HomeFed Stock Off 25% on New Loan Concerns : Thrifts: A sagging economy and real estate market could leave the nation’s fifth-largest S&L; with $1 billion in problem accounts by year-end.

Hard hit by troubled real estate loans, HomeFed Bank has told federal regulators that if the economy fails to improve, its problem loans could increase by $250 million in the fourth quarter to a total of about $1 billion by year’s end.

That news from the nation’s fifth-largest savings and loan was viewed as dramatic proof of California’s weakening economy and its increasingly lackluster real estate market.

It also offered further evidence that the state’s struggling financial industry could face even tougher times ahead, if HomeFed’s assumption is correct that there will be no immediate improvement in the economy.

HomeFed stock fell Tuesday by $1.875 or 25% to $5.50 after a leading Wall Street analyst issued a “sell” report. Stock in HomeFed, which had been one of the nation’s strongest thrifts, has plummeted from a high of $33.25 in June.

On Tuesday, analysts cautioned that San Diego-based HomeFed could be hit with further bad news soon if the federal Office of Thrift Supervision and the Federal Deposit Insurance Corp. uncover more nonperforming loans in upcoming inspections.

In his report, Jerome Gitt, a San Francisco-based analyst with Merrill Lynch Global Securities Research, warned that HomeFed’s “current reserve levels may not be adequate in six months or a year” if more nonperforming loans are found or the economy does not improve. He offered the recommendation to sell the stock Tuesday.

Campbell K. Chaney, a San Francisco-based analyst with Sutro & Co, observed that for HomeFed, “The big intangible right now is the examiners’ visit. Examiners could be more conservative (than HomeFed) when it comes to determining nonperforming loans.”

HomeFed President Robert Adelizzi declined to comment on the regulators’ upcoming, regularly scheduled December visits. “That would be speculation,” he said. “We’re on top of our issues, we know our portfolio reasonably well.”

If HomeFed’s portfolio of nonperforming loans increases by $250 million, its ratio of problem loans to total assets would increase to 5.3%, an alarmingly high figure. As of Sept. 30, HomeFed’s nonperforming loans totaled $749 million, or 3.92% of assets. In a 10-Q filing dated Nov. 13, HomeFed said it expected problem loans to exceed $1 billion if economic conditions continue.

Adelizzi said the anticipated increase in problem loans could be blamed on across-the-board problems with its single-family mortgage, apartment and commercial real estate loan portfolio.

The $1-billion estimate in the SEC filing was “based on trends we’re seeing in the market and in our portfolio right now,” he said.

Part of the increase in problem loans was due to the S&L;’s formally classifying as nonperforming a $70-million office building loan to La Jolla developer Jack Naiman. The loan, HomeFed’s single largest, is secured by a first mortgage on Naiman Tech Center, a 635,000-square-foot office and research park in San Diego’s Sorrento Valley. HomeFed will “continue to negotiate” with Naiman, Rowan said.

HomeFed, with $19.1 billion in assets and 215 branches, met each of the federal government’s three minimum capital adequacy tests on Sept. 30. It “intends to meet” the capital requirements at year-end, spokeswoman Kaye Rowan said.

David J. Dunn, founder and general partner of La Jolla-based Idanta Partners, which disclosed earlier this month that it had acquired 7.2% of HomeFed’s shares, said he was “not surprised” by market reaction Tuesday. Sharp Drop Tuesday: $5.50, down $1.875