KeyCorp is in advanced talks to buy First Niagara Financial Group Inc., people familiar with the matter said, a tie-up that would combine two regional banks at a time when such firms are grappling with low interest rates and burgeoning regulatory costs.

The deal could value Buffalo, N.Y.-based First Niagara at a modest premium to its market capitalization of just under $4 billion, the people said. The likely price represents more of a premium over where First Niagara shares traded in September, before reports first surfaced that the bank might be for sale.

It would be one of the biggest bank tie-ups of the year and would solidify 2015 as the biggest year for bank deals since the financial crisis.

Assuming the talks don’t fall apart, the deal could be announced as soon as Friday, the people said.

Bank deals are slowly coming back as larger lenders try to become more efficient by getting bigger, and as smaller banks with struggling businesses put themselves up for sale. But bank mergers still face some hurdles—such as tough regulatory scrutiny—and the biggest U.S. banks are effectively prohibited from doing deals.