Ladies and gentlemen, thank you for standing by. Welcome to M/I Homes' first quarter earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. If you wish to remove yourself from the queue, please press the pound key. If you require any further assistance, please press star zero. Thank you. I would now like to hand the conference over to your host, Mr. Phil Creek. Sir, the floor is yours.
Thank you, and thanks for joining us today. Joining me on the call from various locations today are Bob Schottenstein, our CEO and President, Tom Mason, EVP, Derek Klutch, President of our mortgage company, Anne Marie Hunker, VP Corporate Controller, and Kevin Haake, Senior VP. First, to address regulation fair disclosure, we encourage you to ask any questions regarding issues that you consider material during this call because we are prohibited from discussing significant non-public items with you directly. As to forward-looking statements, I want to remind everyone that the cautionary language about forward-looking statements contained in today's press release also applies to any comments made during this call, including comments related to COVID-19. Be advised that the company undertakes no obligation to update any forward-looking statements made during this call. During this call, we disclose certain non-GAAP financial measures.
A presentation of the most directly comparable financial measure calculated in accordance with GAAP and a reconciliation of the differences between the non-GAAP financial measure and the GAAP measure, which was included in our earnings release issued earlier today, that is available on our website. With that, I'll turn the call over to Bob.
Thank you, Phil, and good afternoon, and thank you all for joining us to review our first quarter results. We had an outstanding first quarter highlighted by record income, record revenue, record deliveries, record new contracts, and record backlog. However, as we report our results today, we all know that the world is dramatically different now than it was for most of the first quarter, and we are all continuing to grapple with the effects of the COVID-19 pandemic, both in terms of the widespread illness and loss of life that are impacting so many throughout our country, as well as the severe financial effects caused by a substantial shutdown of our economy. This is a time unlike anything we have ever faced, since early March, our primary concern has been and continues to be the health and well-being of our employees, trade partners, customers, and their families.
We are closely monitoring updates from the CDC, along with guidance from state, local, and federal authorities, continually adapting our operations and business to safeguard our employees, customers, and work environments. Today, the vast majority of our employees are operating remotely, all are practicing appropriate distancing. At the same time, we're doing everything we can as a company to safely continue selling, building, and delivering homes. In order to operate and to continue to operate in the current environment, we are leveraging our existing digital platform and tools continuing to use creative ways to interact with our customers as well as our business partners. Home building and mortgage services have been designated as essential in all of our markets, with the exception of Detroit. Detroit accounts for slightly less than 5% of our business.
Most of our communities, greater than 95%, our sales and construction efforts therein remain open for business. That said, where we are open, our operations are constrained. Our sales offices are now open by appointment only. So far, this has been a somewhat effective method of selling, clearly, our business has been impacted as there has been a marked decline in foot traffic and sales since the last half of March. Having said that, we are encouraged by the fact that in most of our markets, our online traffic, particularly since mid-March, has increased significantly year-over-year. Our success in cultivating online leads and converting them to appointments is a critically important part of our operations has been for some time. This is something that we give great focus to day in, day out.
At the beginning of the year, housing conditions were very good, as good as we've seen in a long time, we entered 2020 with tremendous operating momentum. As Phil will discuss shortly, we had record-setting sales in both January and February, up until mid-March, that trend continued. As noted in this morning's release, the COVID-19 pandemic first began to impact our business in the second half of March. Traffic declined, and our cancellation rate increased to 28%, resulting in our new contracts being down roughly 50% for the last half of March compared to prior-year levels. In recent weeks, we've seen a slight but noticeable improvement in conditions, reflecting the improvement in the so-called flattening of the pandemic curve and the early stages of return to work for select businesses in select markets.
Specifically, our new contracts for the first three weeks of April have improved, aided by a slight decline in the cancellation rate. Specifically, April month-to-date new contracts are roughly 35% below the prior-year level. Because of the unknown overall effects of an economic slowdown on home buyer demand, we have taken a number of measures to extend or delay a significant number of our land purchases and lot takedowns across our markets. In a few cases, we've actually terminated contracts. We've also pulled back on our pace of land development to align with our expected needs. We will continue to monitor market conditions and our pace of home sales and deliveries, will adjust our land and related overhead spend accordingly. In a similar fashion, we also quickly pulled back on starting the construction of new inventory or so-called spec homes that are not subject to a purchase contract.
We will continue moving forward to be very selective in starting these inventory homes. Overall, it's safe to say that we're managing very carefully, leaning on the extensive experience of our management teams in each of our markets to continue to execute and move forward in these unprecedented times. I'll mention just a few highlights of our first quarter results before turning it over to Phil, who will describe them in more detail. As I mentioned at the outset, we had many records. We achieved record first quarter revenue of $578 million, an increase of 20% from last year's first quarter, driven by a first quarter record level of 1,495 home closings during the quarter. This was 26% better than a year ago. Pre-tax income for the quarter was 76% better than a year ago, and net income for the quarter increased by 79%.
Our diluted earnings per share increased to $1.09, compared to $0.63 per share last year. We have continued to expand our most affordably priced Smart Series line of homes, which has been very successful for us in achieving both above average pace and above average margin. At the end of the quarter, our Smart Series homes were offered in 63 of our active communities, or 28% of total M/I communities, and that represents all 15 of our markets and aggregates 30% of our total sales reported during the first quarter. Companywide, our backlog sales value at the end of the quarter was an all-time record $1.3 billion. Units in backlog were up 23% to a quarterly record of 3,265 homes, while the average sale price of backlog was relatively flat, down 1%, due to a shift in mix and the impact of our Smart Series communities.
Importantly, our balance sheet and liquidity remained very strong. We ended the quarter with shareholders' equity in excess of $1 billion, and a very healthy home building debt-to-capital ratio of 39%, down significantly from 47% at the end of the first quarter a year ago. I will wrap up my comments by expressing my deep appreciation for all our employees and our management teams across our divisions for their perseverance and capabilities in meeting this situation head on and for their dedication and resilience. We entered this crisis in the best shape in company history, and as I previously mentioned, with significant operating momentum. I have every confidence that we will get through this and emerge as an even stronger and better home building company. With that, I'll turn it over to Phil.
Thanks, Bob. New contracts for the first quarter increased 27% to 2,089, an all-time quarterly record, compared to 1,644 for last year's first quarter. Our sales pace per community improved to 3.1 per month in the first quarter from 2.6 in quarter one last year. Our new contracts were up 66% in January, up 58% in February, and down 17% in March. In the second half of March, our new contracts were down 50%, and for the first three weeks of April, our new contracts were down 35%. Our cancellation rate was 28% for the last half of March and 26% for the first three weeks of April. As to our buyer profile, about 50% of our first quarter sales were to first-time buyers compared to 49% in last year's fourth quarter.
About 50% of our first quarter sales were inventory homes compared to 44% in last year's fourth quarter. Our community count was 223 at the end of the first quarter, up 4% versus 2019's first quarter. The breakdown by region is 98 in the northern region and 125 in the southern region. During the quarter, we opened 17 new communities while closing 19. Due to the uncertainty of the current environment, we are withdrawing our previous estimate and not providing estimated information for the remainder of the year. We delivered a first quarter record of 1,495 homes in the first quarter, delivering 56% of our backlog, compared to 54% a year ago. Revenue increased 20% in the first quarter, reaching a first quarter record of $578 million.
Our average closing price for the first quarter was $374,000, a 5% decrease when compared to last year's first quarter average closing price of $393,000. Our backlog sale price is $399,000, down 1% from a year ago, our backlog average sale price of our Smart Series product is $305,000. Our first quarter margin was 20.2%, up 90 basis points year-over-year, up 100 basis points from last year's fourth quarter. Our construction and labor costs were flat when compared to last year's first quarter. Our first quarter SG&A expenses were 12.2% of revenue, improving 70 basis points compared to 12.9% a year ago, reflecting grading operating leverage. Interest expense decreased $2.1 million for the quarter compared to last year.
Interest incurred for the quarter was $11.9 million, compared to $12.9 million a year ago, the decrease in interest is due to lower outstanding borrowings in the first quarter, as well as a lower weighted average borrowing rate. During the quarter, we generated $59 million in EBITDA, compared to $40 million in last year's first quarter. We have $22 million of capitalized interest on our balance sheet. That is about 1% of our total assets. Our effective tax rate was 23% in the first quarter, compared to 25% in last year's first quarter. Our first quarter rate benefited from energy tax credits, and we currently estimate our annual effective rate for 2020 to be around 24%. Our earnings per diluted share for the quarter increased to $1.09 per share from $0.63 per share last year.
During the first quarter of this year, we repurchased $2 million of our outstanding shares. Now Derek Klutch will address our mortgage company results.
Thanks, Phil. We have a strong and experienced team in our mortgage and title operations across our markets, and they have already stepped up to serve our customers with care in this challenging environment. Technology we invested in over the past few years is allowing us to work remotely from loan application throughout the entire mortgage process. We implemented some changes to allow us to conduct closings while maintaining social distancing guidelines. First quarter pre-tax income for financial services was $5.6 million, a 14% increase compared to 2019's first quarter. Revenue was also up 14% to $13.5 million, due to a higher volume of loans closed and sold. Our results were impacted by a reduction in the value of our mortgage servicing rights and margins caused by the disruption in the mortgage market.
The loan to value on our mortgages for the first quarter was 84% in 2020, up slightly from 82% in 2019's first quarter. 72% of the loans closed in the quarter were conventional, and 28% were FHA or VA. This compares to 76% and 24%, respectively, in 2019's first quarter. Our average mortgage amount decreased to $306,000 in 2020's first quarter, compared to $315,000 last year. Originations increased to a first quarter record of 1,131 loans, and the volume of loans sold increased by 16%. For the quarter, the average borrower credit score on mortgages originated by M/I Financial was 741, down from 744 last quarter. Our mortgage operation captured about 85% of our business in the first quarter, a significant increase from 79% last year. We maintain two separate mortgage warehouse credit facilities, which provide us with funding for our mortgage originations prior to the sale to investors.
At March 31st, we had $105 million outstanding under the MIF warehousing agreement, which is a $125 million commitment that expires in June of 2020. We also had $40 million outstanding under a separate $65 million repo facility, which expires in October of this year. Both facilities are typical 364-day mortgage warehouse lines that we extend annually. We are working with our lenders on the warehousing agreement that expires in June, and we expect approval and closing in May. With that, I'll turn the call back to Phil.
Thanks, Derek. As far as the balance sheet summary, our financial condition continues to be strong with $1 billion in equity, home building debt to cap ratio of 39%, and $448 million of available liquidity at quarter end. We are carefully monitoring our cash and expenses, as always, along with our balance sheet. Total homebuilding inventory at March 31, 2020 was $1.8 billion, an increase of $92 million above last year, and our unsold land investment at March 31st is $809 million, compared to $796 million a year ago. In March 31, we had $396 million of raw land and land under development and $413 million of finished unsold lots. We owned 5,169 unsold finished lots with an average cost of $80,000 per lot, and this average lot cost is 20% of our $399,000 backlog average sale price.
Our goal is to maintain about a one-year supply of finished lots and to own a two to three-year supply. Lots owned and controlled as of March 31 totaled more than 33,800 lots, 14,800 of which were owned and 19,000 under contract. We own 6,800 lots in our northern region and 8,000 lots in our southern region. A year ago, we owned 14,500 lots and controlled an additional 13,500 lots for a total of 28,000 lots. The increase in controlled lots is due primarily to additional positions for our Smart Series product. During 2020's first quarter, we spent $76 million on land purchases and $62 million on land development for a total of $138 million, and about 45% of the purchase amount was for raw land.
We are carefully monitoring our land spend, and due to the uncertainty of the current environment, we are withdrawing our previous estimate and not providing an estimate for the year. At the end of the quarter, we had 556 completed inventory homes, which is about two per community, and 1,322 total inventory homes. Of the total inventory, 582 are in the northern region and 740 are in the southern region. In March 31, 2019, we had 560 completed inventory homes and 1,278 total inventory homes. This completes our presentation. We will now open the call for any questions or comments.
Thank you, sir. At this time, I would like to remind all participants, please press star then the number one on your telephone keypad if you want to ask a question. Again, that is star then the number one on your telephone keypad. If you wish to remove yourself from the queue, please press the pound key. We will pause for just a moment to compile the Q&A roster. I see your first question will come from the line of Alan Ratner from Zelman & Associates. Sir, your line is now live. Please proceed.
Hey, guys. Good afternoon. Glad to hear everyone's doing okay. Hopefully, everyone in the company is as well, and thank you for all the great detail as always.
Thanks, Alan. Same to you.
Obviously, the April results are encouraging, and I think we're seeing similar momentum from other builders that have reported over the last few days. I'm curious if you can maybe just talk a little bit about where you're seeing that improving demand and just kind of thinking about your portfolio, both geographically as well as product type. One of the things that seem to be benefiting right now is spec inventory. You're seeing a lot less competition on the resale side. I'm curious, as buyers are coming in and buying houses today, is that being skewed more towards spec inventory than perhaps it had been leading up to this pandemic here?
You mentioned kind of curtailing the new spec starts, but are you planning on kind of shifting the mix of your business between spec and to-be built going forward, just given the risk profile and dynamics in the market?
Let me try and answer both those questions. I think that, with a few exceptions, the increased sales velocity, obviously nowhere near where we'd like it to be, but certainly better than it was, as you've noted. We've seen that in quite a number of our 15 markets. Exceptions would be Detroit, which has effectively been closed. I think things have been a little slower in Florida, very honestly, and I would particularly note Orlando. Clearly, the significant furloughing of employees at Disney has created a little bit of a cloud over that market. Not as robust, or robust is the wrong word, but probably not as good as you'd expect it to otherwise be in this environment. I think that the impact there has been a little greater. I think Dallas is a little bit, for us, of a bright spot.
Appears to be holding up maybe even comparatively better than some of the other markets. We're seeing good activity in Columbus and Indianapolis and Minneapolis and Chicago, we've had pretty good results, Austin. I think that the uptick has been pretty well shared, calling out maybe Orlando on the low end and Dallas on the higher end. As far as specs goes, I think your point is an interesting one. Broadly speaking,
I think we're in really good shape in terms of our spec inventory. That said, given where we are and our maybe slightly more optimistic than a few weeks ago outlook on the year, we manage the business subdivision by subdivision. Not only is every market different, but within markets, communities tend to have their differences and in some cases, significant. We will be very carefully looking at all of our communities within each market, and it's possible that we could be increasing our spec inventory where we think it makes sense to do so.
Got it. That's all very helpful, so thank you for that. Second question. You gave some great data on the mortgage side of the business. We've heard, obviously, the tightening that's been going on in the market, and it would seem like just based on your averages, you're not being overly impacted by that. I don't know if you can provide some color just in terms of what tightening have you seen, in terms of maybe overlays or FICO scores, anything that is limiting your ability to get loans done, and roughly what percentage of either your backlog or your orders, however you want to think about it, would those overlays apply to?
Yeah, sure, Alan. This is Derek. Yes, the industry has definitely tightened the credit standards, both credit score and DTI ratios. One thing to keep in mind, though, is the investors have raised minimum credit scores on purchasing government loans, but FHA and VA have not raised credit scores, so they will still insure them. We've just had to kind of modify how we're selling the government loans and who we're selling them to, but we have not had any restrictions on being able to deliver the government loans. As far as percentages, our average credit score I mentioned is about a 740-plus credit score. Over 75% of the loans that we do are above a 700 credit score, and only about 10%, a little more than 10%, are below a 680 credit score. In the big-
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scheme of things, we haven't really had much of a negative effect due to the tightening.
That's great. When you mentioned kind of changing how you sell the loans, do you sell directly to Ginnie Mae and Fannie and Freddie in those situations where you're maybe bypassing the investors that are instituting those overlays?
We do have the ability to sell directly to the agencies, to all three, to Ginnie, Fannie, and Freddie, either on a servicing released or servicing retained basis.
Got it. All right. Great guys. Thank you very much and good luck and stay safe.
Yeah, you too, Alan.
Thanks, Alan.
Thank you. Your next question will come from the line of Alex Barron from Housing Research. Sir, please proceed.
Yeah. Thanks, guys. Hope you guys are all well. I wanted to ask about build times. Have you seen any noticeable extension of build times because of labor constraints or social distancing? That's my first question.
Alex, this is Phil. Not really. Every market has a challenge here and there with some products and there's little problems here and there. As far as overall, not really any significant changes.
Okay. That's good to hear. How about on the incentives front? Have you guys seen an increase in the level of incentives you've had to offer under the current circumstances or felt more competition from other builders that you have to try to match?
Alex, that's always a subdivision-by-subdivision type of question. In general, not really. We have been selling a few more specs the last few weeks. In the comments I made, we're about 50% of inventory homes in the first quarter. That's moved up to the 55%-60% range, but that kind of moves now and then. There's always kind of some incentives on maybe some older spec inventory. Overall, not really any change.
Okay. Great. Last question. What would you guys need to see or feel, and what are you looking for to maybe reengage on the land side, and on opening new communities?
We have not disengaged on the land side by any measure. I don't think you meant to imply that. Nor have we walked away from opening any new communities. What we have done, and it's deal by deal, and we have many deals throughout our 15 divisions, is we've thoroughly analyzed each one. Much of this work was done about a month ago when we were in the very early innings of this pandemic. In reviewing those deals, our belief was, and I suspect it was widely shared by a lot of our competitors, is that we need more time, and that we knew we would know more in 30, 60, or 90 days than we knew now.
Where we had negotiated the right to do so by virtue of the contracts that were in place. As you know, most of our land is under control and not yet owned. We went back to sellers and/or developers, and on a deal-by-deal basis, didn't do it on every deal, but we were able to do it on a pretty good number of them. We were able to secure more time, either time to decide whether or not to sign off on a contingency period, time to close, whatever stage the contract might have been in.
There's been very few deals that we've actually walked from, and there are quite a few that we have actually closed on during the last 30 days, because after having gone through that very exhaustive process, we made a decision that it absolutely made sense to do so because of the price, the product, the price point, the market, all those sort of things. As far as new community openings, just to reiterate what I said, we have opened a number of new communities this year, and we have plans to open quite a few more throughout the course of the year. Phil, I don't know if you want to add anything more on the new community side.
Yeah, the only thing I'll add in general, Bob, is if you look at owned lots, we're only up about 300 lots where we were a year ago. If you look at total unsold inventory, we're only up about 3%, even though our first quarter volume was quite a bit higher than a year ago. We think we've done a pretty good job managing those investment levels, and will continue to.
Great. Well, I wish you the best, and stay safe. Thank you.
Thanks a lot. Same to you.
Thank you. Your next question will come from the line of Mr. Jay McCanless from Wedbush. Please proceed.
Hey, good afternoon, guys. Thank you for taking my questions.
Thanks, Jay.
Yeah. My first question, just staying on land for a minute. If you think about what you've walked away from or what you're trying to acquire now, is this an opportunity maybe for you guys to get deeper in Smart Series or deeper into some more affordable product?
That really wasn't our thinking. That may happen. We've continued to grow Smart Series to the point where it's now about, as you know, 30% of first quarter business, pretty close to what we projected it to be 90, 180 days ago. I suspect it'll continue to grow somewhere between 30%-40% of the business. We've got a great business that's not Smart too, that is very successful for us. As far as our thinking on land, admittedly, when this health crisis came upon us, we pivoted quite quickly from almost full-time offense as a company to significant defense. Not full-time defense, though. Whether we remain 10%-15% offensive, we wanted to keep a very quick, careful eye on just how bad things might get. We also knew there would still be some opportunities out there.
As I mentioned in response to the last question, we have closed on quite a number of land deals over the last 30 days and are very glad that we have. Not just because things have gotten slightly better, and we think that they probably will continue to get a little bit better with each passing several weeks, but because those deals make sense, and they're the right thing for us, and they were negotiated in a way that we think will produce very good results. Even with the deals that we canceled, and there's been a few, as we look out over the next 12-24 months, we're very bullish on our business. We're very bullish on home building as an industry. I think that there could be an unintended, maybe, but nonetheless positive tailwind to home ownership rates coming out of this crisis.
Even if there isn't, we think that a lot of just, and you've probably heard this from so many other builders, and I think it's widely viewed that the macro fundamentals most point in the right direction for improved housing conditions over the next several years, and we're poised to grow. We haven't cut back on our growth goals. We'll see how this year turns out. We were poised to have another record year this year. This obviously has caused a pause in that thinking. Depending upon how quickly we can emerge from this, we'll have a better feel for it.
The land that we own and that we have under our control give us the ability to reengage very effectively with our growth goals as we begin to see more light at the end of the tunnel coming out of this crisis and have a better feel for what the recovery will look like. I'm a whole lot more optimistic now than I was a month ago. I don't think we're being silly. I think we're being smart, and I think that, like I said, I really believe in home building. I always have, but I really believe in it, and I think that the home ownership rate's going to be positively impacted from this.
We all know, even if that rate goes up just a quarter % or a half a %, that's a lot more households living in a home, and if just a small fraction of them choose to buy new rather than buy used That's a good tailwind for our industry, and we expect to get our fair share.
Yeah, I'd agree. April 29th, for whatever reason, feels a lot better than March 29th did. I guess my second question on the same line, thinking forward to maybe some people whose credit need a little fixing up or need a little more time to actually become homeowners, has any of what you've seen the last two months maybe pushed you in the direction of doing some single-family build for rent or partnering up with a single-family rental organization to help keep your volumes up if things were to get a little bit slower from here?
No. It's a great question. For all the reasons that we've been saying in response to that question, I know other builders look at it differently. That's what makes it an interesting game. We think we can put a lot of points on the board doing what we're doing. We have been putting a lot of points on the board. My guess is we would've had some of the strongest sales comps in the industry before March 15th. We've got a lot of confidence that we've got the right strategy and the right focus. As far as credit-impaired buyers, we do a lot with that now to try to get them into our product as a buyer. It's something we've been focused on for almost two years. Internally, we call it our Welcome Home Club. That's a part of the M/I Financial operation.
Got it. It may be too early to ask this question. Here goes anyway. Are you seeing an increase in potential private builders for sale or the opportunity to expand? If you were to do so, would you look to grow into new markets or expand out where you have a footprint now?
I personally am not aware of anybody who's on the blocks. It's pretty hard for me, I guess, just reacting to your question, to think about that at this moment. We would like to be in additional markets. We have flirted with opening in one or two over the last six, nine months. Haven't been able to find the right deal. We'll be back at that kind of thinking sooner than later, I hope, because that'll mean that we're closer to the all clear sign. We want to continue to be prudent from a balance sheet standpoint for the near term, even though we've got a tremendous amount of liquidity and our public debt, the nearest maturity isn't until 2025.
We're in great shape from a balance sheet standpoint and certainly could do something if the right opportunity presented itself. We'd want to make sure we had a lot of daylight on what the long-term impact is of this current situation.
Got it. The last one from me. Nice improvement in the cancellation from second half March to the beginning of April. Could you talk about how many homes actually have canceled in April? Maybe also some builders have given out a stat where they talk about what the cancellations looked like as a % of the beginning backlog. Would you all be able to give me that stat as well?
Jay, there's a lot of different ways to come at that. We analyze cancellations very carefully as far as at what point in the process are they coming from. A big part of our cancellations continue to come before the houses are started. The part that's kind of moved up a little bit is that even though about 90% of the people that are scheduled to close are still closing, normally those closings are all scheduled two to three weeks prior to the closing date. The good news is 90% or so of the people are closing. We are seeing a few more people cancel right at the pre-closing process. Again, that gets back to Bob's comments about being careful on starting specs. The last couple of years, our CAN has been in the 10%-15% range, it's obviously been a little higher than that.
We have a record backlog of over 3,000 units. The way we try to approach it is we're constantly scrubbing our backlog. We're trying to be very careful as far as we do not have many houses to sell contingency in our backlog. We try to be careful with that and make sure our backlog gets through the process. The good news is it is coming down a little bit, that's just something we stay focused on every day.
Phil, how much do you think of your backlog has a contingency behind it right now or with it right now?
As far as a house to sell or whatever, it's less than 10%.
That's great to hear. Okay. All right. Thank you all for taking my questions.
Thanks, Jay.
Thanks.
Thank you. Of course, at this time, I would like to remind everyone in order to ask a question, please press star then the number 1 on your telephone keypad. The center of your next question will come from the line of Art Winston from Pilot Advisors. Please go ahead.
Thank you. It was good to hear that everybody in the company is safe and healthy.
Thanks, Art.
I want to just thank you for a sensational first quarter. That was terrific. I think I heard in the prepared remarks that you said that the Smart Series have a slightly higher profit margin than the rest of the houses. Did I hear that right, or did I hear it wrong?
You heard it correctly. There were two things there. On average, our Smart Series communities have better pace, which is sales per month, as well as slightly better gross margins.
Excellent. My next question on the land. It sounded like that, in effect, there's no values, no discounting in terms of what you could buy. Basically, the cost of what you're acquiring is the same as you thought it would be three months ago, it sounds like.
I think that's right, but not completely. There's been a few deals. I don't know if I can give too many specifics, though. I don't want to mislead, but I can think of several deals where, not that it was our goal, but as a result of these conversations about wanting more time, we've been able to get a price discount also. Maybe we didn't get quite the time we wanted, but we got a discount. I can think of one in particular where it was a 10% reduction in price, roughly $400,000 against a $4 million-plus acquisition. There may be one or two others. Which is good. Obviously, if we didn't like them, we'd say no and just terminate. I think we've gotten maybe in two or three or four instances, some kind of price concession.
Excellent. My next question is on the mortgage servicing rights which were detracted to the profit. I assume that's a non-cash charge. I was wondering if that should become bigger or a bigger problem going forward rather than sort of becoming less of a problem for the time being.
Yeah, this is Derek. Yes, it was a non-cash write down. We ran some shock tests against it. At the level interest rates are right now, we don't think it will be a big problem going forward. We ran it at 25 basis point increments on interest rates. Don't really see another big impairment coming up.
Good. Okay. My last is less of a question, but how about just spending a small amount of your huge liquidity on buying back some shares, given that probably, you could buy your land cheaper by buying the shares than buying somebody else's land? Just a small amount of share repurchase.
Well, as we did disclose, we did spend about $2 million on stock during the quarter. Right now, there's just so much uncertainty going on. Again, with the stock, even with the good run today still being significantly below book, it's something that we will continue to look at. We want things to kind of stabilize a little bit before we get back into that.
Okay. Thank you very much for everything.
You too, Art. Thank you.
Thank you. Of course, at this time, I would like to remind everyone, if you want to ask a question, please press star then the number one on your telephone keypad. T here are no further questions at this time. May you please continue.
Thanks for joining us. Look forward to talking to you next quarter.
Thank you everyone for participating. This concludes today's conference. You may now disconnect. Stay safe and have a lovely day.