Regulators have dismantled New Jersey's largest savings and loan--City Federal Savings Bank--in transactions that will cost taxpayers $1.5 billion, the second most expensive thrift bailout to date.
The Resolution Trust Corp. said it sold 27 Florida branches of the Somerset, N.J.-based City Federal to Great Western Bank of Beverly Hills and nine Camden, N.J.-area branches to First Fidelity Bank of Burlington, N.J.
The government will operate the remaining 66 branches in New Jersey while it seeks a buyer.
The agency, which announced the deals late Friday, estimated the eventual cost of the City Federal takeover, after the remaining branches are sold, at $1.5 billion. CenTrust Savings Bank of Miami, which the agency handled in June, cost an estimated $1.7 billion.
Eventually, Lincoln Savings & Loan Assn., based in Irvine and still under government control, is expected to cost taxpayers $2 billion, analysts say. However, the agency has not estimated the cost for that bailout.
The City Federal deals still leave the insolvent thrift largely unresolved. Great Western is paying $9.75 million to take over $938 million in deposits while First Fidelity is paying $9.1 million to take over $468 million in deposits.
The two acquirers also will purchase about $1.1 billion in loans. The trust corporation is retaining $8.2 billion in City Federal loans and other assets and will continue to be responsible for $7.2 billion in deposits and other liabilities.
City Federal, which was seized by the government in December, got into trouble with large commercial real estate and construction loans in Florida, New Jersey and Texas.
According to analysts, two of the biggest problem projects were Grant Harbor, a condominium development in Vero Beach, Fla., and Port Liberte, a $750-million luxury condominium project in Jersey City, N.J., on New York Harbor modeled after Port Grimaud on the French Riviera.
In a related development, the trust corporation said it sold a record $1.5 billion in securities last week, bringing total securities sales to $11 billion since March.
The securities, including junk bonds and mortgage-backed securities, were sold to brokers for resale to their customers.