Fitch downgrades bank with South Florida real estate dealings

First BanCorp suffers a series of high-profile foreclosures including Abel Homes at Key Winds

Abel Homes at Key Winds Florida, on which First BanCorp filed to foreclose in May

Fitch Ratings placed First BanCorp on a negative ratings watch list and downgraded the ratings of its main subsidiary, Firstbank Puerto Rico last Friday, citing concerns by federal regulators about a large number of bad loans involving real estate in Puerto Rico and South Florida.

San Juan-based First BanCorp on June 4 announced a so-called consent order with the Federal Deposit Insurance Corp. and the Office of Commissioner of Financial Institutions of Puerto Rico, as well as a written agreement with the Federal Reserve Bank of New York.

Fitch said the downgrade reflects continued weak operating performance due to a struggling real estate market in Puerto Rico and South Florida, where it operates about 10 branches. The bank’s percentage of non-performing loans, compared with total gross loans more than doubled to 14.9 percent from 7.2 percent a year earlier.

The lender has experienced a number of high-profile foreclosures in the South Florida market in recent months. In May a suit against Coral Gables-based GREC Conversions and managing member Agustin Herran, was filed in Miami-Dade Circuit County Court to foreclose on the 199-unit Abel Homes at Key Winds Florida, where it had a $29.5 million mortgage and Carrington Park, in Maitland, Fla., where it had $12.7 million in outstanding loans, according to the South Florida Business Journal.

Earlier, in September 2009, First BanCorp filed a $39.4 million suit against Herran and his Quantum Ventures development firm over the unfinished Venetian Parc project in southern Miami-Dade.

“The prolonged economic recession in Puerto Rico and Florida has negatively affected real estate values, the construction industry and the financial condition of many of our customers,” said Aurelio Aleman, president and CEO of First BanCorp, in a June 4 statement. “We are committed to continue to work expeditiously to resolve the items detailed in the agreements and execute our strategies to strengthen our balance sheet and return FirstBank to its full earnings potential.”

First BanCorp has a total of 175 branches in Puerto Rico, the U.S. Virgin Islands and British Virgin Islands, including the 10 South Florida branches.