SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: September 12, 1996
MS FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-26474 64-0835847
(State or other jurisdiction (Commission (IRS Employer
of incorporation or organization) File Number) I. D. Number)
715 S. Pear Orchard Road
Suite 300
Ridgeland, Mississippi 39157 (601) 978-6737
(Address of principal executive (Registrant's telephone number,
offices) (Zip Code) including area code)
Item 5. Other Events
In June, a vice president, the manager and the supervisor of
the Company's customer service department each resigned to pursue
other interests. According to vice chairman and CEO Philip J.
Hubbuch, Jr., this unexpected transition in management, combined
with continued pressure to reduce delinquencies, resulted in a
significant increase in extensions granted to delinquent
customers during June. An internal review of the extensions
granted during this period found that documentation of extensions
and internal controls related to extensions fell below the
company's standard.
A second, independent review authorized by the Company's
audit committee confirmed that some extensions were granted in
violation of company policies and procedures. Based upon the
recommendation of the audit committee, the company will implement
enhanced controls and documentation procedures for extensions,
and the company's independent auditors have been engaged to
periodically review extension practices until the audit committee
is convinced that the new policies and procedures are being
followed.
Delinquencies were 14.4% of gross managed portfolio at July
31 and 17.8% of gross managed portfolio at August 31. As of June
30, 1996, delinquencies were reported at 8.3%, due to the high
level of extensions.
The Company finances its operations through securitizations,
including a securitized warehouse line, and traditional secured
bank lines of credit. Increases in delinquencies and losses can
effect these financing sources. Additionally, under the
securitization agreement, due to the level of delinquencies, the
financial surety that provides credit enhancements for the
securitized receivables pool could replace the Company as
servicer or increase the premium for the surety coverage. The
Company has informally reviewed current delinquency levels with
its principal banks and the financial surety. None has indicated
at this point that any adverse action will be taken.
Existing securitization agreements require increases in cash
reserve accounts as delinquencies rise. These increases are
funded with excess cash flow which otherwise would be paid to the
Company, effectively delaying the company's receipt of these
funds.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, hereunto duly authorized.
MS FINANCIAL, INC.
Dated: September 12, 1996 By: /s/ R. Dale Miller
R. Dale Miller
Controller and Principal
Accounting Officer
