Net income increased 5.5 percent to $14.1 million at Cambridge Bancorp last year, from $13.4 million in 2012.

Overall, loans increased $200.2 million, or 27 percent, last year. Residential mortgages increased $110.3 million, or 31.7 percent, and commercial mortgages increased $86.9 million, or 31.4 percent. Home equity loans declined $3.9 million, though, as consumers continued to refinance second mortgages into first mortgages. Deposits increased $127.7 million, or 10 percent.

The drawn-out low interest rate environment continued to put downward pressure on the bank’s net interest margin, which declined 23 basis points to 3.35 percent in 2013, compared with 3.58 percent in 2012. Net interest income declined $408,000, or 0.9 percent, to $45.5 million.

Nonperforming loans increased slightly to $1.7 million, from $1.6 million in 2012. Allowance for loan losses totaled $12.7 million, or 1.35 percent of total loans, compared with $10.9 million, or 1.47 percent, in the previous year. The bank increased its provision for loan losses $700,000 to $1.5 million in 2013, primarily in response to substantial loan growth over the year.

The bank also deployed cash flows from its investment portfolio to meet the shortfall between loan funding needs and deposit growth, as loans outpaced deposits last year. The bank’s total investment securities portfolio decreased to $448 million from $573.5 million at year-end 2012. The shift in the bank’s earning asset mix coupled with the lower interest rate environment resulted in a decrease of $3.1 million in interest income on investment securities for the year. This decrease was partially offset by $1.7 million in higher interest on loans and a slight reduction in deposit costs.

[Editor’s note: The original version of this story stated the incorrect net income.]