Legendary bank investor Harry V. Keefe Jr. says the worst beating he has ever taken on an investment in a bank or thrift has been on his stake in a struggling midsize California thrift, Fidelity Federal Bank.

Mr. Keefe's investment firm, New York-based Keefe Partners, became one of the $3.5 billion-asset thrift's biggest shareholders when it invested in a Fidelity Federal recapitalization in August 1994. Other notable investors in that recapitalization, which was led by a unit of J.P. Morgan & Co., included Michael Price's Mutual Series Fund, Leon Cooperman's Omega Advisors Inc., and Wellington Management Co.

Mr. Keefe now figures that, on paper at least, he has lost about $10 million on the deal, including the reduction in value of his Fidelity stock and the loss of opportunities to invest elsewhere, he said in an interview.

His other bank investments are up 47% this year, but the value of his stake in Fidelity Federal has fallen by about 70%.

"I've been investing in bank stocks for 40-odd years, and I've never had a loss like this," Mr. Keefe said.

Mr. Keefe did not say how much stock he now owns in Glendale-based Fidelity Federal. In a March 15 proxy statement, Keefe Partners was listed as owning 1.4 million shares, or 5.5% of Fidelity's common. Fidelity's stock, listed in the "pink sheets," sold at $5.25 at the public offering but has recently been trading at about $1.50 after the thrift suffered from heavier than expected loan-losses.

Mr. Keefe's frustration comes at a sensitive time for Fidelity Federal. The company is in a supervisory agreement in which regulators are requiring it to raise more capital. It recently disclosed plans for a public stock offering in which it hopes to raise $110 million from current shareholders and other investors.

Fidelity Federal's board chose the investment banking company Friedman, Billings, Ramsey & Co. to lead the restructuring over another plan championed by Fidelity's biggest investors.

In the other plan, J.P. Morgan would have invested $30 million in Fidelity Federal, and the Chicago-based investment advisory firm Belle Plaine Partners Inc. would have led the restructuring.

Because the Belle Plains Partners plan was rejected, J.P. Morgan is unlikely to invest in Fidelity Federal's current offering, a source close to the situation said.

Mr. Keefe said he thought the current offering was "not in the best interest of shareholders." But he also said he hopes it works.

He added that he has not yet decided whether or not to invest in it.

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