纽约联储-班克斯与飓风：飓风“伊尔玛”和“玛丽亚”过后波多黎各的个案研究

BanksversusHurricanes:

NO.1078

NOVEMBER2023

ACaseStudyofPuertoRico

afterHurricanesIrmaandMaria

PeterAnagnostakos|JasonBram|BenjaminChan|

NataliaFischl-Lanzoni|HasanLatif|JamesM.Mahoney|DonaldP.Morgan|LaddMorgan|IvelisseSuarez

BanksversusHurricanes:ACaseStudyofPuertoRicoafterHurricanesIrmaandMaria

PeterAnagnostakos,JasonBram,BenjaminChan,NataliaFischl-Lanzoni,HasanLatif,JamesM.Mahoney,DonaldP.Morgan,LaddMorgan,andIvelisseSuarez

FederalReserveBankofNewYorkStaffReports,no.1078

November2023

/10.59576/sr

.1078

Abstract

WestudyPuertoRico’sexperienceaftertheseverehurricaneseasonof2017tobetterunderstandhow

extremeweatherdisastersaffectbankstabilityandtheirabilitytolend.Despitethedevastationwroughtbytwocategory5hurricanesinasinglemonth,wefindrelativelymodestandtransitoryimpactsonbankperformancewithnoevidentdeclineinlendingcapacity.Wediscussvariousmitigantsthathelplimit

bankexposuretoextremeweatherandwhetherthesemitigantsmaybevulnerablegiventhepotentialformoresevereandmoreimpactfulclimateevents.

JELclassification:G21,Q54

Keywords:climatechange,physicalrisks,hurricanes,banks,PuertoRico

Morgan,Fischl-Lanzoni,Anagnostakos,Chan,Latif,Mahoney,Morgan,Suarez:FederalReserveBankofNewYork(emails:don.morgan@,natalia.fischl-lanzoni@,

peter.anagnostakos@,benjamin.chan@,hasan.latif@,

jim.mahoney@,ladd.morgan@,ivelisse.suarez@).Bramisretired(email:jason1nyc@).TheauthorsthankDinaMaherandJoãoA.C.Santosforhelpfulcomments.

Thispaperpresentspreliminaryfindingsandisbeingdistributedtoeconomistsandotherinterested

readerssolelytostimulatediscussionandelicitcomments.Theviewsexpressedinthispaperarethoseoftheauthor(s)anddonotnecessarilyreflectthepositionoftheFederalReserveBankofNewYorkortheFederalReserveSystem.Anyerrorsoromissionsaretheresponsibilityoftheauthor(s).

Toviewtheauthors’disclosurestatements,visit

/research/staff

_reports/sr1078.html.

1|Page

I.Introduction

Globalclimatewarminghasgarneredbroadscientificconsensus(see,e.g.,NASA(2022)forbroad-basedscientificperspectivesonthetopic),andclimatefinancialrisk–climatechange’simpactonthefinancialinstitutions,financialmarkets,andthefinancialeconomy–isanactiveareaofstudyfrompolicy,

academic,andindustryperspectives.Banks,inparticular,haveclearfinancialincentivestoprotect

againstclimate-relatedlossesfromclimateoutcomes’negativeeffectsontheircustomers,clients,andcounterparties,thecollateralthatisusedtosecuretheirloans,andtheirownbusinessactivities.

Additionally,manycontractualandmarketmechanismsexistforbankstoprotecttheirfinancial

interests.However,severeclimateeventsmayoccurthatarefarbeyondtheworstexpectedoutcomesthatbanksplanfororprotectagainst,soitisanempiricalmatterwhetherbanksareabletoimplementsufficientsafeguardstoprotectthemselvesagainstunexpectedlysevereclimate-relatedevents.

WeusePuertoRico’sexperienceduringthedevastatinghurricanesof2017asacasestudytobetter

understandtheeffectsofsevereweathereventsongeographicallyvulnerableareasandthebanksthatlendinthoseareas.PuertoRico(PR)wasextremelyvulnerableevenbeforeMariastruck.Itseconomyandbankingsectorhadcontractedfornearlyadecadeanditswaterandelectricalinfrastructurewas

fragileduetochronicfiscalconstraintsoninvestmentandmaintenance.Compoundingmatters,

HurricaneIrmadroppedafootofraininPuertoRicojusttwoweeksbeforeMaria,leavingtheislandwaterloggedandpronetomudslides(aperilassociatedwithPuertoRicohurricanes).Giventhose

challenginginitialconditions,Mariamightconstituteaworstcaseforstudyingbankresilienceagainstextremeweather.1

ThedestructionanddisruptionfromMariawereimmense.Nearly80percentoftheisland’selectricalgridwasdestroyedandmostoftheisland3.4millionresidentslostpowerformonths.Thousandsof

homesweredamagedordestroyed.Flashfloodscausedlandslidesanddestroyedmanybridges.FEMAestimateddamagesfromMariaat$90billion,thethirdcostliestinU.S.history.ThecombineddamagesfromIrma-Marianearlyexceededtheisland’sentireannualGDPofaround$104billionin2016.

Despitethedevastation,wefindthatfinanciallossestobankswererelativelyminorandtransitory.Weformallyidentifytheeffectsusingdifference-in-differenceanalysis,wherewecomparehowbanks

headquarteredinPuertoRicofaredrelativetoacontrolgroupofUSbanksonthemainland.Wefindhigherloandelinquencyrates,buttheimpactwasmodestandshort-lived.Banks’capitalandincomewerenotsignificantlyaffected,norwasloangrowth.

Ourresultsareconsistentwithpreviousresearchonhurricanesrisktobanks.Brei,Mohan,andStrobl(2019)findthatbanksineasternCaribbeanislandsexperienceddepositwithdrawalsafterhurricanes,butnodeteriorationinloandefaultsorcapital.GallaherandHartley(2017)findthatconsumerloan

delinquenciesroseonlybrieflyandmodestlyafterHurricaneKatrinastruckNewOrleansin2005.A

studyofU.S.weatherdisastersmoregenerallysince1995,Blickle,Hamerling,andMorgan,(2022)findssmallorinsignificanteffectsonbankperformance.DuandZhao(2020)comparetheresidential

1AccordingtoGermanwatchGlobalClimateRiskIndex(2021),PuertoRicorankedhighestof180countries/

territoriesbasedonthenumberofsevereweatherevents,fatalities,andeconomiclossesfrom2000to2019,mostofwhicharehurricanerelated.MariaalsobadlydamagedDominicaandSt.Croix.

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Since1960,theCaribbeanoverallhasexperienced264hurricaneswhichaccountfor95%ofthetotal

damagesfromallnaturaldisastersandforthevastmajorityofextremerainfalleventsandextremesealevelsexperiencedintheregion(Burgess,Taylor,2018).Theislandissquarelyin“HurricaneAlley,”theswathoftheNorthAtlanticwherehurricanesareendemic,asshowninFigure1.

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Figure1.HurricaneAlley

Source:createdusingUser:jdorje/TracksbyNilfanionon2006-08-05usingdatafromtheNationalHurricaneCenter.

/w/index.php?curid=1023164

Figure2showsthefrequencyofhurricanesintheCaribbeangoingbacknearly200yearsandconfirmstheobservedincreaseinhurricanefrequency.

Figure2.AnnualHurricaneandStallingHurricaneFrequency,1850-2020

Source:Vosper,Mitchell,Emanuel(2020)

TwomeasuresofhurricaneintensityintheNorthAtlanticareshownintheFigure3below.Bothindicesreflecthurricanefrequency,power,andduration.Thepowerdissipationindex(PDI),theorangelineatleft,closelytracksseasurfacetemperatures(hurricanesneedwatertemperaturesabove79Fahrenheittoform).Theaccumulatedcycloneenergy(ACE)indexisshownontheright.Bothmetricsappearto

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showagrowingintensityofTCseasonssince1950,whichcorrelateswiththeincreaseinseasurfacetemperatures.

Figure3.NorthAtlanticTropicalCycloneActivity–PDI&ACE,1950–2020

Source:EPA-ClimateChangeIndicators

II.bHurricaneMaria

MariatouchedlandonthesoutheastpartofPuertoRicoandthentravellednorthwesterlyacrosstheisland(seeFigure4).

Figure4HurricanesMaria’sPathAcrossPuertoRico

Source:USGeologicalSurveywebsite(2022)

Mariastandsoutrelativetopriorstormsintermsofintensity,rainfall,wind,anddamage.

•Intensity:Asacategory5stormwithmaxwindspeedof175mph,itwasthemostintensetostrikeontheislandsincethe1928SanFelipeSegundohurricane.HurricaneMariawasa1in115-year

extremerainfalleventforPuertoRico.

6|Page

•Rainfall:Outof129stormsthatimpactedPuertoRicosince1956,theextremerainfallassociatedwithHurricaneMariahadthelargestmaximumdailyprecipitation—66%highermeantotalrainfallthanHurricaneGeorges(thepreviousmostdamaginghurricane).ThedamagecausedbytheheavyrainswasexacerbatedbyHurricaneIrma,whichhaddrenchedthegroundwithraintwoweeks

earlier.DuringHurricaneMariasevereflashfloodingoccurredinmanyinlandlocations.30rivers(13%)reachedmajorfloodstage,and13ofthosewereatoraboverecordstages.Manybridgesweredestroyed.USGeologicalSurvey(USGS)evaluatedhundredsofthemorethan70,000

landslidesbroughtonbyhurricaneMaria.

•Wind:HurricaneMariaknockeddown80percentofPuertoRico’sutilitypolesandalltransmissionlines,resultinginthelossofpower,cellphoneservice,andmunicipalwatersuppliestoessentially

alloftheisland’s3.4millionresidents.Acrosstheisland,manybuildingssufferedsignificantdamageorweredestroyed.Thousandsofhomeswereheavilydamagedordestroyed—themajoritylow-risewood-framedbuildingsthatcollapsedfromhigh-velocityfloodforcesorhighwindpressures.Strongwindsfrequentlypenetratedroofsandwindowsallowingdamagingrainfalltopenetratestructures.

•Damage:FEMAestimateddamagesfromMariaat$90billion,thethirdcostliestinU.S.history.ThecombineddamagesfromIrma-Marianearlyexceededtheisland’sentireannualGDPofaround$104billionin2016.DamagescausedbyHurricanesIrmaandMariapromptedahumanitariancrisisintheU.S.Caribbeanbycausingthecollapseoftheregion’smainenergy,water,transport,and

communicationinfrastructure.

II.c.1FutureHurricaneRisksFacingPuertoRico

Risingsealevelsleadstohigherstormsurgesandmoredestructivehurricanes,allelseequal.

RelativesealevelsinPuertoRicohaverisenbyabout0.08inches(2mm)peryearonaveragealong,andthetrendhasbeenacceleratingsincetheearly2000s.Figure5illustratespotentialsealevelriseunderthreescenariosforgreenhousegasconcentrations.TheextremescenariocorrespondstoaworstcasewithintheIPCChighestemissionsscenario(RCP8.5).3TheIntermediateandIntermediateLow(Net

Zero)scenariosroughlycorrespondtoRCP4.5andRCP2.6.Projectedincreasesinsealevel,averageTCintensity,andTCrainfallrateswilleachgenerallyacttofurtherelevatefuturestormsurgerisk.Ofthe

variousinfluencesonsurgerisk,climatescientistsaremostconfidentthatsealevelriseoverthecomingcenturywillleadtohigheraveragestorminundationlevelsforTCsthatoccur,assumingallotherfactorsequal.

3Climatescientistsdevelopdifferentclimatescenariosbasedonlevelsofgreenhousegas(GHG)concentrationintheatmosphere.Thesescenariosaretypicallyindicatedbyanumericrepresentativeconcentrationpathway(RCP)andoverallglobaltemperatureincreasevs.pre-industriallevels.CategoriesofNGFSscenarioscommonlyusedbythefinancialindustryarederivedfromthreeIPCCscenarios:OrderlyTransition(1.4-1.6°C,RCP2.6),Disorderly

Transition(1.4-1.6°C,RCP2.6),andHotHouse(2.6-3°C,RCP6).

7|Page

Figure5.ObservedandProjectedSeaLevelRise

Source:U.S.GlobalChangeResearchProgram:IPCCFourthNationalClimateAssessment

Scientistscannotyetmakeclaimswithahighlevelofconfidenceaboutlong-termtrendsinthe

frequencyofallTCs.ButaccordingtoIPCCSixthAssessmentReport(2021),4itislikelythatthe

percentageofmajorTCs—thosereachingcategories3to5—increasedoverthelastfourdecades.Scientistsareconfidentinsayingthattherewillbemorefrequentstormsinthehighestintensitycategoriesof4and5.

II.c.2VulnerabilityofPuertoRicotosealevelriseandsevereweatherevents

Thevulnerabilityofpropertyisafunctionoftheparticularconstructionmethodsemployedandpropertylocation,whichareoftendrivenbyeconomicconsiderationsandmarketavailability.

Commercialentitiesandresidentswithgreaterfinancialmeanstendtochooseconcretebuildingsindevelopedneighborhoodsthathavebeendesignedandbuiltbyprofessionalsfollowinglocalbuildingcode.Unfortunately,PuertoRico’songoingeconomicdifficultieshaveleft40-50percentofthe

Commonwealth’sresidentslivinginpoverty,andmanyresidentsliveininformalwood-framedbuildingsonhillsidesorfloodplains.

FEMArecentlyupdateditsfloodzonemaps,indicatingwhichareasareconsideredatriskofaflood

every100or500years(1%and0.2%riskzones,respectively).Accordingtoa2019CUNYHunterstudy,approximately15%(488,560)ofPuertoRico’spopulationresidedinthe100-yearfloodplain;and19%

(624,414)ofthepopulationlivedinacombined100-and500-yearfloodplain.ThemapinFigure6

illustratestheFEMAcurrentandproposed100-yearfloodzones.Theproposedupdatestothesefloodzonemapsstillhavenotbeenfinalizedasoflate2022,astheprocesstoformalizeandadoptthesemapsislaboriousandtime-consuming.Thetimedelaysinformallyupdatingfloodzonemapscancause

unintendedrisk-taking,ashomeownersorinsuranceproviderswhorelyonoutdatedmapsmay

underestimatefloodrisk.5

4

https://www.ipcc.ch/report/ar6/wg1/chapter/chapter

-11/.Theprojectionsinthisreportdrawfroma2020WorldMeteorologicalSociety(WMO)assessmentreportwhichaggregatesanumberofleadingstudiesandnormalizesresultsunderanRCP8.5scenario.

5TheNewYorkTimeshasreportedthatdelaysofofficialFEMAfloodzonemapshasgivenrisetobroaderrelianceonprivate-sectormodelingoffloodzones,suchasbythoseofFirstStreetFoundation;seeNewDataReveals

8|Page

Figure6.FEMACurrentandProposed100-yearFloodZoneMapforPuertoRico

Source:HSOAC/RAND,AfterHurricaneMaria(2020)

II.dPredictedHurricaneDamages

Thehighpercentageofcoastalareasrelativetothetotalislandlandareameansthatalargeproportionoftheregion’speople,infrastructure,andeconomicactivityarevulnerabletosealevelrise,more

frequentintenserainfalleventsandassociatedcoastalflooding,andsaltwaterintrusion.Highlevelsofexposureandsensitivitytoriskintheregionarecompoundedbyalowlevelofadaptivecapacity,dueinparttothehighcostsofmitigationandadaptationmeasuresrelativetotheregion’sgrossdomestic

product,particularlywhencomparedtocontinentalU.S.coastalareas.Forexample,theIMF6estimatesthatwhilepublicadaptationcoststoclimatechangewillgrowtoapproximately0.25%ofglobalGDPincomingdecades,forsmallislandnationsexposedtotropicalcyclonesandrisingseasthatnumbercouldreach20%ofGDP.

Mejia(2016)estimatestheimpactofclimatechangeonhurricanedamageintheCaribbeanby

constructingadatasetthatcombinesadetailedrecordofTCs’characteristicswithreporteddamages.

ThepaperestimatesthattheaverageannualhurricanedamagesintheCaribbeanwillincreasebetween22and77percentbytheyear2100,inaglobalwarmingscenarioofhighCO2concentrationsandhighglobaltemperatures.BurgessandTaylor(2018)estimatedannualizeddamagesofapproximately$824

million(2005USD),or1%ofGDPfortheCaribbeanoverthehistoricalperiod1964to2013and

predictedthatannualnormalizeddamagesmaypotentiallyincreasetoatleast$1.4BNfor1.5°Candevenhigherdamagesat2°C.

III.EconomicandFinancialConditionsBeforeMaria

III.aEconomicConditions

HiddenFloodRiskAcrossAmerica-TheNewYorkTimes().Theprivate-sectorfloodmapsrevealheretofore“hidden”floodexposures.

6

/en/Blogs/Articles/2022/03/23/blog032322

-poor-and-vulnerable-countris-need-support-to-adapt-to-climate-change

9|Page

Wellbeforethe“GreatRecession”hittheU.S.economyin2008,adeepandprotractedeconomic

downturnwasalreadywellunderwayinPuertoRico.From2006to2017,PuertoRico’spopulationfellby11%,GDPfellby10%,andemploymentfellby17%.Asaresultofthisout-migrationandprotracteddeclineinitstaxbase,exacerbatedbyalackoftransparencyinbudgeting,PuertoRicodevelopedafull-blownfiscalcrisis,whichdidnotbecomewidelyapparentuntil2014.

IntheyearsleadinguptoMaria,PuertoRico’spowerandwaterinfrastructure—alreadydilapidatedandfragilepriortothefiscalcrisis—deterioratedfurther,asaresultofbudgetcutsandlackofmaintenance.Evenbeforethestorm,extensivepoweroutageshadalreadydarkenedmostoftheislandoccasionally.WhenMariastruck,PuertoRicowouldfacethemostextensiveblackout,intermsofmagnitudeand

duration,inU.S.history.

OnestructuralchallengeinPuertoRicoisitshighpovertyrate—higherthaninanyofthe50states,androughlytwicethenationalaverage.Medianhouseholdincomeisjust$21,000,justaboutone-thirdofthemainlandlevel.Onecontributingfactorisitshistoricallylowlaborforceparticipationrate:lessthanhalfofitsadultpopulationiseitherworkingorlookingforwork.Some“missingworkers”mayactuallybeemployedintheisland’sinformaleconomy.

Anotherrelevantstructuralfactorrelatestohomeownership.WhilehomeownershipratesinPuerto

RicoarecomparabletothemainlandU.S.,mortgagefinancingismuchlesscommon.7Only41%owneroccupiedhomesweremortgaged,versus67%onthemainland(U.S.Census).Residentsinthelarge

“unofficial”housingsector,whichcanincludehomesbuildonpubliclandandsubdividedfamilyplots,maylackofficialtitletotheirproperty,makingamortgagehardtoobtain(Garcia2021).Lackoftitlecanalsolimithomeowners'accesstoanyFEMAassistancethatrequiresproofofownership.8

III.bBankingConditions

ThebankingindustryinPuertoRicocontractedalongwithitseconomyinthedecadebeforeMaria.Bankfailures,consolidation,andfirmexitshranktotalassetsheldbycommercialbanksoperatinginPuertoRicobyover40%between2006and2016(Figure7).

7In2017,68%ofoccupiedhomesinPuertoRicowereowneroccupied,similartothemainlandrateof64%.

/pubs/researchreports/RR2595.html

.

8TheJonesAct(formally,theMerchantMarineActof1920),whichprohibitsforeign-flaggedshipsfrom

transportinggoodsbetweenU.S.ports,mayhavealsohinderedrecoveryalthoughtheActwaswaivedbytheTrumpAdministrationshortlyafterMariastruck.

/2017/09/28/us/jones

-act-waived.html

10|Page

Figure7.TotalPuertoRicoCommercialBankingAssets

TotalloansoutstandingbybanksoperatinginPuertoRicoalsocontractedsteadilyintheyearsleadinguptoMaria(Figure8).Whiledemandfromcommercialborrowersremainedweak,bankshave

experiencedaresurgenceinretaillendingasdemandforautoloansandotherconsumerunsecuredloanshavesurged.

Figure8.LoansandLeasesOutstandingatBanksOperatinginPuertoRico

Source:CallReportFR-Y9C

III.cThePuertoRicoeconomyafterMaria

ThedualIrma/Mariahurricanes,occurringjustweeksapart,exacerbatedthealreadyweakeconomic

andfinancialconditionsinPuertoRico.Irma’srainandstormsurgecreatedanenvironmentofanisland

11|Page

thatwasalreadywaterloggedandwasnotabletoabsorbeventheearlyrainsfromMaria.Additionally,afterIrma’sinitialdevastationofcertainCaribbeanIslands,manyneighboringislands,includingPuertoRico,sentpeople,aid,andsuppliesinresponsetoIrma’sdestruction,notanticipatinganotherstormofMaria’smagnitudewouldarrivesoshortlyafterwards.ThismovementofcriticalresourcesawayfromPuertoRicohinderedtheresponsetoMaria.

Widespreadandprotractedoutagesofpower,communication,andwater,aswellascriticaldamagetobridges,roads,andothertransportationlinkscrippledPuertoRico’seconomyintheFallof2017.FromAugusttoOctober2017,private-sectoremploymentfellby7percent(Figure9).Asitturnedout,

however,employmentreboundedfairlyquickly;byDecember2017,nearlytwo-thirdsoftheinitialjoblosshadbeenreversed,andbythefollowingsummer,employmentwasbackuptopre-stormlevels.

Figure9.EmploymentinPuertoRicoBeforeandAfterMaria

Figure10showsthattotalwageandsalaryincomedroppedbyabout$250millioninthethirdandfourquarterof2017butresumedgrowingbythefirstquarterof2018.9Interestingly,growthlaterin2018wasmorerobustthanbeforeMaria,consistentwithRoth-TranandWilsons’(2022)findingthatlocal

economicgrowthtendstoaccelerateafterdisasters.

9QuarterlyGDPgrowtharenotavailableforPuertoRico.

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Figure10.WageandSalaryIncomeinPuertoRicoBeforeandAfterMaria

Source:BureauofLaborStatistics/HaverAnalytics

IV.BankPerformancearoundMaria

IV.aBank-LevelAnalysis

ThissectioninvestigateshowPuertoRicobanksfared,relativetoacontrolgroupofbanks,afterMariastruckinSeptember2017.WefocusonthethreebanksheadquarteredinPuertoRicoatthetime-

BancoPopulardePuertoRico(BPPR),FirstBankandOrientalBank.By2017,thesethreebanks

controlledmorethan75%ofdepositsontheisland.10Wefindthatdelinquenciesatthesebanksrose

afterwards,buttheeffectsweretransitory.Charge-offs,capital,income,andlendingwerenotaffectedwhilebankdefaultriskfellslightly.

Data

Table1summarizethebankoutcomeswestudy.Thedataarequarterlyandcomefrombankholdingcompanies’Y9-Creports.11Thesampleperiodis2015q1–2019q3,aroughly5-yearspancentered

around2017q3.12Weconvertedallnon-ratiovariablestologtermstosmoothoutvolatilityforthe

PuertoRicoobservations(ofwhichtherewere,atmost,57).ThecontrolgroupcomprisesallU.S.banksthatwerenotexposedtoanaturaldisasterofanykindoverbetween2017q3and2019q3.13Consistent

10Cooperatives,akintocreditunionsinthemainlandU.S.,comprisedabout6%ofon-Islandfinancialsectorassetsatyear-end2020.Duetodatalimitations,wearenotabletoconsidertheminouranalysis.

11WeuseCallReportdataforBancoPopularPRtoavoidconfoundingwithBancoPopularNY.12Extendingthesamplewouldaddconfoundingeffectsfromamergerlaterin2019.

13Morespecifically,thecontrolbanksoperatedentirelyinU.S.countiesthatdidnothaveaFEMA-declareddisasterbetween2017q3-2019q3.

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withtheweakinitialconditionsjustdiscussed,thePuertoRicobankshad(much)higherdelinquencyandchargeoffrates,lowerZ-scores,andslowerloangrowthcomparedtothecontrolgroup.Ontheother

hand,theyhadhigherincomeandcapital/assetratios.

Table11.DescriptiveStatisticsforPuertoRicoBanksandControlBanks

PRBanks

ControlBanks

Mean

Median

N

Mean

Median

N

Log(Delinquency)

0.91

1.12

57

-2.10

-1.94

2,767

Log(Charge-offs)

0.26

-5.51

57

-8.33

-8.29

3,429

Log(NetIncome)

17.21

17.20

52

12.48

12.54

4,916

Capital/Assets

13.17

13.40

38

11.72

10.98

5,108

Z-Score

54.05

39.32

57

168.61

151.13

5,055

Loangrowth

-0.02

-0.01

57

0.01

0.01

5,107

Depositgrowth

0.01

0.00

57

0.01

0.00

5,107

Source:Authors’calculationusingdatafromY9-C,CallReports,andCensus.

Note:Alldifferencesbetweenmeansaresignificantat1%level,exceptdepositgrowth.Sampleperiod:2015q1-2019q3.ControlbanksarethosenotfacinganyFEMAnaturaldisastersbetween2017q3-2019q3.

Analysis

Thissectionappliesdifference-in-difference(DiD)analysistoassesstheimpactofMariaonPuertoRicobanks.Tothatend,weestimateregressionmodelsoftheform:

P=a+a′xPR_bank+a′′xPost+βxPR_bankxPost+contTols+e.

Thedependentvariable,P,equalsoneoftheperformancemeasuresaboveforeachbankanddate.Theconstantterm,a,measuresthemeanofPoverallsample.PR_bankequalsoneforPuertoRicobanks

andzeroforotherbanks.Itscoefficient,a′,measuresthedifferenceinthemeanPforPuertoRicobanks

versuscontrolbanksoverthefullsampleperiod.Postequalszerobefore2017Q3andoneonorafterthatdate.ItscoefficientequalsthedifferenceinmeanPafterMariaatallbanks.Thecoefficientofinterest,β,equalstherelativechange,ordifference-in-difference,inPafterMaria.

Tocontrolforotherdifferencesamongbanks,theregressionmodelincludesbankassets(laggedone

quarter),population,medianincome,andtheunemploymentrate.Thelatteraremeasuredatthe

PuertoRicolevelforPuertoRicobanksandatthe(weighted)countylevelforcontrolbanks.Wealso

includeafixedeffect(constantterm)f