Cambridge Bancorp, parent of Cambridge Trust Co., reported a healthy 5.8 percent year-over-year profit increase for the first quarter – but that provides relatively little comfort when margins are being squeezed tight.

The jump – to a $3.3 million profit from $3.1 million a year earlier – was credited to a decent increase in net interest income, which hit $11.5 million, compared to $10.6 million the prior year. Interest income was $12.4 million compared to $11.6 million while interest expense was $867,000 compared to $1 million.

Non-interest income for the quarter was $4.8 million compared to $4.6 million in the same quarter a year ago. Non-interest expense increased to $11.3 million from $10.4 million.

All of this put Cambridge Trust’s net interest margin at 3.72 percent, down from 3.89 percent in the first quarter of 2011.

Return on average assets was 1.02 percent, compared to 1.09 percent last year, and return on average equity fell to 13.57 percent from 13.9 percent.

So while net income was certainly better than it was a year ago, it had to be in order to deal with the tightening margin. Is this how it’s going to be for the foreseeable future?

“I’m not sure what normal’s going to be,” Cambridge Trust CFO and Treasurer Albert Rietheimer told Banker & Tradesman. “Our margin clearly has some pressure on it.”

Rietheimer noted that while Cambridge Trust’s margin was down 17 basis points from the first quarter of 2011, it was down seven from fourth quarter.

“With the interest rate environment that all banks face right now, most cash flows that we receive from loans or investments are going back out at rates less than they were,” Rietheimer said. He said it would be “difficult” for interest rates to “compress further,” but “I think the pressure will continue until the interest rate environment changes.”

Cambridge Trust’s total loans outstanding increased $18.1 million to $691 million from the end of 2011 and $84.7 million compared to the first quarter of 2011.

Non-performing loans were flat at 0.18 percent.

Bob Davis, chief lending officer, said loan growth was driven by the commercial side of the house.

“Small business owners who have been very concerned about uncertainty, and not borrowing over the last few years, are coming out of the shell,” Davis told Banker & Tradesman. “They’re saying, ‘Let’s be very careful about how we borrow,’ and we’re seeing low line-of-credit usage… There’s no ‘Let’s try this, it might work,’ but there’s not the doom and gloom of the past three years.”

Total deposits increased 14.6 percent to $1.15 billion from $1 billion a year ago and 2.8 percent compared to $1.12 billion in the fourth quarter.

Total assets were $1.34 billion, compared to $1.14 billion a year ago and $1.27 billion at the end of 2011.