Regulators have started dismantling New Jersey's largest savings and loan -- City Federal Savings Bank -- a process that is ultimately expected to cost taxpayers $1.5 billion, one of the most expensive thrift rescues yet.

The Resolution Trust Corp. (RTC), the federal agency running the S&L cleanup, said late Friday that it sold 27 Florida branches of the Somerset, N.J.-based City Savings to Great Western Bank of California, and nine Camden, N.J.-area branches to First Fidelity Bank, Burlington, N.J.

The government will keep and operate the remaining 66 branches in New Jersey while it seeks a buyer.

The RTC estimated the ultimate cost of resolving the City Savings case 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 and Loan Association, Irvine, Calif., is expected to cost $2 billion, but it is still under government control.

Great Western is paying $9.75 million to take over $938 million in deposits while First Fidelity is paying $9.1 million for $468 million in deposits. The buyers also will purchase about $1.1 billion in loans. The RTC 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.