An 80/20 revenue split shows how overreliance on lending is putting small-to-medium institutions at risk. Non-interest income is now essential.
Community banks and credit unions have a revenue problem. They rely too heavily on lending at a time when margins are under pressure and customer expectations are shifting. The numbers tell the story.
“In 2024, credit unions earned $115 billion from lending and only $26 billion from non-interest income – an 80/20 split.”
By early 2025, the gap had grown worse. Non-interest income at credit unions dropped 7.4 percent year-over-year (NCUA).
Community banks are also feeling the strain. Net interest margins fell from 3.56 percent in 2022 to 3.23 percent in 2023 as deposit costs rose faster than loan returns (FDIC). This kind of dependency leaves smaller institutions exposed. When loan growth slows or rates shift, they do not have other revenue streams to fall back on.
Interest Rates Are Adding Pressure
The rate environment is keeping margins tight. In Q1 2025, many community banks with assets under $10 billion saw margins fall by 12 to 18 basis points compared to the prior year (S&P Capital IQ).
“Deposit costs are rising faster than loan income, leaving less room for profit.”
The FDIC’s 2025 Risk Review confirmed what many leaders already see: even as the Fed has started to lower rates, banks have had to keep deposit rates higher to retain customers. That means little relief for earnings.
Why Non-Interest Income Matters
Non-interest income is the pressure valve. It is steadier than loan income, less tied to rate changes, and easier to scale through products and services.
Large banks can offset margin pressure through wealth management, investment services, and other diversified business lines. Small-to-medium banks and credit unions do not have those levers. Their non-interest revenue typically comes from fees, interchange, or service-based products. That makes these income streams essential to building resilience.
“Without fee-based revenue, growth stalls, safety nets thin, and competitiveness declines.”
Where ID Protection Fits
Identity fraud is widespread. One in three U.S. adults experienced identity fraud in 2023 (Javelin Strategy). That makes identity protection one of the clearest opportunities to grow non-interest income while meeting a real customer need.
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Recurring income. Subscription fees create steady revenue every month.
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High demand. Fraud continues to rise and customers expect protection.
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Trust and retention. Providing protection builds loyalty.
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Low effort to deploy. Programs are turnkey, branded to the institution, and managed with minimal internal work.
“ID protection is one of the few services that drives revenue and builds trust at the same time.”
Case Study: National Bank Identity Protection Program
A regional bank wanted to respond to customer demand for identity protection but lacked the resources to build a program.
Solution
The bank launched a branded identity protection program through PrivacyGuard. It included a free tier with a premium upgrade and was integrated into the bank’s digital channels. The program was delivered as a fully managed service, requiring almost no internal lift.
Results
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Significant recurring subscription fee income
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Improved customer profitability
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Higher engagement and retention
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An uplift in customer acquisition in competitive markets
The program created a new revenue stream, increased customer satisfaction, and strengthened the bank’s market position.
The Bottom Line
Small-to-medium banks and credit unions cannot keep relying almost entirely on lending. With deposit costs rising and margins shrinking, non-interest income is essential. Identity protection is a proven way to deliver recurring revenue, meet consumer demand, and strengthen the brand, all with minimal effort to deploy.