MS Financial Inc., already reeling from the unexpected resignation of its chief financial officer, recently reported its delinquency ratio was 74% higher than stated at the end of the second quarter.

MS Financial, a subprime auto lender based in Jackson, Miss., said that its 30-day delinquency ratio reached 14.4% at July 31, up from 8.3% reported on June 30, and was "expected to be higher at Aug. 31."

The company, which has $150 million of managed loans, attributed the sudden upsurge to "a significant increase in extensions granted to delinquent customers during June."

MS Financial blamed the liberal extension policy on upheaval in its customer service department following the resignation of two key executives there, combined with "continued pressure to reduce delinquencies."

The company said its vice president for strategic planning, Robert W. Jernigan, had "temporarily" assumed control of the customer service department.

Mr. Jernigan was previously director of client services for World Omni Financial Corp. and served 15 years as a manager with Ford Motor Credit.

The announcement of unexpectedly high delinquencies, coming one month after MS Financial reported disappointing second quarter earnings and the resignation of chief financial officer E. Peter Healey, left analysts complaining about a breakdown in the company's credit controls.

"This is like the cardinal sin of a lending institution, when you don't have a good handle on your delinquent loans," said Morgan Keegan's Peter W. Tuz. "You just want to put the whole company and its stock aside until you have some faith in their ability to report accurate numbers."

Mr. Tuz has had a "hold" rating on MS Financial for the last two months. The stock, which went public at $12 a share in July 1995, was trading under $3 late last week.

"This has to go down as one of the worst IPOs in financial services history," he said.

MS Financial, which provides car loans for people with impaired credit, was one of many subprime auto lenders that went public in the last few years. Several of those companies have since reported disappointing earnings and rising credit problems, including TFC Enterprises Inc., Eagle Finance Corp., General Acceptance Corp., and Monaco Finance Inc.

MS Financial executives could not be reached for comment.

In a written statement, the company said it had tightened its controls and documentation procedures for granting extensions to delinquent borrowers. But it also noted that increases in delinquencies and losses can affect its financing sources, which include a securitized warehouse line and traditional secured bank lines of credit.

MS Financial added that its securitization agreements contain provisions that, if triggered by high delinquencies, could result in its loss of servicing rights on the securitized receivables or higher surety coverage premiums.

The company said recent conversations with its principal banks and financial surety indicated that no such adverse consequences had yet occurred.

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