Citadel Holding shares ride waves of speculation fueled by sale rumors.

The stock price and trading volume of Glendale-based Citadel Holding Corp. continued their roller coaster ride last week, surging uphill on what analysts said were buyour rumors and then dropping when poor quarterly financial results were reported.

Citadel's stock price rose $1 a share on Sept. 13, closing at $17.62, on volume that was more than three times its daily average.

"There's only one thing it could be ... it's buyout rumors" said Campbell Chaney, financial institutions analyst with Dakin Securities in San Francisco. "There's no other reason to buy that much stock at this time."

Whether rumors "are true or not" remains to be seen, Chaney said. He added that Citadel has sen the kind of "roller coaster movement" in its stock that is typical of companies known to be for sale -- as merger rumors surface and fade.

The day after Citadel's most-recent surge, on Sept. 14, in a down market for financial institutions, Citadel's stock fell $1 a share, closing at $16.62.

Also that day, Standard and Poor's Corp., a credit-rating service, downgraded the credit rating of Citadel's primary subsidiary, Fidelity Federal Bank, by two notches -- from BB-plus to BB-minus. That downgrading was based on Fidelity's poor performance in the second quarter of 1993. Citadel's stock closed at $16, down 62 cents on Sept. 15.

A spokesman for Citadel said he did not have an explanation for the unusual movement in the company's stock last week.

Citadel reported a net loss of $15.2 million, or $2.31 a share, for the quarter ended June 30. The loss was "primarily due to provisions the company took for losses on loans and foreclosed real estate," Citadel said in a statement.

Last week's roller coaster ride was just the latest chapter in what has been a recurring fluctuation pattern begun in April, when Citadel officials confirmed that Fidelity Federal has been put up for sale.

The stock price of Glendale-based Citadel began rising right after the company's April disclosure that it had hired investment banking firm First Boston Corp. to advise it on the possible sale of Fidelity Federal.

Then, in June, the stock shot up once again when Citadel Chief Executive Officer Richard M. Greenwood announced that the company had begun soliciting acquisition proposals.

Since then, the company's thinly traded stock had remained quiet, until last week.

Fidelity has beeN a profitable thrigt, but has seen its loan portfolio sour in the last year, which could drive off potential buyers, said Howard Rosenscrans, an analyst with the investment research firm of HD Brous & Co. in Great Neck, N.Y.

As of June 30, Fidelity Federal had $253 million, or 5.61 percent of its total assets, in either nonperforming loans or foreclosed real estate. That compares with nonperforming assets of $234 million, or 4.99 percent of total assets, six months earlier and nonperforming assets of $189 million, or 3.94 percent of total assets, a year earlier.

Timothy Comiskey, an analyst at Standard & Poor's who recommended that Fidelity's credit rating be downgraded, said he is concerned about "continuing deterioration" in Fidelity's loan portfolio. He noted that the thrift has a high proportion of its loans on apartment buildings in Southern California.

Rosencrans said he thinks, if Fidelity Federal is sold, the sale will be finalized by the end of 1993. If there not, he said, officials will probably separate Fidelity Federal's bad assets into a separate institution.

Greenwood told shareholders in June that, in addition to selling the thrift, the company is considering isolating "most of the company's problem assets into a separate structure."