USA, Apr. 7, 2009 (Info-Prod Research) -- Moody's Investors Service downgraded theratings of Western Alliance Bancorporation (NYSE:WAL) (issuer rating to Ba3 fromBaa3) and its subsidiary Bank of Nevada (bank financial strength ratingto D+ from C-; deposits to Ba1 from Baa2). The short-term ratings of thebank were also downgraded to Not Prime from Prime-2. The rating outlookis negative. This concludes the review for possible downgrade initiatedon March 12, 2009. The downgrade and negative outlook reflects Moody's view that Western Alliance's capital position, particularly its tangible common equity(TCE), could come under pressure in the short-term because of its largereal estate lending concentration. Western Alliance's true commercialreal estate (CRE), excluding owner occupied, equals approximately $1.6billion, or 5.7 times TCE, which Moody's considers a very high level.The company's residential mortgage portfolio is approximately $580million, or two times TCE. Additionally, Western Alliance operates insome of the weakest real estate markets in the U.S., specifically Nevada,Arizona, and California. Over the last year, Western Alliance'snonperforming assets have steadily increased by almost four-fold,reaching approximately 25% of TCE and reserves at year end. Moody'sexpects continued acceleration given the recessionary environment. Although Moody's had previously incorporated Western Alliance's realestate and geographic concentration into its ratings, the sharp declinein real estate prices and anticipated deterioration in loan performancehas led Moody's to considerably increase its loss expectations for bothCRE and residential mortgages. The agency added that expected lossesfrom the company's investments in nonagency residential mortgage-backedsecurities and bank preferred securities also contributed to thedowngrade. In aggregate, the potential losses associated with WesternAlliance's loans and investments could lead to a substantial decline fromthe company's current solid capital position in Moody's view. As ofDecember 31, 2008, Tier 1 was 9.7% and TCE as a percentage ofrisk-weighted assets was 6.1%. Today's rating action is consistent with Moody's recent announcement that it is recalibrating some of the weights and relative importance attached to certain rating factors within its current bank rating methodologies.Capital adequacy, in particular, takes on increasing importance indetermining the bank financial strength rating (BFSR) in the currentenvironment. Moody's last rating action was on March 12, 2009 when Western Alliance's ratings were placed on review for possible downgrade. Western Alliance Bancorporation, which is headquartered in Las Vegas, Nevada reported total assets of $5.2 billion as of December 31, 2008.