Humboldt Merchant Services' Holding Company Shut Down by Regulators

EUREKA, Calif. — NETbilling President Mitch Farber sought to reassure his customers and told XBIZ, "NETbilling has been working with HBMS [Humboldt Merchant Services] for 10 years and has many merchants processing with them utilizing our payment gateway. They have been very solid in the industry and are run by a group of true professionals.

“We are confident that HBMS will continue to thrive,” Farber added, “and encourage our merchants to continue processing transactions with their HBMS merchant accounts."

On Friday, federal regulators closed the First National Bank of Nevada and, subsequently, its merchant division, Humboldt Merchant Services (HBMS).

As holding bank for adult online payment processor NETBilling.com, the action caused a flurry of activity on webmaster board GFY.com, from webmasters concerned about the status of their accounts.

A post on GFY from After Shock Media said, “For a long time they really were the ‘it,’ or only bank you could deal with in the U.S. Not sure how many more have opened up since then either.

“This has me very worried and has ruined my weekend and more than likely then some, until we all know for sure,” the post continued.

The Federal Deposit Insurance Corporation (FDIC) was named receiver for First National Bank of Nevada, and all accounts have been transferred to Mutual of Omaha Bank, located in Omaha, Neb.

Also closed on Friday was First Heritage Bank of Newport Beach, Calif., which along with First National of Nevada, were units of First National Bank Holding Co., based in Scottsdale, Ariz.

All 28 offices of the two banks affected reopened Monday as branches of Mutual of Omaha Bank. All depositors, including those with deposits in excess of the FDIC's insurance limits, automatically became depositors of Mutual of Omaha Bank for the full amount of their deposits, FDIC officials stated in a release.

"We would first like to reassure all customers of First National Bank of Nevada and First Heritage Bank that all their deposits are safe and accessible." Chairman and CEO of Mutual of Omaha Bank Jeff Schmid stated to the media. "Their deposits will automatically transition to Mutual of Omaha Bank and we will be open for business on Monday morning."

HBMS Senior Vice President and Sales Manager Hilda Tuel told XBIZ, “Business is as usual.”

She later added that she was in the office today with a full staff of 85 employees, ready to address concerns and help clients with their accounts, as well as “conducting business as usual for retail, restaurant and high-risk merchants.”

"We are committed to all of our merchants, and our high-risk merchants are a top priority," Tuel said.

A formal statement issued on the HBMS website from bank president Ken Musante said, "First National Bank of Nevada was the holding bank for Humboldt Merchant Services and acted as the acquiring and sponsoring bank for the more than 20,000 merchant accounts that are part of the HBMS merchant portfolio.

“I would like to take this opportunity to assure you that our daily ongoing operations and management remain intact,” the statement continued. “The Federal Deposit Insurance Corporation (FDIC) assumed majority interest in Humboldt Merchant Services to ensure our ongoing operations and continued growth.

"This means that our customers will continue to receive uninterrupted payment processing. Additionally, processing of funds have not and will not be impacted. Settlement and customer support will continue to operate as normal with no disruption in daily activities,” Musante said.

"We continue to be a thriving processor with the unique skills to appropriately manage and service all our clients with exceptional service,” he added. "If you have any concerns or questions, please call me at (707) 269-3207. I personally want to say 'thank you' for your trust and continued business."

In a statement to XBIZ, the bank reassured all webmasters that had voiced their concerns on GFY that transactions would continue as normal and processing also would continue.

Those with questions can contact Tuel at (707) 269-3303 or (707) 616-7681 or e-mail HTuel@HBMS.com.

The bank closures are the latest in a rash of closures by regulators, including the shuttering of mega-bank IndyMac only two weeks ago.

Banking authorities rate banks on the basis of their “high risk” assets, or nonperforming assets as a percentage of its loans. High risk assets include nonperforming loans, foreclosed assets and loans that are more than 90 days past due. A ratio of more than five percent identifies banks that are in the “danger zone” and potentially at risk of failure.