Buffeted by intense competition in the mortgage market and a weak California economy, Fidelity Federal Bank is experimenting with another variation on thrift survival strategies.

Fidelity is staking its future on deploying a lean sales force that can sell everything from 30-year, fixed-rate home loans to mutual funds and annuities. The new fee income, as well as a reduction in fixed costs and nonperforming assets, are intended to produce higher profits.

Like many of his counterparts, Fidelity's chief executive, Richard M. Greenwood, said the traditional thrift focus on mortgage investment is "antiquated."

"It is time to move on to a revised business charter, whether it is a formal revision by Congress or by fiat - simply the way we all do business," Mr. Greenwood said.

The Los Angeles thrift, with assets of $3.5 billion, makes hardly any home loans for its predominantly multifamily portfolio. Instead, acting as a mortgage broker, Fidelity Federal earns fees by originating single-family loans for Weyerhaeuser Mortgage Co.

The thrift is aiming to build fee income to one-quarter of all revenues, according to Mr. Greenwood.

Separately, the thrift will purchase single-family mortgages and treasury securities for its own portfolio, executives said.

On Wednesday, Fidelity reported first-quarter earnings of $1.5 million, up 50% from the same period in 1994. In the fourth quarter of 1995, Fidelity recorded a net loss of $50.4 million, as it charged off multifamily nonperformers.

Fidelity originated $10 million in home loans in the first quarter. Fee income from loan originations and the sale of investment products was $2 million in the first quarter, down 23% from a year ago.

Longtime thrift analyst, Charlotte Chamberlain of Wedbush Morgan Securities, Los Angeles, said the latest earnings underline her concerns about Fidelity's "moribund" business strategy.

The purchase of mortgages from other lenders for its portfolio and the sale of financial products for other companies are just not enough to generate adequate returns for shareholders, Ms. Chamberlain said.

"From an investor's perspective, theirs is not a compelling story," Ms. Chamberlain said.

Neil L. Osborne, senior vice-president at Fidelity, said that the thrift expects fee income to rise in coming quarters, and that Wednesday's earnings were strong on several fronts - lower costs and nonperformers, as well as higher interest margins.

Lower costs are a centerpiece of Fidelity's sales strategy. Head count at the thrift is down more than 50% from a few years ago, to 530.

Doubling as financial counselors, loan officers generate additional fee income by selling mutual funds and annuities for American Express, Franklin, Liberty, Keyport, and other national fund companies. They also offer certificates of deposit from Fidelity.

W.C. Taylor 3d, executive vice president and chief lending officer, said back-office savings make up for the yield Fidelity gives up in feeding its portfolio with loans from other lenders, rather than its own originations.

Like many other thrifts, Fidelity is really just waiting for a buyer, said Ms. Chamberlain. But as long as the multifamily market remains soft and the thrift's multifamily holdings continue to be a big portion of its loan portfolio, there will be few takers, she said.

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