Moody's Investors Service Inc. said it may upgrade one Southern banking company but downgrade another.

The agency said last week that it may upgrade low-rated Bank South Corp., citing the Atlanta company's improving financial picture. But higher-rated First Alabama Bancshares may get pulled down a notch in a merger-related move.

Bank South's B2 subordinated debt rating is under review.

Moody's said improving asset quality, earnings, capital, and liquidity sparked the credit review, which will focus on how management disposes of remaining problem real estate assets.

Favorable Signs

Among positive developments at the company, Moody's noted that regulatory agreements with the Comptroller of the Currency and the Federal Reserve Bank of Atlanta were recently lifted.

In addition, Moody's noted that the company last month reinstated the dividend on its common stock.

Regarding First Alabama, Moody's said it may downgrade the Montgomery-based company's Aa2-rated long-term debt because of its recently announced acquisition of Secor Bank, Birmingham.

Other Actions

The rating agencies, took the following other actions last week:

Ashikaga Bank: Moody's lowered long-term deposits to A3 from A1 and subordinated debt to Baa1 from A2. It said the bank, one of Japan's largest regionals, may have to increase its provision for loan losses because of its exposure to real estate.

Another Japanese regional, Bank of Yokohama, was cut to A3 from A1 on senior debt and to Prime-2 from Prime-1 on short-term deposits.

Bank of New York Co.: Standard & Poor's upgraded senior debt to A from A-minus, citing the company's success in reducing risk of its loan portfolio and improving earnings and capital.

Subordinated debt was increased to A-minus from BBB-plus, preferred stock to BBB-plus from BBB, and commercial paper to A1 from A2.

Moody's noted that the planned acquisition of National Community Banks Inc., Maywood, N.J., will extend Bank of New York's operations to northeastern New Jersey and increase the company's low-cost core deposits.

Bankers Trust New York Corp.: Fitch assigned a AA-minus rating to a new $150 million issue of 7 5/8% convertible capital securities due June 1, 2033.

At the option of Bankers Trust, the coupon can be reduced by 150 basis points. If the option is exercised, the debth-older can convert the notes into cumulative preferred stock.

Colorado National Bankshares: Standard & Poor's upgraded senior debt to A-minus from BB-plus after the company was acquired by First Bank System Inc. Uninsured certificates of deposit were raised to A/A1 from BBB-minus/A3.

Royal Bank of Canada: IBCA, the London-based rating agency, downgraded long-term debt to AA-minus from AA. It cited the planned acquisition of many of the operating units of Royal Trustco.

Western Financial Savings Bank: Standard & Poor's assigned a BB-plus rating on the Irvine, Calif. company's planned $100 million of subordinated capital debentures. Outstanding subordinated debt was also rated BB-plus, while uninsured certificates of deposit were rated BBB-minus/A3.

The agency said the ratings reflect the bank's exposure to the depressed California real estate market, particularly multifamily housing.

But it added that a planned $25 million infusion from parent Westcorp Inc. as well as ample loan-loss reserves and capital and a profitable niche in automobile financing offset the real estate woes.

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