Less than two months after becoming wholly shareholder owned, Fidelity Financial Corp. of Cincinnatisaid this week that it will acquire a thrift of nearly equal size - $229 million- asset Circle Financial Corp. of Sharonville.

Fidelity, 44% of whose stock was issued in 1992 and the rest in March, has about $50 million in equity, for a 20% equity-to-assets ratio. Buying Circle with stock and cash would bring that down to a more reasonable 12.3%, said John R. Reusing, chief executive of $250 million-asset Fidelity.

"People were asking us what we're going to do with our excess capital; well, this is part of the answer," said Mr. Reusing.

"We need to put more of it to use, but this is a big step."

The two thrifts are among the top five in market share in the greater Cincinnati area. Their merger would make Fidelity the largest, with about $469 million of assets.

The deal illustrates the sorts of strategies newly converted thrifts must consider.

A high capital level from an initial offering makes it hard to produce strong returns. And meager returns can stir shareholders to push for the sale of the institution.

To avoid such unrest, consultants say, mutual thrifts thinking of conversion should decide early in the game how to use the capital they'd raise - for example, by buying other institutions.

Mr. Reusing said Fidelity will consider other acquisition opportunities as they arise.

Despite the similar size of Fidelity and Circle, the deal is not a merger of equals. Fidelity is offering Circle shareholders cash or stock valued at $38 for each share of Circle stock. The exact value will be determined by the average price of Fidelity stock in the 20 days before receipt of regulatory approval.

If Fidelity stock dropped below $8, Circle would have the right to terminate the deal, provided that Fidelity were given the chance to amend the terms.

"This is an acquisition with a heart," said Mr. Reusing. "They have some individuals over there that will meld nicely into our company."

Donald H. Rolf Jr., chairman of Circle, would become chairman of Fidelity, and Joseph Hughes, chief executive of Fidelity, would become executive vice president.

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