More borrowers are struggling to make loan repayments as the ongoing economic downturn bites deeper into household budgets.The latest figures from financial regulator the Bermuda Monetary Authority show a marked increase in loan impairments in the first three months of this year.The regulator believes that lenders are facing a ‘new normal’ environment, in which more people are falling behind with loan and mortgage repayments.Non-performing loans (NPL) — described as loans for which repayments are 31 days or more behind — increased to 8.3 percent of banks’ total loans, up from 5.4 percent in the same period of last year.There was also a sharp increase of 1.3 percentage points from the fourth quarter of last year, when the percentage of NPLs in the loan book amounted to seven percent.In its Quarterly Banking Digest the BMA stated: “Banks continue to show a significant deterioration of their lending portfolio driven by the sector’s large exposure to the real estate sector amid a recessionary environment.“The current economic stagnation has delivered a ‘new normal’ scenario for firms, which revolves around elevated non-performing loan balances and rising risk-weightings.“The proportion of performing loans to total loans declined during the quarter from 93.0 percent to 91.7 percent while net charge-offs remained unchanged at 0.6 percent.”The data added that the provisions to NPLs set aside by banks decreased to 16.2 percent in the first quarter from 18.4 percent in the fourth quarter of 2011 and 20.8 percent a year earlier. This was the fourth consecutive quarter that the loss provision ratio has declined.HSBC Bermuda said yesterday that it keen to work with borrowers feeling the pinch.“Bermuda continues, as other jurisdictions, to experience a period of unprecedented economic challenge,” a spokesperson for the bank said.“HSBC Bermuda certainly has been, and continues to be, available to help guide customers through financial challenges successfully. We continue to work with our customers, encouraging them to contact us when faced with challenges, so we can understand the specifics.“We have specialists available who are willing to work with customers, to look at their financial budgeting and help them to understand the options that are available to them. Circumstances are assessed, and alternatives that will help the customer are considered.”We did not receive answers for our request for comment from either Butterfield Bank or Capital G Bank by press time.The BMA report also showed that customer deposits at Bermuda’s banks fell by 4.1 percent in the first quarter, as Bermuda dollar deposits dipped 1.2 percent and foreign currency deposits plunged 4.7 percent.The trend of a widening Bermuda dollar funding gap continued, meaning that foreign currency deposits are increasingly supporting Bermuda dollar lending.This is expressed by the Bermuda dollar loan-to deposit ratio, which was 151 percent in the first quarter, compared to 139.5 percent a year earlier.Despite the economic conditions, Bermuda’s banks remained profitable with an annualised 8.8 percent return on equity for the sector in the first quarter, according to the BMA.Total assets fell 3.3 percent in the quarter and banks’ capitalisation levels fell. The ratio of tier one capital — what regulators think of as high-quality, core capital — to risk-weighted assets was 23.7 percent, down from 25.1 percent in the previous quarter. However, despite the decrease, the BMA noted that this level was “well above international standards” and indicated a high level of solvency.