NEW YORK (TheStreet) -- Puerto Rico's Governor Alejandro Garcia Padilla says the island's debts of more than $70 billion are "not payable." He says the commonwealth is in a "death spiral." Per capita, Puerto Rico has built up more municipal bond debt, than any U.S. state. According to Nick Timiraos in the Wall Street Journal, the commonwealth's $72 billion debt amounts to almost 70% of the island's economic output.

Investors have questions: Will Puerto Rico be able to stop the bleeding? Who will bail out the commonwealth? How will it recover? Will the banks shut down like in Greece? Speaking of the banks, we used TheStreet Ratings,TheStreet's proprietary ratings tool to see how investors should play the three publicly traded Puerto Rico banks.

The answer? Don't buy. 

TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a buy yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a buy yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Check out which Puerto Rican banks made the list. And when you're done, be sure to read about which volatile aerospace and defense stocks to buy now. Year-to-date returns are based on June 26, 2015, closing prices. The highest-rated stock appears last.

OFG ChartOFG data by YCharts
3. OFG Bancorp (OFG)

Rating: Hold, C+
Market Cap: $590 million
Year-to-date return: -15.6%

OFG Bancorp, a financial holding company, provides various banking and financial services primarily in Puerto Rico. It operates in three segments: Banking, Wealth Management, and Treasury.

"We rate OFG BANCORP (OFG) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its expanding profit margins over time. At the same time, however, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • OFG, with its decline in revenue, underperformed when compared the industry average of 0.0%. Since the same quarter one year prior, revenues fell by 11.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • 47.70% is the gross profit margin for OFG BANCORP which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, OFG's net profit margin of -2.62% significantly underperformed when compared to the industry average.
  • Net operating cash flow has decreased to $34.17 million or 15.94% when compared to the same quarter last year. Despite a decrease in cash flow OFG BANCORP is still fairing well by exceeding its industry average cash flow growth rate of -37.23%.
  • OFG BANCORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, OFG BANCORP reported lower earnings of $1.50 versus $1.74 in the prior year. For the next year, the market is expecting a contraction of 32.7% in earnings ($1.01 versus $1.50).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Commercial Banks industry. The net income has significantly decreased by 112.6% when compared to the same quarter one year ago, falling from $23.75 million to -$2.99 million.

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