Fitch Affirms Ratings for AmSouth, Outlook is Stable.

CHICAGO -- Fitch affirmed the ratings for AmSouth Bancorporation (ASO) and its subsidiaries following the company's announced agreements with the U.S. Attorney's Office for the Southern District of Mississippi (USAO), the Federal Reserve Board of Governors (FRB), the State of Alabama Department of Banking (SADB), and the Financial Crimes Enforcement Network (FinCEN). The Outlook remains Stable. A list of ratings is below.

The origin of the regulatory issues date back to 2002 when the USAO began an investigation into the custody accounts of two ASO clients who, in 2003, pled guilty to a fraudulent promissory note scheme. As a result of the USAO's investigation, ASO has agreed to a $40 million fine and a deferred prosecution agreement, which charges ASO with failing to file suspicious activity reports in a timely, complete, and accurate manner, as well as its failure to respond timely and completely to government subpoenas in the related investigation. The USAO has agreed to seek to dismiss the case with prejudice should ASO be in full compliance with all of its obligations under this agreement within the next 12 months.

Additionally, ASO has entered into a cease and desist order (CND) with the SADB and FRB who levied an additional $10 million in civil money penalties. Specifically, the FRB identified weaknesses in the company's compliance program, particularly those dealing with the Bank Secrecy Act (BSA) that must be addressed. Among other things, ASO is required to commission an independent review of its BSA compliance program and strengthen the overall effectiveness of the program. The company already has taken several steps to reach compliance with these requirements, which leads Fitch to believe the process is readily manageable.

From an analytical perspective, the dollar amount of the fines amount to slightly more than 20% of the company's quarterly pretax earnings but do not have a meaningful effect on other financial measures. That said, Fitch will monitor the impact the added costs and distraction caused by the increased regulatory scrutiny will have on the company's short-term strategic plans, which rely on aggressive expansion in Florida. These plans will be curtailed until the FRB is satisfied with the company's implementation of a more thorough BSA compliance program.

Ratings affirmed for the following:

AmSouth Bancorporation

-- Long-term debt 'A-';

-- Short-term debt 'F1';

-- Subordinated debt 'BBB+';

-- Individual 'B';

-- Support '5'.

AmSouth Bank

-- Long-term deposits 'A';

-- Short-term deposits 'F1';

-- Long-term debt 'A-';

-- Short-term debt 'F1';

-- Subordinated debt 'BBB+';

-- Individual 'B';

-- Support '4'.