Community Bank CEOs: Why Some Shareholders Never Get Paid After Bank Mergers
The deal closed.
The signs changed.
Your shareholders are waiting for their money.
They think it's simple.
Sign the papers, get the check.
Like selling a house.
It's not that simple.
Welcome to the share conversion process—the part of the merger nobody warns you about.
The Question Everyone's Asking
"When do I get my money?"
Your shareholders have been patient through months of waiting.
They approved the merger.
They watched the regulatory process play out.
They saw closing day come and go.
Now they want their proceeds.
And they want them now.
Here's what they don't understand: Getting paid requires work on their part too.
The First Challenge: Finding the Certificates
Before shareholders can get paid, they need to send in their physical stock certificates.
Sounds simple, right?
Here's the reality: Many shareholders have no idea where their certificates are.
They've been in a drawer for 20 years.
Or a safe deposit box.
Or filed away somewhere after a parent died.
Or lost in a move.
Some certificates were issued to a trust that no longer exists.
Some are in maiden names from decades ago.
Some are held by IRA custodians who've merged with other companies.
Start communicating this early.
Tell shareholders on announcement day: "Find your stock certificates now. You'll need them after closing."
Repeat this message in every communication between announcement and closing.
Why?
Because if shareholders wait until after closing to discover their certificates are missing, fixing the problem takes time and money.
Paying agents and stock transfer agents charge significant fees to replace lost certificates.
The process can take weeks or months.
You don't want shareholders waiting for replacement certificates while everyone else is getting paid.
The Data Cleanup Nobody Thinks About
After closing, you'll need to provide the paying agent or stock transfer agent with shareholder data.
Not just names and addresses.
Everything:
- Social Security numbers (or EINs for IRA custodians and corporate shareholders)
- Current addresses
- Proper legal titling (exactly as it appears on the certificates)
- Number of shares
- Phone numbers
- Email addresses
All of it needs to be current and accurate.
The buyer's legal counsel will work through your legal counsel to get you specific instructions for formatting and submitting the data.
Their systems require data in very specific formats.
If your shareholder records are messy, you have a problem.
When was the last time you thoroughly updated shareholder contact information?
If the answer is "I'm not sure," start now.
Don't wait until closing to discover your data is a mess.
By then, shareholders are calling daily asking where their money is, and you're scrambling to fix address errors and track down EINs.
Do the cleanup work starting on announcement day.
Or better yet, keep shareholder data current all the time.
The Letter of Transmittal
After closing, shareholders receive a "Letter of Transmittal."
This letter provides detailed instructions for surrendering stock certificates and receiving merger consideration.
It explains exactly what shareholders need to do, what to send, and where to send it.
You need to get a copy of this letter as soon as possible.
You probably won't see it until about 30 days before closing but ask for it early.
Why do you need it?
Because shareholders will call you with questions.
Lots of questions.
You need to understand what the letter says so you can answer accurately.
The Mail Timing Problem
Letters of transmittal typically go out via regular U.S. Postal Service.
This creates a timing problem.
Some shareholders get their letters in three days.
Others wait two weeks.
The delivery times are all over the board.
Shareholders who don't receive their letters quickly start calling.
"Did mine get lost?"
"Why haven't I gotten mine?"
"My neighbor got his last week!"
You need electronic copies of every letter that went out.
Request these from the paying agent or stock transfer agent.
Having electronic copies serves three purposes:
First: You can verify the right information went to the right people.
Second: When shareholders call saying they haven't received their letter, you can confirm their correct address in your system.
Third: If their letter truly got lost in the mail, you can email them a copy immediately instead of waiting for a replacement to be mailed.
This simple step saves countless hours of phone calls and frustration.
Cash, Stock, or Both
The specific process varies slightly depending on what shareholders are receiving:
All cash:
Shareholders send in certificates.
The paying agent sends checks or wire transfers.
All stock:
Shareholders send in old certificates.
The stock transfer agent issues new certificates in the buyer's stock.
Cash and stock combination:
Shareholders send in certificates.
They receive both cash payment and new stock certificates.
But regardless of which scenario applies, every shareholder must surrender their physical certificates first.
Communication Is Everything
The share conversion process takes time.
Depending on how many shareholders you have, it could take weeks or months for everyone to get paid.
Some shareholders act immediately.
They get their letters, send in certificates, and receive proceeds within days.
Others procrastinate.
They put the letter aside meaning to deal with it later.
Weeks pass.
They forget about it.
Your job is to keep everyone moving forward.
Communicate frequently.
Update shareholders regularly on the process, even when there's not much new to report.
"We're continuing to process share conversions. If you haven't sent in your certificate yet, please do so this week. If you have questions, contact us."
Even when there's little new information, say so:
"There is little new information to report since our last communication."
This simple message removes worry that shareholders missed something important.
The Deadline You Can't Ignore
For cash transactions, there's typically a deadline—usually one year from closing—when uncollected proceeds revert to the buyer.
Yes, you read that right.
Money that shareholders don't collect within a year goes back to the buyer.
This sounds crazy.
Who wouldn't collect money owed to them?
But it happens more often than you'd think.
Some shareholders can't be located.
Addresses are wrong.
Phone numbers disconnected.
They moved and didn't update information.
Some shareholders just don't respond.
They received the letter.
They have the certificate.
They simply don't act.
Apathy or procrastination costs them money.
Don't let this happen to your shareholders.
Stay on top of collections from day one.
Don't assume you have plenty of time.
A year sounds like forever.
But months slip by faster than you realize.
Before you know it, you're at month 10 with several shareholders who still haven't collected.
Exhaust every effort to find and communicate with shareholders.
Try multiple phone numbers.
Send certified mail.
Ask other shareholders if they know how to reach missing shareholders.
Push shareholders who've received letters but haven't acted.
"You need to send in your certificate this week. The deadline is approaching."
Make it your mission to get every single shareholder paid before that deadline hits.
The Data Audit You Should Do Now
Don't wait until you're selling to discover your shareholder records are a disaster.
Audit your shareholder data now.
Today.
Even if you have no plans to sell.
Ask yourself:
- When was the last time we thoroughly updated shareholder contact information?
- Are all addresses current?
- Do we have working phone numbers for every shareholder?
- Do we have email addresses for every shareholder?
- Are all Social Security numbers or EINs on file?
- For IRA shareholders, do we have current custodian contact information?
- For corporate shareholders, do we have current corporate contacts?
- Is all titling accurate and properly recorded?
Create an annual process to keep this information current.
Maybe do it in conjunction with your annual shareholder meeting.
When shareholders attend the meeting, have them verify and update their contact information.
Send a form with the meeting notice asking them to confirm or update details.
This small effort now saves enormous headaches later.
Why This Matters Beyond Selling
Even if you never sell your bank, accurate shareholder records matter.
You need current information to:
- Send dividend checks
- Distribute annual reports
- Notify shareholders of meetings
- Communicate material developments
- Comply with regulatory requirements
Maintaining good shareholder data is basic corporate governance.
The fact that it also makes a future sale easier is just a bonus.
The Communication Mindset
Throughout the share conversion process, adopt this mindset:
When in doubt, communicate.
Shareholders tolerate a lot if they're kept informed.
They get frustrated when they're left in the dark.
Send regular updates.
Answer calls promptly.
Be accessible.
Show them you're managing the process professionally.
The shareholders who stayed with you through the merger deserve to be paid smoothly and efficiently.
Make that happen.
The Bottom Line
Getting shareholders paid after closing requires physical stock certificates, current shareholder data, and consistent communication. Start preparing on announcement day by asking shareholders to locate certificates and updating all contact information. Uncollected cash proceeds typically revert to the buyer after one year, so stay on top of collections. Audit your shareholder data now—even if you're not selling—to avoid scrambling when you need it most.
P.S. I'm not a lawyer, an accountant, or an investment banker. Just a former bank CEO who has been in your shoes.
There are zero hacks or tricks in this newsletter. Just proven tactics that help you choose the right path for your bank.
Your path will:
- Inform your strategic plan.
- Guide your annual business plan and budget.
- Clarify priorities.
- Define your message so it can be communicated with confidence.
This is how savvy bankers navigate.
They build smart and valuable banks and choose the best time to sell on a timeline of their own choosing – serving the needs of the shareholders and the board.
I hope you found this short lesson helpful.
What are your thoughts?
I’ll see you next week.
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