within the sales agreement, which is generally when title to and possession of the home are transferred to the buyer at the home closing date. Revenue from a home delivery includes the base sales price and any purchased options and upgrades and is reduced for any sales price incentives.

We generally do

not

record the sale of a home or recognize the associated revenue if all of the following criteria are present: (

) HomeAmerican originates the mortgage loan and has

not

sold the mortgage loan, or loans, as of the end of the pertinent reporting period; and (

) the homebuyer does

not

meet certain collectability thresholds, based on the type of mortgage loan, related to their credit score, debt to income ratio and loan to value ratio. The deferral is subsequently recognized at the time HomeAmerican sells the respective loan to a

third

-party purchaser. In the event the gross margin is a loss, we recognize such loss at the time the home is closed.

In certain states where we build, we are

not

always able to complete certain outdoor features (such as landscaping or pools) prior to closing the home. To the extent these separate deliverables are

not

complete upon the closing of a home, we defer home sale revenues related to incomplete outdoor features, and recognize that revenue upon completion of the outdoor features.

Revenue Recognition for HomeAmerican

. Revenues recorded by HomeAmerican primarily reflect (

) origination fees and (

) the corresponding sale, or expected future sale, of a loan, which will include the estimated earnings from either the release or retention of a loan’s servicing rights. Origination fees are recognized when a loan is originated. When an interest rate lock commitment is made to a customer, we record the expected gain on sale of the mortgage, plus the estimated earnings from the expected sale of the associated servicing rights, adjusted for a pull-through percentage (which is defined as the likelihood that an interest rate lock commitment will be originated), as revenue. As the interest rate lock commitment gets closer to being originated, the expected gain on the sale of that loan plus its servicing rights is updated to reflect current market value and the increase or decrease in the fair value of that interest rate lock commitment is recorded through revenues. At the same time, the expected pull-through percentage of the interest rate lock commitment to be originated is updated (typically an increase as the interest lock commitment gets closer to origination) and, if there has been a change, revenues are adjusted as necessary. After origination, our mortgage loans, generally including their servicing rights, are sold to

third

-party purchasers in accordance with sale agreements entered into by us with a

third

-party purchaser of the loans. We make representations and warranties with respect to the status of loans transferred in the sale agreements. The sale agreements generally include statements acknowledging the transfer of the loans is intended by both parties to constitute a sale. Sale of a mortgage loan has occurred when the following criteria, among others, have been met: (

) fair consideration has been paid for transfer of the loan by a

third

party in an arms-length transaction, (

) all the usual risks and rewards of ownership that are in substance a sale have been transferred by us to the

third

party purchaser; and (

) we do

not

have a substantial continuing involvement with the mortgage loan.

We measure mortgage loans held-for-sale at fair value with the changes in fair value being reported in earnings at each reporting date. The impact of recording changes in fair value to earnings did

not

have a material impact on our financial position, results of operations or cash flows during the years ended

December 31, 2018,

2017

2016.

Our net gains on the sale of mortgage loans were

$41.6

million,

$39.0

million and

$34.0

million for the years ended

December 31, 2018,

2017

and

2016,

respectively, and are included as a component of revenues in the financial services section of the consolidated statements of operations and comprehensive income.

Revenue from Contract With Customer, Cost of Sales, Policy [Policy Text Block]

Home Cost of Sales

. Home cost of sales includes the specific construction costs of each home and all applicable land acquisition, land development and related costs, warranty costs and finance and closing costs, including closing cost incentives. We use the specific identification method for the purpose of accumulating home construction costs and allocate costs to each lot within a subdivision associated with land acquisition and land development based upon relative fair value of the lots prior to home construction. Lots within a subdivision typically have comparable fair values, and, as such, we generally allocate costs equally to each lot within a subdivision. We record all home cost of sales when a home is closed and performance obligations have been completed on a house-by-house basis.

When a home is closed, we

may

not

have paid for all costs necessary to complete the construction of the home. This includes (

) construction that has been completed on a house but has

not

yet been billed or (

) work still to be performed on a home (such as limited punch-list items or certain outdoor features). For each of these items, we create an estimate of the total expected costs to be incurred and, with the exclusion of outdoor features, the estimated total costs for those items, less any amounts paid to date, are included in home cost of sales. Actual results could differ from such estimates. For incomplete outdoor features, we will defer the revenue and any cost of sales on this separate stand-alone deliverable until complete.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-Based Compensation Expense

. In accordance with ASC Topic

718,

Compensation—Stock Compensation

(“ASC

718”

), stock-based compensation expense for all share-based payment awards is based on the grant date fair value. For stock option awards granted with just service and/or performance conditions, we estimate the fair value using a Black-Scholes option pricing model. For any stock option awards granted that contain a market condition, we estimate the fair value using a Monte Carlo simulation model. We recognize expense for share-based payment awards based on their varying vesting conditions as follows:

●

Awards with service-based vesting conditions only – Expense is recognized on a straight-line basis over the requisite service period of the award.

●

Awards with performance-based vesting conditions – Expense is

not

recognized until it is determined that it is probable the performance-based conditions will be met. When achievement of a performance-based condition is probable, a catch-up of expense will be recorded as if the award had been vesting on a straight-line basis from the award date. The award will continue to be expensed on a straight-line basis until the probability of achieving the performance-based condition changes, if applicable.

●

Awards with market-based vesting conditions (“Market-Based”) – Expense is recognized on a straight-line basis over the requisite service period, which is the lesser of the derived service period or the explicit service period, if

one

is present. However, if the market condition is satisfied prior to the end of the requisite service period, we will accelerate all remaining expense to be recognized.

An annual forfeiture rate is estimated at the time of grant for all share-based payment awards that contain service and/or performance conditions. That rate is revised, if necessary, in subsequent periods if the actual forfeiture rate differs from our estimate.

Earnings Per Share, Policy [Policy Text Block]

Earnings (Loss) Per Common Share.

For purposes of calculating earnings (loss) per share (“EPS”), a company that has participating security holders (for example, holders of unvested restricted stock that have non-forfeitable dividend rights) is required to utilize the

two

-class method for calculating earnings per share 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 further adjusted to include the effect of potentially dilutive stock options outstanding.

New Accounting Pronouncements, Policy [Policy Text Block]

Adoption of New Accounting Standards

Accounting Standards Update (“ASU”)

2018

02,

Income Statement – Reporting Comprehensive Income (Topic

220

)

(“ASU

2018

02”

). ASU

2018

allows for a reclassification from accumulated other comprehensive income to retained earnings for certain tax effects resulting from the Tax Cuts and Jobs Act that was signed into law in

December

2017

(the “Act”). ASU

2018

is effective for our interim and annual reporting periods beginning

January 1, 2018,

and is to be applied either (a) at the beginning of the period of adoption or (b) retrospectively to each period in which the income tax effects of the Act related to items remaining in accumulated other comprehensive income are recognized. On

January 1, 2018,

we adopted ASU

2018

by recognizing an adjustment to the opening balance of retained earnings for certain tax effects related to net unrealized gains on equity investments. The comparative information has

not

been restated and continues to be reported under the accounting standards in effect for the period. Please see the table below for a summary of all transition adjustments from adoption of new accounting guidance.

ASU

2016

18,

Statement of Cash Flows (Topic

230

): Restricted Cash

consensus of the FASB Emerging Issues Task Force

(“ASU

2016

18”

). ASU

2016

amends ASC

830,

Statement of Cash Flows

and requires restricted cash to be included with cash and cash equivalents when reconciling the beginning and ending amounts on the statements of cash flows. In certain states, we are restricted from using deposits received from our customers who enter into home sale contracts for general purposes unless we take measures to release state imposed restrictions on such deposits received from homebuyers, which

may

include posting blanket surety bonds. As a result, cash deposits with such restrictions are classified as restricted cash. On

January 1, 2018,

we adopted ASU

2016

using the retrospective transition method. The comparative information in our statements of cash flows has been restated and the impact from adoption of this guidance was

not

material to our statements of cash flows.

ASU

2016

15,

Statement of Cash Flows (Topic

230

): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)

(“ASU

2016

15”

). ASU

2016

amends ASC

830,

Statement of Cash Flows

and clarifies guidance on the classification of certain cash receipts and payments in the statements of cash flows. On

January 1, 2018,

we adopted ASU

2016

using the retrospective transition method. There were

items in our comparative statements of cash flows that required restatement as a result of the adoption of ASU

2016

and the impact from adoption of this guidance was

not

material to our statements of cash flows.

ASU

2016

01,

Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities

(“ASU

2016

01”

). On

January 1, 2018,

we adopted ASU

2016

using a modified retrospective transition method. Prior to this amendment, our equity investments with readily determinable fair values were classified as available for sale with changes in fair value being reported through other comprehensive income. Under the amended standard, any changes in fair value of equity investments with readily determinable fair values are now recognized in net income. We adopted the changes from ASU

2016

by recognizing an adjustment to beginning retained earnings for our net unrealized gains/losses on equity investments with readily determinable fair values. The comparative information has

not

December 31, 2018

was a decrease of approximately

$1.6

million.

ASU

2014

09,

Revenue from Contracts with Customers

(“ASU

2014

09”

). In

May 2014,

ASU

2014

was issued which created ASC Topic

606,

Revenue from Contracts with Customers

(“ASC

606”

) and is a comprehensive new revenue recognition model. In addition, ASU

2014

amended ASC

340,

Other Assets and Deferred Costs

by adding ASC

340

40,

Other Assets and Deferred Costs – Contracts with Customers

(“ASC

340

40”

). On

January 1, 2018,

we adopted ASC

606

and ASC

340

using the modified retrospective transition method applied to contracts that were

not

completed as of

January 1, 2018.

We recognized the cumulative effect of initially applying ASC

606

and ASC

340

as an adjustment to the opening balance of retained earnings. The comparative information has

not

606

and ASC

340

40,

there was

not

a material impact to our consolidated balance sheets or consolidated statements of operations and comprehensive income.

As substantially all of our contracts are completed within a year, we do

not

disclose the value of unsatisfied performance obligations.

The cumulative effect of the changes made to our consolidated

January 1, 2018

balance sheet for the adoption of ASU

2018

02,

ASU

2016

and ASU

2014

were as follows:

	Balance at December 31, 2017		Adjustments due to ASU 2018-02			Adjustments due to ASU 2016-01			Adjustments due to ASU 2014-09			Balance at January 1, 2018
Balance Sheet	(Dollars in thousands)
Assets:
Homebuilding:
Housing completed or under construction	$	936,685	$	-		$	-		$	7,406		$	944,091
Property and equipment, net		26,439		-			-			25,270			51,709
Prepaid and other assets		75,666		-			-			(34,227	)		41,439
Deferred tax asset, net		41,480		-			-			(573	)		40,907

Financial Services:
Other assets		9,617		-			-			3,898			13,515

Stockholders' Equity:
Retained earnings		258,164		(860	)		4,852			1,774			263,930
Accumulated other comprehensive income		3,992		860			(4,852	)		-			-

Accounting Standards Issued But

Not

Yet Adopted

February 2016,

the Financial Accounting Standards Board (“FASB”) issued ASU

2016

02,

Leases

(“ASU

2016

02”

), which is codified in ASC

842,

Leases

(“ASC

842”

) and supersedes current lease guidance in ASC

840.

ASC

842

requires a lessee to recognize a right-of-use asset and a corresponding lease liability for substantially all leases. The lease liability will be equal to the present value of the remaining lease payments while the right-of-use asset will be similarly calculated and then adjusted for initial direct costs. In addition, ASC

842

expands the disclosure requirements to increase the transparency and comparability of the amount, timing and uncertainty of cash flows arising from leases. The Company will be adopting the new standard effective

January 1, 2019

using the modified retrospective transition method by recognizing a cumulative effect adjustment to the opening balance of retained earnings. We will

not

apply the standard to the comparative periods presented in the year of adoption. We will elect available practical expedients permitted under the guidance, which among other items, allow the Company to carry forward its historical lease classification and

not

reassess leases for the definition of lease under the new standard. Upon the adoption of ASC

842,

we do

not

expect to record a right-of-use asset and related lease liability for leases with an initial term of

months or less and we plan to account for lease and non-lease components as a single lease component. We are still assessing the potential impact that ASC

842

will have on our financial statements and disclosures, but we expect to recognize net homebuilding liabilities of

$33.6

million, primarily related to a lease liability of

$34.3

million, and net homebuilding assets of

$33.5

million, primarily related to a right-of-use asset of

$33.2

million. The cumulative effect adjustment to the opening balance of retained earnings is expected to be a decrease of

$0.1

million. The actual impact

may

differ from our estimate. We do

not

expect there will be a material impact to our consolidated statements of operations and comprehensive income or consolidated cash flows as a result of adoption of this new guidance.

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

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. ASU

2016

is effective for our interim and annual reporting periods beginning

January 1, 2020,

and is to be applied using a modified retrospective transition method. Earlier adoption is permitted. We do

not

plan to early adopt ASU

2016

and with our current holdings of financial instruments that are subject to credit losses, we do

not

believe adoption of this guidance will be material to our financial statements.