Stockholders' Equity

9 Months Ended

Sep. 30, 2013

Stockholders' Equity Note [Abstract]

Stockholders' Equity

Stockholders’ Equity

(a) Earnings Per Common Share

The following table illustrates the reconciliation of weighted average shares used for earnings per common share computations for the three and nine months ended September 30, 2013 and 2012:

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2013			2012			2013			2012
	(Dollars in thousands)
Net income:
Net income	$	3,290		$	2,863		$	8,865		$	10,227
Less: Dividends and undistributed earnings allocated to participating securities	(41		)	(37		)	(110		)	(135		)
Net income allocated to common shareholders	$	3,249		$	2,826		$	8,755		$	10,092
Basic:
Weighted average common shares outstanding	16,163,205			15,149,292			15,485,086			15,301,868
Less: Restricted stock awards	(204,992		)	(194,405		)	(187,828		)	(177,911		)
Total basic weighted average common shares outstanding	15,958,213			14,954,887			15,297,258			15,123,957
Diluted:
Basic weighted average common shares outstanding	15,958,213			14,954,887			15,297,258			15,123,957
Incremental shares from stock options	10,854			13,784			11,983			14,266
Total diluted weighted average common shares outstanding	15,969,067			14,968,671			15,309,241			15,138,223

Potential dilutive shares are excluded from the computation of earnings per share if their effect is anti-dilutive. For the three and nine months ended September 30, 2013 anti-dilutive shares outstanding related to options to acquire common stock totaled 145,943 and 173,294, respectively, as the assumed proceeds from exercise price, tax benefits and future compensation was in excess of the market value. For the three and nine months ended September 30, 2012 anti-dilutive shares outstanding related to options and warrants to acquire common stock totaled 227,044 and 257,231, respectively, as the assumed proceeds from exercise price, tax benefits and future compensation was in excess of the market value.

(b) Dividends

Common Stock: The timing and amount of cash dividends paid on our common stock depends on the Company’s earnings, capital requirements, financial condition and other relevant factors. Dividends on common stock from the Company depend substantially upon receipt of dividends from the Bank, which is the Company’s predominant sources of income. The following table summarizes the dividend activity for the nine months ended September 30, 2013 and subsequent through the date of this filing.

Declared	Cash Dividend per Share		Record Date	Paid or Payable
January 30, 2013	$	0.08	February 8, 2013	February 22, 2013
April 24, 2013	$	0.08	May 10, 2013	May 24, 2013
July 23, 2013	$	0.18	August 6, 2013	August 15, 2013
October 23, 2013	$	0.08	November 5, 2013	November 15, 2013

The FDIC and the Washington DFI have the authority under their supervisory powers to prohibit the payment of dividends by Heritage Bank to the Company. Additionally, current guidance from the Federal Reserve Board provides, among other things, that dividends per share on the Company’s common stock generally should not exceed earnings per share, measured over the previous four fiscal quarters. Current regulations allow the Company and its subsidiary bank to pay dividends on their common stock if the Company’s or the Bank’s regulatory capital would not be reduced below the statutory capital requirements set by the Federal Reserve Board and the FDIC.

(c) Stock Repurchase Program

The Company has had various stock repurchase programs since March 1999. On August 30, 2012, the Board of Directors approved the Company’s tenth stock repurchase plan, authorizing the repurchase of up to 5% of the Company’s outstanding shares of common stock, or approximately 757,000 shares. During the three and nine months ended September 30, 2013, the Company repurchased 544,000 shares at an average purchase price of $15.88 per share under this tenth plan. In total, the Company has repurchased 596,900 shares at an average price of $15.70 per share under this tenth plan. The Company repurchased 490 and 12,809 shares at an average price of $16.01 and $14.24 to pay withholding taxes on restricted stock that vested during the three and nine months ended September 30, 2013, respectively.