Current banking literature reveals the recent trend in the overall banking industry that banks may opt for diversification by shifting their revenues to non-interest income. Consequently, this paper asks whether cooperative banks in Germany are able to increase performance during the period 2005 to 2010 by shifting revenues towards non-interest income. Results show that concentration (indirect effect) is significantly positive related to risk-adjusted returns. At the same time, there is a significant positive impact on risk-adjusted returns for non-interest income (direct effect). The evaluation of the net effect shows that banks who are heavily exposed to non-interest income benefit by shifting towards non-interest income since the direct effects dominates the indirect effect. This may imply that a bank’s diversification strategy depends on its business line exposure, which in turn may have implications for managers, supervisors and borrowers.