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But a bank spokesman downplayed the downgrades.

"I would note we are investment grade with Moody and S&P [rating services], who we provide information to; Fitch, we don't provide them information, we don't have a relationship with them," said Chevy Chase Bank Executive Vice President Thomas McCormick. "I know they have a dour view of the mortgage business generally … I don't think their review has as much to do with us as it has to do with the mortgage business."

Asked if the Fitch rating would change the bank's business in any way, McCormick replied: "Not one iota. It won't have any effect whatsoever."

In knocking down the privately held Bethesda bank's long-term issuer default rating to BB+ from BBB-, Fitch cited the bank's nonperforming assets totaling 4.2 percent of its loans and other real estate owned at June 30. That's a "significant increase" from 1.68 percent at Dec. 31, Fitch reported — and it's likely to worsen, because of "unprecedented declines of real estate values."

"The downgrade reflects continued asset quality deterioration and a low ratio of loan loss reserves to nonperforming assets," the ratings company said in a statement.

Fitch downgraded Chevy Chase's long-term deposits to BBB- from BBB, and its short-term issuer default rating was downgraded to B from F3.

A rating of BBB is considered the lowest investment grade

category, or "good credit quality," according to Fitch's Web site. A rating of BB is considered speculative, with "a possibility of credit risk developing, particularly as the result of adverse economic change over time; however, business or financial alternatives may be available to allow financial commitments to be met."

Moody's Investors Service in June rated Chevy Chase Bank's "intrinsic financial strength" at C-; a C rating indicates "adequate" strength. The service's top rating is A, while the lowest is E.

"This is a tough time for the large banks, regional and non-regional players," said Paul Joegriner, banking consultant and former executive with Chevy Chase Bank and American Partners Bank. "A lot of them are taking it on the chin, mainly stemming from real estate-related lending such as mortgage and home equity loans, loans to builders and developers and the disruption of the mortgage markets.

"For example, if a bank were heavily originating loans for delivery to the secondary markets, it could have a large pool of loans that were not intended for portfolio, especially as investors were pulling out of the credit markets and real estate values were declining," Joegriner said. "If that happened, there could be potential writedowns of the value of the loans and now that it's part of the portfolio, there may be additional loss reserves required if the underlying characteristics of the loans indicate a potential loss."

Fitch reported several recent positive actions by Chevy Chase Bank. It has discontinued originating payment option adjustable rate mortgages, which had been its primary lending product. It also "increased significantly" its provisions for its loan loss reserves, and the primary shareholder has provided capital to help the bank maintain regulatory capital ratios. The bank's CEO and chairman is B. Francis Saul II, who founded it in 1969.

"While each of these events is viewed favorably, the continued decline of asset quality will continue to place pressure on operating performance," Fitch analysts said in a statement. "Chevy's relatively conservative underwriting has been offset by unprecedented declines of real estate values, thereby affecting the loan-to-value characteristics of the loan portfolio, particularly in loan types that allow negative amortization.

"Given Fitch's expectation for continued widespread declines of real estate values into 2009, Chevy's loan delinquency trends are likely to worsen," with earnings likely to be hampered.

The ratings agency also noted that Chevy Chase's net annualized charge-offs almost doubled from its second to its third fiscal quarter, to 0.7 percent.

The bank has struggled over the past year. It has cut its workforce from 4,725 in March 2007 to about 4,000 this past March, according to the Federal Deposit Insurance Corp. Its assets grew to $15.13 billion from $14.32 billion over the same period. It has $11.6 billion in deposits, with $8 billion in Maryland, making it the state's third largest bank in deposits. It has branches in Maryland, Virginia and Washington.

The bank has also cut branch office hours and is closing its branch offices in Giant Food stores.