Omni Financial Services, Inc. (OFSI) said Wednesday afternoon that it would delay filing its first quarter earnings as the small community banking company continues to struggle with the financial effects of a surge in real-estate owned inventory. The Atlanta-based company, which is the parent to Omni National Bank, has yet to file its earnings for 2007 with the Securities and Exchange Commission after REO inventory surged to close out last year. Omni Financial said it faces problems tied to "documentation supporting valuation assertions" surrounding its REO inventory, primarily the result of a surge in foreclosures through the bank's community lending operations. It's likely that the bank's REO valuations were over-inflated, sources suggested to HW; Omni said it was working with its auditors to resolve the valuation issue, although it couldn't set a timetable for resolution. Omni said it will likely write-down a significant portion of the value of its REO, forcing it in turn to increase loan and lease losses, and decrease net interest income -- driving what it said its expects to be a "substantial loss" for 2007. Losses are expected to continue into its first quarter results, the bank said, citing a growing "number of non-performing loans and OREO foreclosures" in its portfolio. "The increase in non-performing assets has resulted in a reduction of interest income and reversal of accrued interest on loans now classified as non-performing loans," the company said. Omni Financial's stock has been battered over the past year, losing more than 90 percent of its value. Disclosure: The author held no positions in OFSI when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.