I Believe,
The word transformed in the context that I used it is to be conformed to the image of Christ, a process that is not completed while we are still in our corrupt flesh. How do we know this? Because we all still sin.
According to his mercy, he saved us applying to us the righteousness which is from God by faith.
Good works in obedience to God through the leading of His Spirit and Word are good and profitable to men that they may not be unfruitful.
Either word will do, it is the process that is critical. That the process is in fact in progress is the reason for the salvation (redemption) of mankind. True, it will neither be completed, nor perfected in this life because of our sinning.
Because we still sin, by default negates your entire understanding of man's salvation through faith. It cannot be a one-time, not guilty, perfection, no sin in this life. That is the massive error of the judicial or forensic theory. It is not realty. It also negates the whole work of the Holy Spirit IN man during his life on earth as a believer.
I'm glad you did not use the word 'impute' because that is far from reality as well. We are righteous in so far as we don't sin. In so far as we don't sin we have righteousness accounted to us as our own which does come from Christ. That definition of 'faith' has been since Abraham where we have the first explanation of faith being accounted of his good works. Yes, definitely, fruitful because it is what saves man. No works, no salvation, faith is dead.
What is just explained can be summed up in the same text you quoted:
"I count all things to be loss...that I may gain Christ and be found in him, not having a righteousness of my own, that which is of the law, but that which is through faith in Christ, the righteousness which is from God by faith"
"not by works of righteousness, which we did ourselves, but according to his mercy, he saved us"
This has nothing to do 'per se' with the saving of the believer. This is in reference to all of mankind. This needed to be accomplished by Christ so that mankind could accept that free Gift by Grace. Once accepted, we become believers and we then seek to do His will in conforming to His Image in which we were created.
Then this text again sums up the struggle of the believer in this life in attempting to conform all the while still in possession of his sinful nature.
"Not that I have already obtained, or am already made perfect; but I press on, if it is so that I may take hold of that for which also I was taken hold of by Christ Jesus...to the extent that we have already attained, let us walk by the same rule...For our citizenship is in heaven, from where we also wait for a Savior, the Lord Jesus Christ; who will change the body of our humiliation to be conformed to the body of his glory"
But God, being rich in mercy, for his great love with which he loved us, even when we were dead through our trespasses, made us alive together with Christ (by grace you have been saved), and raised us up with him, and made us to sit with him in the heavenly places in Christ Jesus, that in the ages to come he might show the exceeding riches of his grace in kindness toward us in Christ Jesus; for by grace you (have been saved through faith), and that not of yourselves; it is the gift of God, not of works, that no one would boast. For we are his workmanship, created in Christ Jesus for good works, which God prepared before that we would walk in them. (Eph 2:4-10)
This text has both elements of salvation within it.
The first part, by Grace we were saved.....made alive together with Christ... is in reference only to the objective work of Christ on the Cross whereby ALL men were saved. All men have been made alive again. Meaning, body and soul have been reunited. Christ overturned death which was instituted by Adam. Then by His death and resurrection (baptism) we are raised with Him to sit with Him and reign with Him in His Kingdom.
Then beginning with for by grace again, Paul is summing up the whole of salvation and again lists both elements. The Objective work of Christ (redemption) and then the works we were created to do once we accept that free Gift. Walking in them is work and it is salvation of the believer. If no walking, no believer, no salvation.
Your text of (Phi 3:3-21) is a summary of man's redemption and salvation.
Titus 3:3-15 is along the same vein.
Here is another way to look at the whole picture.
Christ's work of redemption is related to our nature. (all men - mankind)
The work of the Holy Spirit begins at Pentacost and has to do with the deifying or conforming work - our personhood. Neither can do without the other but it takes both for the salvation of man.
We are declared righteous by faith in Christ and strive to become like Christ through the leading of the Holy Spirit.
Actually two things are not what the Apostles taught. We, that is mankind has been made right. Justified. We appropriate that righteousness by faith and increase that righteousness as we grow in faith, as we strengthen faith, as we begin to conform to His Image, in His Likeness. as we become partakers of His divine nature.
If we were in fact declared righteous, we would be perfect. We would have already attained the Image. That is only possible in the eschoton.
There are a lot more implications in this meaning of which protestants do not recognize.