HomeFed Pays Heavy Price for Survival : S&Ls;: Sale of $836 million in loans is intended to lower capital requirements, but in so doing the thrift is jettisoning some of its best-performing assets.

SAN DIEGO —  Troubled HomeFed Bank is rapidly downsizing in a frenetic bid to meet minimum regulatory capital requirements and to avert a possible government takeover.

But, as HomeFed’s recent bulk sale of loans to Union Bank of San Francisco illustrates, a problem thrift must pay a heavy price to shrink its assets: the first loans to go are usually those that provide the wounded thrift with much-needed profits.

The 210-branch savings and loan last week announced it was selling $800 million in high-quality home equity loans and loan commitments to Union Bank and $36 million in auto loans to Comerica of Detroit. The only home equity loans HomeFed will make at its branches will be done as an agent for U.S. Bancorp of Portland, Ore., with HomeFed receiving a fee for each loan closed.

The loan sales to Union Bank and Comerica will lower total assets at HomeFed, the nation’s fifth-largest thrift, to about $16 billion from as high as $19 billion last September. By year’s end, HomeFed will have shrunk by an additional $1 billion, to about $15 billion.

The loan sales were good news for HomeFed in the sense that reduced assets mean the S&L; needs less capital to protect against bad loans. That’s important because HomeFed is already deficient in one of three regulatory capital requirements and is soon to be short of another, HomeFed has disclosed.

HomeFed’s capital was ravaged by a $247.5-million net loss in 1990 and a $173.9-million loss in first-quarter 1991. The S&L;’s problems caused regulators to force HomeFed’s chief executive, Robert Adelizzi, to resign last month. HomeFed will soon submit a plan to regulators outlining how it will come back into capital compliance.

The sale of home-equity and car loans was particularly beneficial from a capital standpoint because the loans were deemed by regulators to be in the “risk-weighted” category of assets that require an S&L; to keep an even higher percentage of capital on hand than, say, for single-family mortgages.

The bad news is that HomeFed’s high-yield, home-equity loans were among the best performing assets in its portfolio, just the class of loans that an S&L; in HomeFed’s condition would prefer to hang onto. Of the 14,300 home-equity loan accounts that HomeFed is selling to Union Bank, only 11 are delinquent, HomeFed spokeswoman Kaye Rowan said Friday.

Sadly, HomeFed needs all the high-quality loans it can muster. It has a rising pile of nonearning assets--$1.47 billion as of March 31--that has begun to cut deeply into the S&L;’s income from lending activities.

HomeFed’s first-quarter net interest income, or income from loans and investments less interest paid to depositors, slipped to $82.8 million in first quarter 1991, down from $116 million for first quarter 1990.

“If you are short of equity, you have two choices: raise equity or lower assets,” said Gary Gordon, vice president and thrift analyst at PaineWebber in New York. “What kind of assets are you going to lower? You can’t get rid of the junk so you have to sell the good stuff. That’s what HomeFed did last week, and that’s what everyone in their position has to do.”

“Is it good news? Not particularly,” Gordon said. “What’s the advantage of getting rid of good assets? They’re getting rid of assets that are earning money.”

In an interview, Adelizzi said that HomeFed’s board of directors may still be up to six weeks away from naming his successor, but that he will stay on until his replacement is found. Adelizzi said he has still not decided what he will do once he leaves HomeFed.

HomeFed stock closed at $2.875, unchanged in New York Stock Exchange trading Monday.