The adjusted NII decline was driven by the impacts of the lower discretionary loan balances within the consumer real estate portfolio. If we look at net interest yield on an adjusted basis it was up a touch from the third quarter of 2014 to 2.3%. Given the movement lowering rates that we saw during the quarter, we did become more asset-sensitive touched at 100 basis point parallel increase in rates from what we saw at the end of the year we’d be expected to contribute roughly $3.7 billion in NII benefits over the course of the next 12 months. And given the boom in rates, the sensitivity is now more evenly weighted to both long-term as well as short-term rate moves. Before we leave this slide I do want to remind you that during the first quarter of ’15 we have two fewer interest accrual days than the fourth quarter of ’14 which will negatively impact NII by a couple of $100 million.
Non-interest expense and then moving to Slide 8 was $14.2 billion in the fourth quarter of ’14 and included approximately $400 million in litigation expense. As I said earlier, this is the lowest quarterly expense amount that we have reported since the Merrill Lynch merger. We exclude litigation, total expenses were $13.8 billion which declined $300 million from the third quarter of ’14 and was driven by our LAS initiative cost savings as well as lower revenue related incentive costs within our global markets business. We compare these expenses to the fourth quarter of 2013, we were down $1.2 billion driven by LAS cost savings, new BAC benefits and to a lesser degree, the lower revenue related incentives. Legacy assets and servicing costs ex-litigation were $1.1 billion in the quarter, $200 million lower than the third quarter and $700 million lower than the fourth quarter of 2013. As we continue to work through these delinquent loans, we expect these quarterly costs will come down a few $100 million more by the end of 2015. Headcount was down 5,800 during the quarter and as we look at expense a reminder, that we will record our normal annual retirement eligible incentive cost in the first quarter of 2015 and we expect that number to be roughly $1 billion consistent with what we’ve seen in the past couple of years.
We turn to asset quality on Slide 9. That quality continue to improve during the quarter. Q4 provision expense was $219 million and we relived the net $660 million of reserves given the continued pace of asset quality improvement particularly within our consumer real estate portfolio. Reported charge-offs were $879 million and declined from the third quarter of 2014. I would remind you both periods of net charge-offs included NPL sales and not their recoveries and the fourth quarter included approximately $150 million of cost related to actions that were taking in relation to our DOJ settlement which we’re previously reserved for. If we exclude the recoveries in the DOJ component, charge-offs in the fourth quarter were just over $1 billion versus a similarly adjusted net charge-off amount of 1.2 billion in the third quarter of ’14. Loss rate on the same adjusted basis were 47 basis points in the fourth quarter of ’14 versus 52 basis points that we saw in the third quarter of ’14.
Let’s now move to the business segment results which we start on Slide 10 with consumer and business banking. Our results within consumer and business banking shows solid bottom-line performance with earnings of $1.8 billion. Those were down from the fourth quarter of ’13 due largely to lower release of loan loss reserves and to a lesser degree, higher tax rates. Business generated a solid 24% return on allocated capital during the quarter. Revenue was up slightly on a year-over-year basis despite net interest income being down as our non-interest income grew more than 5% with a strong improvement in card income. We look at customer activity during the quarter.
