Good morning, and welcome to Nelnet's 2021 Annual Meeting of Shareholders. I would now like to turn the call over to the Chairman of today's meeting, Mike
Dunlap. Thank you. I'd like to call the 2021 Nelnet Annual Meeting of Shareholders to order and welcome everyone who's participating this morning. I'd also like to introduce several people that are in the room or on the call with us today. Our executive team, Jeff Nordhoek, CEO, raise your hand Jeff.
Terry Hymas, Chief Operating Officer. Tim Tavis, President. Jim Krueger, CFO Bill Munn, Secretary and General Counsel Our Board of Directors, Jim Abel, Chief Executive Officer of NEFCO, Preeta Bonsoil, former corporate lawyer, White House Counsel and Solicitor General of New York, Wilson Taney, Chairman and Chief Executive Officer, Mace Industries Kathy Farrell, Dean, College of Business, University of Nebraska Lincoln David Graf, Chief Executive Officer, Huddle Joanne Martin, Vice Chair, Emeritus Tom Henning, President and Chief Executive Officer of Surety and Kimberly Rath, Co Chair, Talent Plus. Others in attendance, Tim Sabo, Executive Director of Internal Audit, serving as our Inspector of Elections for today's meeting Sean Stoecker, our KPMG Audit Partner. Sean is available to respond to any questions that shareholders may have this morning.
And Bill Munnet's secretary will now report on the mailing of the notice of the meeting and the presence of a quorum.
Thanks, Mike. The company posted a notice of annual meeting with shareholders on the website on April 8, 2021. On the same date, we mailed a notice of Internet availability of proxy materials to each shareholder of record as of March 29, 2021, who's entitled to vote. Immediately prior to this meeting, our Inspector of Election counted 34, 310, 184 shares of company's Class A Class B common stock, representing 133, 926, 918 total votes in present in person or by proxy. This represents 96.41 percent of the combined voting power of all classes of the stock.
Accordingly, I declare a quorum as present at this meeting. I'd like to thank everyone that voted in advance of today's meeting. And based on the votes cast in advance, the shareholders have approved all 3 items of business. However, the polls will remain open throughout the meeting for shareholders that wish to Securities and Exchange Commission within the next 4 business days. And as a reminder, if you already voted in advance of the meeting by proxy, there's no need to vote today unless you want to change your vote.
Thanks, Bill. Based on the votes cast in advance, the shareholders have approved all 3 items of business. Proposal 1 related to the election of the Board of Directors. Kathy Farrell, Chair of the Nominating and Corporate Governance Committee will report on this item.
Mr. Chairman, the company's articles of incorporation classify the Board of Directors into 3 classes with directors in each class serving staggered 3 year terms. For this year's annual meeting, the company's Nominating and Corporate Governance Committee nominated and the shareholders approved 3 Class 1 directors to serve for the 3 year terms until the 2024 Annual Meeting. The individuals named in the company's proxy statement who have been reelected to the Board are Mike Dunlop, Executive Chairman, Nelnet Cree de Bonzel, former corporate lawyer and White House General Counsel and Solicitor General of New York and Joanne Martin, current Vice Chair and former CEO of Emeritus.
For those voting this morning those that wish to change their vote on the election of directors, please do so now. The next item of business was to ratify the Board's appointment of KPMG as the company's independent registered public accounting firm. To report on this item, I recognize Tom Henning, Chairman of the Audit Committee.
Mr. Chairman, the Audit Committee was assigned the responsibility of recommending the independent registered public accounting firm to be appointed by the Board of Directors. The committee was established in August of 2003 and since its inception has consisted entirely of directors who are independent of corporate management. Has had direct access to both the outside and internal auditors. Since inception, the committee has worked closely with KPMG, has had substantial opportunity to evaluate their work and is found it to be of consistent high quality.
The committee recommended KPMG and the shareholders have ratified the Board's appointment of KPMG to audit the consolidated financial statements of Nelnet and its subsidiaries as of and for the year ending
1. For those voting this morning or those that wish to change their vote on the appointment of KPMG as our independent auditor, please do so now. Next item of business was an advisory vote on the compensation of the company's named executive officers. I'd like to call up on Kimberly Rath, Chairman of the People Development and Compensation Committee to report on this proposal.
Mr. Chairman, the company is required to give its shareholders the opportunity to cast an advisory vote on the compensation of the company's Compensation Committee is responsible for designing and administering the company's executive compensation program and the committee values the opinions expressed by shareholders in their vote on this proposal and considers the shareholders vote when making future compensation decisions. We believe the compensation structure for the named executive officers is competitive, equitable and designed to encourage focus on the long term performance objectives of the company and the shareholders have agreed by their approval of the compensation of the named executive officers as disclosed in the company's proxy statement.
For those voting this morning or those that wish to change their vote on the advisory vote on the compensation of the company's named executive officers, please do so now. As it appears all votes have been submitted for those voting online this morning, I hereby declare the polls closed. Thank you to our shareholders for your votes in favor of all the items on the agenda. Since no other agenda items have been introduced, I'll adjourn the meeting and call on Jeff Nordhoek and Jim Kruger to provide a business and financial update. After their prepared remarks, we'll answer any questions that shareholders may have.
Good morning, and welcome to our 2021 shareholder meeting. It is May 21st, and as of this week, we officially started welcoming our associates back in the office. Every year this week is what we deem Nelnet Week with our all directors meeting, our board meetings and our annual shareholder meeting. The theme of our meetings this week is Forward Together. From a Nelnet perspective, this pandemic is at its tail end.
We are ready to move forward. Given the success of the vaccines, I'm confident this will be our last virtual shareholder meeting for many years to come. We want to see people in person. We want to have live interaction with our shareholders and interested constituents. 25 years ago, we started a finance company that is now Nelnet.
I know that because it's also my 25th wedding anniversary and I gave my notice in my last job 25 years ago to join Nelnet on the day I got back from my honeymoon. 25 years, so much has happened. Who could imagine that we could have a year 2020 to bring on a global pandemic that would challenge how we lead our lives and run our businesses. And at the same time propel us into the new thought processes and how we work and communicate. In the midst of chaos, uncertainty of the pandemic, we accomplished so many feats.
Just to name a small few, we successfully launched a bank, We acquired 2 new businesses in MBS. We recapitalized ALLO for growth. We nearly doubled the size of our private loan servicing business. We are launching new servicing and origination platforms. We booked record earnings.
The financial outcome over $9 per share is unbelievable. For perspective, the year we went public, we booked approximately $1 per share in earnings. During the last year alone in MBS, we processed over $45, 000, 000, 000 in payments. We served 11, 500, 000 students globally and we're expanding internationally as our products are now utilized in 56 countries and growing. In our loan servicing division, we now service over $500, 000, 000, 000 in loans across multiple loan types, touching over 15, 000, 000 people on a regular basis.
In Allo, we grew from 48, 000 customers to over 60, 000 customers and launched our service in 4 new communities. We accomplished incredible things in 1 of the most difficult years in modern human history. Just a couple of years ago, we had serious debates around if we should let people work from their homes. Now we're moving to a corporate endorsed hybrid work model for our over 7, 000 associates. It has the potential to be a sea change in all of our processes, hiring, onboarding, training, career pathing, cost structures and corporate culture.
We have big hairy opportunities for growth. I have labeled them BHOGs. We intend to grow all of our businesses, grow the bank, grow our payments processing, our loan servicing diversification, grow
Allo
and grow and diversify our loan portfolio, lots of BHOGs. We recently picked as 1 of the best places to work in our core locations in Denver, Colorado, Mass and Wisconsin and we are also named in the top 3 in our hometown Lincoln, Nebraska. We were recently named as Healthiest Employers in Nebraska, Wisconsin, Minnesota and Texas. In addition, we were recently picked in the Forbes list of best employers for diversity. However, we are not resting on our laurels.
We have many opportunities to create better opportunities for the people in Nelnet. I like to call it bopping. We want this place to be bopping. We've expanded initiatives on culture, innovation, diversity and inclusion, training, personal development and growth. Yes, as always and with all businesses, we have some roadblocks, some headwinds.
We have an outstanding bid in the government servicing business. The nation is looking at a potential increase in corporate tax rates, ever increasing government regulations, government inaction and government action. 14, 000, 000 borrower customers who have been in deferment will be entering into repayment in our portfolio alone in October. We are currently in the process of hiring over 1, 000 new associates within the next few months. Given increasing asset prices across virtually every sector in the economy, there's potentially an economic bubble that could pop.
We are living in a world where everyone is wondering what to do next given how much the world has changed in the last 14 months. We don't see these as scary things, but opportunities to accomplish even greater success. I want to thank you for your continued investment in our company and trust in our management team. Now, I'll turn it over to Jim Krueger to discuss our financial results. Jim?
Thanks, Jeff, and good morning, everyone. To reiterate, 2020 was a year like we have never seen before. Not only is it related to the pandemic, but also in terms of our outstanding operating results, especially when you consider the headwinds created by the disruption during 2020. Moving on to the first slide, we have a list of items here I want to cover that kind of highlight 2020. First is the impact of the pandemic.
In the Q1 of 2020, Nelnet recognized just under $100, 000, 000 of pretax charges related to the pandemic as we boosted our reserves for loan losses, we recognized a provision related to our partial ownership in certain consumer loan securitizations and we impaired certain venture investments. These charges were appropriate given the economic forecast at the time, which was predicting a doom and gloom outlook for key economic metrics such as unemployment and GDP. We began to recover a portion of these reserves in the second half of 20 20 as economic conditions improve. And as of our recently reported Q1 results, all reserves that were established at the start of the pandemic have now been fully recovered. As far as our huddle investment, during the midst of the pandemic in May of 2020, huddle completed a capital raise in which Nelnet participated and invested an additional $26, 000, 000 into the business.
Pretty incredible feat by Huddle to raise capital during a pandemic when sports had been paused across the globe. We account for our huddle investment using the measurement alternative method, which requires an adjustment to the carrying value for a change in fair value from an observable transaction. This capital raise was considered an observable transaction. As a result, Nelnet recognized a $51, 000, 000 pretax gain in the Q2 of 2020 to mark our investment deferred value. This increased the carrying value of our investment huddle to $129, 000, 000 Moving on to Nelnet Bank.
In March of 2020, Nelnet received approval from the FDIC and the Utah Department of Financial Institutions to establish a Utah based industrial bank. In November of 2020, just 8 short months later in the midst of the pandemic, Nelnet Bank launched operations and Nelnet funded the bank with $100, 000, 000 of capital. The amount of capital we are willing to put in the bank gives you a sense of how enthused we are about serving a critical customer problem related to education finance, while at the same time growing our bank's balance sheet. At the end of Q1 of 2021, Nelnet Bank had nearly an $80, 000, 000 private student loan portfolio in just a few months of operations. We are thrilled to have the bank charter and excited what the bank can contribute to the enterprise over the long term.
As far as Allo recapitalization, the value of Allo's high speed broadband products in the market was never more obvious than during the pandemic as both work and school transitioned to a remote environment. In the Q4 of 2020, Nelnet entered into agreements to recapitalize the balance sheet and provide additional funding for future growth of the business with our new partner SDC Capital. As a result of the recapitalization, NOMA's ownership interest was reduced to 45%, while SDC and management owned the remaining 55 percent equity interest. Nelnet deconsolidated Allo from our operating results in December of 2020 as a result of our ownership interest in Allo dropping below 50% and our lack of control over the operations. Nelnet recognized a pretax gain of $259, 000, 000 upon deconsolidation of Allo in the Q4 of 2020.
The recapitalization along with Allo accessing the credit markets enabled Allo to redeem a total of $260, 000, 000 of preferred security interest held by Nelnet in late 2020 early 2021. At the end of the Q1 of 2021, Nelnet holds roughly $130, 000, 000 of preferred securities, which earned a preferred annual return of 6.25 percent that Allo will use best efforts to redeem by April of 2024. Nelnet will account for its remaining 45 percent equity interest in ALLO using the hypothetical liquidation at book value method of accounting, HLBV for short. Suffice it to say, the HLBV method of accounting along with our right to utilize tax losses from Allo's operations may result in the recognition of earnings or losses that will not correspond to our membership interest in Allo. But don't let the HLBV GAAP accounting treatment mask the value being created from the tax efficient structure of the transaction that will benefit NOMED's long term cash flow.
While we are on the topic of HLBV accounting, NOMED has invested approximately $150, 000, 000 in renewable energy, specifically solar projects through March of 2021. These investments also utilize the HLBV method, which results in accelerated losses in the initial years of the investment. Again, the GAAP accounting treatment in the early years does not reflect the long term positive cash flow and attractive returns that are being generated by the investment. Moving on to NBS and NBS operating performance. Our primary operating businesses performed exceptionally well during a worldwide pandemic that decimated many other sectors.
Both segments had strong top line results given the circumstances and expenses were managed proactively or in other cases, expenses were just not being incurred due to the circumstances surrounding the pandemic. We continue to generate strong operating results from both of these business units while making strategic investments in products and services to serve the customer and create long term value for the business. And lastly, the loan portfolio. Our loan portfolio performed at a high level once again in 2020. Lower interest rates during 2020 resulted in core student loan a strong core student loan spread just north of 130 basis points or 15 basis points higher than 2019.
The lower interest rate environment benefits the portion of the FELT portfolio which earns fixed rate floor income. This legacy FELT guaranteed portfolio continues to fully melt away, but we are encouraged by the launch of NOMIT Bank, which will generate quality private education loan assets to offset some of the portfolio amortization that will invariably occur with our legacy FFELP assets. Moving on to the next slide, got a graph for our consolidated adjusted EPS. As I mentioned earlier, here's a graph that will paint a picture of how 2020 was indeed like no other year that we've ever had. Our earnings per share in fiscal year 2020 was $9.57 per share, our best year ever in terms of earnings per share.
We've talked about many of the reasons why we had such superb results. We had the gain on the deconsolidation of Allo. We've marked the huddle investment to fair value. Strong operating performances from our NDS and NBS business units and our net interest margin improvement on the loan portfolio were some of the drivers that led to these outstanding earnings results. Moving on to the next slide, our results of operations by operating segment.
A few items to highlight related to the results when you look at it from an operating segment lens. First, we had strong bottom line contributions from NDS and NBS combining for more than $2.30 per share of earnings per share. Allo was a drag on earnings in 2020, no surprise given the capital intensive nature of the business. AGM, which is our loan portfolio, continues to provide the most significant contribution to the bottom line, which has been the case historically. And our corporate and other activities is normally a cost center, but with the gain on the deconsolidation of alloy, it had a positive contribution in 2020.
What a year with EPS of nearly $10 a share based on $374, 000, 000 of adjusted net income. Moving to the next slide, our balance sheet and the cash provided by operating activities. A few highlights from our balance sheet and our cash flow. Nelnet remains extremely well capitalized with $2, 600, 000, 000 of capital or an 11% capital ratio with minimal operating debt. NOMENT has strong liquidity position with significant cash and liquid investments and a $455, 000, 000 operating life credit that had no amount drawn at the end of Q1 of 2021.
And lastly, we generated $200, 000, 000 of cash from operations in 2020 and we expect our portfolio of loan assets that are financed to term to generate more than $2, 000, 000, 000 of cash over the next 10 to 15 years. Pretty incredible cash projection as we look forward. Moving on to the final slide, our Nelnet Corporate performance versus the S and P 500. So this last chart is our marketing pitch to our shareholders. This chart puts into context Nelnet's performance relative to the S and P 500 in terms of return on investment.
I think the takeaway here is we continue to operate the business to generate long term sustainable cash which will create value for our shareholders well into the future. The 17 plus percent compound annual growth rate since we went public demonstrates our ability to invest capital and achieve returns well in excess of the S and P 500. We want to thank you for your investment in Illment and your continued confidence in the team. That concludes our prepared remarks. We will now open up the floor to questions.