Accounts filed at Companies House show fee income was down from £13.1 million to £11.8m in the 12 months to the end of March 2012.
The results also include the period when Tods Murray merged with the smaller private client specialist Fyfe Ireland.
That deal in January last year added two partners, eight solicitors and six support staff to the Tods Murray roster.
Direct expenses in the financial year were steady at £8m while administrative expenses declined from £1.7m to £1.4m.
The lower income meant operating profit was at £2.37m, as opposed to £3.3m the previous year, and profit before partner remuneration and profit share fell from £3.1m to £2.3m.
The average number of partners during the year was down one to 35 with the highest paid seeing their remuneration static at £112,124.
Overall staff numbers increased from 143 to 151 while employee costs remained stable at £4.63m against £4.67m.
David Dunsire, executive partner, said: "Our results were as expected, reflecting both a slow market and a year of investment for the firm.
"It would appear that 2011 was a false dawn and our 2012 results have mirrored the rest of the Scottish corporate scene. However, there does appear to be some glimmer of growth around the corner and we expect to bounce back to 2011 levels this year, with signs of turnover already up 12% on the current year."
The firm said the merger with Fyfe Ireland is starting to show positive results and its private client team saw turnover increase 28% between April and November last year while adding five new solicitors.
The banking and finance team's income was up around 55%, thanks to a strong level of referrals from firms in England and outside the UK.
Mr Dunsire said much of the growth Tods Murray is seeing is coming out of London with corporate activity in Scotland still muted.
The real estate is one area still having problems as the number of deals remains low due to fewer borrowing opportunities and a lack of confidence in the property market.
Mr Dunsire added: "We can see recovery in London already. However, Scotland is traditionally slower to recover from recession.
"We have taken steps over several years to restructure and build a lean and effective practice which leaves us well placed, I believe, to emerge from this recession stronger and fitter as we have done with others during our 150-year history."
Tods Murray, which can trace its roots back to 1856, said it has invested in cloud computing technology called NetDocuments to increase efficiency and security. It also became the first Scottish firm to achieve the Lexcel legal quality mark.