Edgar Filing: FIRST NIAGARA FINANCIAL GROUP INC

425

Filed by KeyCorp

pursuant to Rule 425 under the Securities Act of 1933

and deemed filed pursuant to Rule 14a-12

under the Securities Exchange Act of 1934

Subject Company: First Niagara Financial Group, Inc.

Filer’s SEC File No.: 001-11302

Date: January 21, 2016

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Corrected Transcript

21-Jan-2016

KeyCorp (KEY)

Q4 2015 Earnings Call

Total Pages: 25

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

CORPORATE PARTICIPANTS

Beth Elaine Mooney William L. Hartmann

Chairman & Chief Executive Officer Chief Risk Officer

Donald R. Kimble Edward J. Burke

Chief Financial Officer Co-President-Key Community Bank , Commercial & Private Bank

Christopher M. Gorman Dennis A. Devine

President-Key Corporate Bank Co-President-Key Community Bank, Consumer & Business Banking,

KeyCorp

OTHER PARTICIPANTS

Joshua Kevin Cohen Matthew Derek O’Connor

Jefferies LLC Deutsche Bank Securities, Inc.

Erika P. Najarian David Darst

Bank of America Merrill Lynch Guggenheim Securities LLC

Scott Siefers Marty Mosby

Sandler O’Neill & Partners LP Vining Sparks IBG LP

John Pancari Geoffrey Elliott

Evercore ISI Autonomous Research LLP

David Eads Peter J. Winter

UBS Securities LLC Sterne Agee CRT

Bob H. Ramsey Matthew Hart Burnell

FBR Capital Markets & Co. Wells Fargo Securities LLC

Gerard Cassidy Kevin James Barker

RBC Capital Markets LLC Piper Jaffray & Co (Broker)

Terry J. McEvoy

Stephens, Inc.

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

MANAGEMENT DISCUSSION SECTION

Operator: Good morning, and welcome to the Key Corp’s Fourth Quarter 2015 Earnings Conference Call. This call is being recorded. At this time, I’d like to turn the conference over to Beth Mooney, Chairman and CEO. Please go ahead, ma’am.

Beth Elaine Mooney

Chairman & Chief Executive Officer

Thank y ou, operator. Good morning and welcome to KeyCorp’s fourth quarter 2015 earnings conference call. Joining me for today ‘s presentation is Don Kimble, our Chief Financial Officer; and av ailable for the Q&A portion of the call is Chris Gorman, President of our Corporate Bank; E.J. Burke and Dennis Dev ine, Co -Presidents of our Community Bank; and Bill Hartmann, our Chief Risk Officer.

Slide two is our statement on forward-looking disclosure and non-GAAP financial measures. It covers our presentation materials and comments, as well as the question-and-answer segment of our call.

I am now turning to slide three. Our fourth quarter closes out what ha s been a significant year for our company. We improved our operating performance, continued our credit discipline, maintained our strong capital position and made inv estments that will drive future growth and profitability. For the year, Key generated posi tive operating leverage that we believe was among the strongest in our peer group. Our rev enues were up 3% and our pre-provision net revenue was up 5%, both compared to the prior year.

These results reflect our success in continuing to grow and expand client relationships in both the Community Bank and the Corporate Bank. And these new clients contributed to our 5% growth in av erage loans and 12% growth in CF&A balances. We also increased our core fee -based income, including investment banking and debt placement fees, which were up 12%, another record year for us. Corporate services, and cards and payments were both up ov er 10%. And I think it’s worth noting that these are areas where we hav e made recent investments that are generating growth and positive returns.

Expense management also remained an area of focus. During the y ear, we continued to execute on opportunities to right-size our business, reduce occupancy costs and improve operational efficiencies. Expense trends reflect our inv estments to drive future growth and profitability as well as merger -related charges and those related to our continuous improvement and efficiency efforts.

Inv estments during the year included remixing our head count to increase client-facing roles in both the

Corporate Bank and the Community Bank. We also enhanced our payments capability, which hav e driven strong growth in purchased and prepaid cards as well as a 13% increase year-over-year in credit card sales. And we continued to invest in our digital and mobile offerings as well as ongoing enhancements to our compliance and regulatory processes.

These were good inv estments that helped drive revenue growth in 2015, and they will make an ev en larger contribution in the future as they fully mature. While these inv estments, including the addition of 60 senior bankers in our Corporate and Community Bank as well as Pacific Crest Securities, position us for growth. They offset some of the efficiency improvement made in other areas of our company last y ear. Importantly, we remain committed to further improvement and the targets that we hav e established.

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

Credit quality remained a good story in 2015 with non-performing loans down for the y ear, and net charge -offs of 24 basis points, which is below our targeted range. We remain committed to strong risk management practices and stay ing true to our relationship focus. The final item on the slide is capital. Our Common Equity Tier 1 ratio remained strong at 11%, which we believe positions us well for the 2016 CCAR process. And we ex pect both share repurchases and a div idend increase to be part of the capital plan we will submit.

I’m now mov ing to slide four, which provides some highlights of our announced acquisition of First Niagara. We continue to make good progress, as we move to ward our anticipated closing in the third quarter of this y ear. Under the leadership of Chris Gorman, we hav e established integration teams with some of the top talent from both Key and First Niagara. And these teams have been focused on developing detailed assessments and moving forward with our integration plans.

As we mov e through these early stages, I’m ev en more confident in this being the right opportunity for Key and our ability to realize the cost savings. The combined company will generate attract ive financial returns and create v alue for our shareholders and accelerates our progress towards becoming a high -performing regional bank. And although not included in our financial projections, we will realize additional v alue from revenue synergies that will also add to the financial performance. We look forward to sharing more developments with y ou in the coming quarters as we mov e towards closing.

Before I turn the call ov er to Don, I would like to close my remarks by saying that it was a good y ear for Key. We executed against our strategic and financial goals and took steps to accelerate our progress going forward. I’m proud of our team and of our performance, and I’m excited about the opportunities that we hav e ahead.

Now, I’ll turn the call ov er to Don to discuss the details of our fourth quarter results. Don?

Donald R. Kimble

Chief Financial Officer

Thanks. And I’m on slide six. As Beth said, we had a good y ear, finishing with fourth quarter net income from continuing operations of $0.27 per common share. This compared to $0.28 in the y ear-ago period and $0.26 in the third quarter. In the fourth quarter, Key incurred $10 million of charges related to pension settlement and the acquisition of First Niagara. The combined impact was $0.01 per common share. Excluding these items, net income from continuing operations was $0.28 per common share, the same as the y ear ago quarter. However, it is worth noting, in comparison with the y ear ago period, that the current quarter includes $23 million in higher prov ision expense and $18 million in lower principal investing gains, giv ing us a strong finish to the y ear.

Also, not on this slide is our rev enue growth. For the quarter, revenue was up 2% from the prior y ear and up 3% from the prior quarter. For the full y ear, Key had a rev enue growth of ov er 3%, reflecting the success we’ve had in growing our businesses. This rev enue growth has allowed us to grow our pre -provision net revenues 5% y ear-over-y ear.

I will cov er the other items on the – within the rest of my presentation. So I’m now turning ov er to slide seven. Av erage loan balances were up $3 billion or 5% compared to a y ear ago quarter and up $295 million from the third quarter. Our y ear-over-year growth was once again driven primarily by commercial, fina ncial and agricultural loans and was broad-based across Key’s business lending segments. Average CF&A loans were up $3.7 billion or 14% compared to the prior year and were up $510 million or 2% unannualized from the third quarter. During the current quarter, we continue to generate strong customer growth that was muted by paydowns of lines to existing customers.

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

Continuing on to slide eight, on the liability side of the balance sheet, av erage deposits, excluding deposits in foreign office, totaled $71.5 billion for the fourth quarter of 2015, an increase of $2.3 billion compared to the y ear ago quarter. The y ear-over-year increase is reflective of growth in our commercial mortgage servicing business and inflows from commercial and consumer clients. Compared to the third quarter of 2015, av erage deposits, excluding deposits in foreign office, increased by $1.5 billion. The growth was driven by both seasonal and short -term deposit inflows from commercial clients, along with growth in NOW and money market deposit accounts and certificates of deposit.

Turning to slide nine, taxable equivalent net interest income was $610 million for the fourth quarter of 2015, and the net interest margin was 2.87 %. These results compared to taxable equivalent net interest income of $588 million and a net interest margin of 2.94% for the fourth quarter of 2014. The increase in net interest income reflects higher earning asset balances, partially offset by lower earning asset y ields, which also drove the decline in the net interest margin. Compared to the third quarter of 2015, taxable equivalent net interest income increased by $12 million and the net interest margin was unchanged. The increase in net interest income and the fav orable net interest margin were attributable to higher earning asset yields and loan fees. And while net interest margin was stable, it was negatively impacted by higher levels of excess liquidity driven by short-term commercial deposit growth.

Slide 10 shows a summary of non-interest income, which accounted for 44% of our total rev enues. Non-interest income in the fourth quarter was $485 million, down $5 million or 1% from the prior year and up $15 million or 3% from the prior quarter. The slight decrease from the prior year was attributed to lower net gains from principal inv esting of $18 million and $7 million of lower trust and inv estment services income reflecting market v ariability. These decreases were partially offset by a $12 million increase in other income gains in our Real Estate Capital line of business along with growth in some of Key ‘s other core fee -based businesses, including $4 million of higher cards and pay ments income, and a $4 million increase in mortgage servicing fees.

Compared to last quarter, non-interest income improved by $15 millio n most notably due to higher inv estment banking and debt placement fees, marking a strong finish to a record y ear. Additionally, other income was higher once again related to gains in real estate capital, and corporate -owned life insurance increased, reflecting normal seasonality. These items were offset by lower net gains from principal investing.

Turning to slide 11. As y ou can see on this slide, expense levels were elevated and reflected a number of mov ing pieces. I’ll start with the current quarter. No n-interest expense was $7 36 million, which included $20 million of charges consisting of $10 million of efficiency charges primarily related to branch closures and severance, $6 million of merger-related cost, and $4 million of a pension settlement expense .

Next, compared to the fourth quarter of last y ear, our non-interest expense was up 5%. The increase was primarily attributed to $20 million of higher personnel costs, reflecting an $11 million increase in benefit costs, the inv estments in client-facing personnel costs across the company, and higher severance expense. We also had a $6 million of merger-related costs.

And finally , linked-quarter expenses were up 2% related to $12 million of higher incentive compensation related to strong capital markets performance and end of the y ear accruals, $6 million of merger -related cost incurred in the fourth quarter, and $6 million of higher efficiency related charges. These were partially offset by the lower pension settlement charge.

Once again, the current quarter included elevated levels of expenses, reflecting the costs noted above and normal seasonal trends. We would expect first quarter expense levels to be significantly lower than the fourth quarter.

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

Also, we would expect the full y ear 2016 expenses to be relatively stable with 2015, adjusted for merger-related costs.

Turning to slide 12. Net charge-offs were $37 million at 25 basis points of av erage total loans in the fourth quarter, which continues to be below our targeted range. In the fourth quarter, p rovision for credit losses of $45 million, slightly above the level of charge-offs, reflecting current trends in our portfolio.

Non-performing loans and non-performing assets were both down relative to prior quarter and y ear-ago period. At December 31, 2015, our reserve for total loan losses represented 1.33% of period -end loans and 206% coverage of our non-performing loans. It is also worth noting that our energy exposure is small, representing 2% of our total portfolio, and has performed in line with our expectations. We’v e built reserves throughout the year, which currently represent 6% of outstanding loans.

Turning to slide 13. Our Common Equity Tier 1 ratio was strong at December 31, 2015 at 10.95%. There were no share repurchases in the fourth quarter. For the full y ear, we repurchased $460 million of common shares. We expect share repurchases and an increased dividend to be included in our upcoming 2016 CCAR submission.

Now, mov ing on to slide 14. For our 2016 outlook, we’re providing guidance on a stand-alone Key operations. In 2016, we expect to continue to drive positive operating leverage. Average loans should grow in the mid -single digit range as we benefit from the strength in our commercial businesses. We anticipate that net interest income growth in the low-single digit percentage range compared to 2015 without any benefit from higher interest rates. With the benefit of future rate increases, we would anticipate net interest income to be up in the mid -single digit range. It is also important to note that we hav e assumed that deposit rates will increase with future rate increases.

Non-interest income is expected to be up mid-single digit percentage range for the y ear. This assumes continued strong improvement in inv estment banking and debt placement fees as well continued growth in cards and pay ments income. We are also assuming v ery modest levels of principal inv esting gains for 2015.

Full y ear reported expenses should be relatively stable with 2015. We would expect to see normal seasonal trends and expenses with first quarter expenses down significantly from the fourth quarter level. Credit quality should remain a good story with net charge-offs below our targeted range of 40 basis points to 60 basis points. We also expect provision levels to maintain a stable level of allowance to total loans.

Finally , we expect our dividend to increase in the second quarter to $0.085 per share and the 2016 CCAR plan to include both common share repurchases and an increased dividend. Our guidance excludes the impact of merger-related charges as well as the acquisition of First Niagara. If the acquisition closes in the third quarter as planned, we would expect EPS impact to be a slight dilution of 1% to 2% in 2016 and accretive in 2017.

With that, I’ll close and turn the call back over to the operator for instructions for the Q&A portion of our call. Operator?

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

QUESTION AND ANSWER SECTION

Operator: Thank y ou. [Operator Instructions] And we’ll go to the line of Ken Usdin with Jefferies. Please go

ahead.

Joshua Kevin Cohen Q

Jefferies LLC

Hey , guy s. This is Josh in for Ken. Can y ou just talk about what rate assumptions you’re including with that NII

guidance with rates?

Donald R. Kimble A

Chief Financial Officer

Sure. Our assumption would be to have two additional rate increases for 2016, both of which in the second half of

the y ear and then the last of which toward the end of the y ear.

Joshua Kevin Cohen Q

Jefferies LLC

Okay . And then, secondly, can y ou just talk to the IB pipeline and what y ou’re seeing here in the outlook?

Christopher M. Gorman A

President-Key Corporate Bank

Sure, Josh. It’s Chris. As we look at our pipelines, kind of across the Corporate Bank, our pipelines are v ery much

in line with where they were a y ear ago and, as Don mentioned, we had a record y ear last y ear so we actually feel

v ery good about our pipelines.

Joshua Kevin Cohen Q

Jefferies LLC

Great. Thanks a lot, guy s.

Donald R. Kimble A

Chief Financial Officer

Thank y ou.

Operator: And next, we’ll go to Erika Najarian with Bank of America Merrill Ly nch. Please go ahead.

Erika P. Najarian Q

Bank of America Merrill Lynch

Hi. Good morning.

Donald R. Kimble A

Chief Financial Officer

Good morning.

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

Erika P. Najarian Q

Bank of America Merrill Lynch

Beth, I just wanted to ask a question on something you mentioned during y our prepared remarks. Y ou mentioned

that y ou’re even more confident about the First Niagara deal after – in terms of extracting cost savings. Could y ou

giv e us a little bit of color in terms of the conversations or the progress that y ou have made after announcing the

deal in terms of thinking about the future impact? And also, what the progress is in terms of getting First Niagara

ready to be embedded into your CCAR process?

Beth Elaine Mooney A

Chairman & Chief Executive Officer

Y es, Erika. I’d be glad to discuss that and I’ll let Don address the CCAR portion because he is closer to that work

than I am. And y ou’re correct that I’m ev en more confident and we feel ev en stronger about the path and quality of

what will be the v alue of this combined company. On the cost sav ings, as y ou know, we had targeted $ 400 million

or approximately 40% of their costs. And while it is early days, the integration teams have been identified and are

working two -by-two to map out those plans. And as we really understand the underlying cost structure,

particularly in technology, operations, v endor expense, there are significant savings in all of those areas that

probably contribute to over 40% of that $ 400 million.

So out of the gates, as we look for the path, while nothing is ev er easy, we also see very real savings that are easy to

garner and will also be realized fairly early within the time after our acquisition. We’re also looking at

complementary business capabilities and revenue sy nergies that we continue to gain confidence about the v alue

that will be created there. So in all, I do think y ou hear a continued tone of confidence as well as a path forward

that we feel strongly about.

Donald R. Kimble A

Chief Financial Officer

As far as the CCAR process, we will be including First Niagara with an assumed acquisition date in the third

quarter as we talked about before for the CCAR submission. We will be rely ing primarily on Key models in the

past and using the First Niagara information where we can to run through our existing models as well. And so we

will show, within the plan, a separate amount for both First Niagara and Key on a stand -alone basis, but the total

CCAR plan will include the assumption that First Niagara is acquired in the third quarter.

Erika P. Najarian Q

Bank of America Merrill Lynch

Got it. And really appreciate the color, the look forward color on the 2016 CCAR submission. And as we think

about the amount of common share repurchases, should we assume, given that First Niagara is part of y our two -

y ear plan, that the 2016 buyback ask would be lighter than the up to $ 7 25 million that you were approved for

2015?

Donald R. Kimble A

Chief Financial Officer

Y eah, I think it’s too early to assume the absolute dollar amount. We do believe and do expect to see a significant

portion of share buybacks as well as an increase in our dividend for 2016 CCAR, but we’ll hav e to work through

that ov er the next several months and finalize those remaining details.

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

Erika P. Najarian Q

Bank of America Merrill Lynch

Okay . Thank y ou.

Donald R. Kimble A

Chief Financial Officer

Thank y ou.

Operator: Next, we’ll go to Scott Siefers with Sandler O’Neill. Please go ahead.

Scott Siefers Q

Sandler O’Neill & Partners LP

Good morning, guy s.

Donald R. Kimble A

Chief Financial Officer

Good morning, Scott.

Beth Elaine Mooney A

Chairman & Chief Executive Officer

Good morning.

Scott Siefers Q

Sandler O’Neill & Partners LP

Just wanted to ask a question on ov erall loan growth. Based on the guide for 2016, it looks like there are no

hiccups or anything, but it just was a little caught off guard by the slowdown in a few categories and then the

ov erall rate of loan growth in the fourth quarter. So, either Don or Beth, I was just hoping y ou could update us on

y our thoughts on ov erall loan demand trends y ou’re seeing, et cetera?

Donald R. Kimble A

Chief Financial Officer

Sure. As far as the ov erall loan growth that – if y ou look at the av erage balances, I would say, on a y ear -over-year

basis, we’re up 5%, we’re say ing for next y ear mid -single digits, pipelines remaining strong. We had a v ery strong

third quarter. And so, if y ou’re just looking at period end balances, there clearly was some slowdown in perio d end

balances because of temporary flows in and out during that subsequent period. But I would say we’re continuing

to see v ery strong growth in our commercial business. Y ou will probably see some slower growth from Key in our

commercial real estate area and that’s intentional as far as some of the credit disciplines we’re maintaining and

backing off of some of the higher growth areas from a multi -family perspective and also adjusting our outlook as

far as student housing and few areas like that. So y ou co uld see a lot less construction loan activity from Key than

y ou might be seeing from some of our peers.

Beth Elaine Mooney A

Chairman & Chief Executive Officer

And, Scott, I would just follow on with the notion that Don did say , we had an extremely stro ng third quarter and

there are some v ariability quarter to quarter, but I think it was a good quarter and obviously a good y ear. And

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

when y ou look to our guidance for 2016 with mid -single digits and continued strength in our commercial

businesses, I look at that across the spectrum and continue to say this is an area of strength and where we hav e

been inv esting in our senior bankers in order to drive growth through client acquisition.

Scott Siefers

Sandler O’Neill & Partners LP

Perfect. All right. That’s good color. Thank y ou.

Donald R. Kimble

Chief Financial Officer

Thank y ou.

Operator: The next question is from John Pancari with Ev ercore. Please go ahead.

John Pancari

Evercore ISI

Good morning.

Donald R. Kimble

Chief Financial Officer

Good morning.

Beth Elaine Mooney

Chairman & Chief Executive Officer

Good morning.

John Pancari

Evercore ISI

Couple of questions here. Back to First Niagara, just any thing about the updated macro environment or are there

mid energy concerns here or just overall U.S. economic development? Anything influencing the marks that y ou

took that would make y ou have to revisit that?

Donald R. Kimble

Chief Financial Officer

The marks that will be taken will be done as of the close date and so I would

say that what we’re experiencing, I

don’t think that there is any outsize risk from the marks on the First Niagara portfolio from a loan book or others

that would suggest any overall concerns there, but again, we’ll finalize those toward the acquisition da te and make

sure that we hav e the appropriate v aluations at that time.

John Pancari

Evercore ISI

Okay . And then, separately, I wanted to get y our – sorry , if I missed this, but I wanted to get y our updated

thoughts on the manufacturing sector as it pe rtains to impacting loan growth as well as credit. I know we’v e seen

some – at the industrial space, seeing some pressure here and some banks have flagged some incremental concern

there. But wanted to get y our updated thoughts. Thanks.

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

Christopher M. Gorman A

President-Key Corporate Bank

So, John, it’s Chris. Clearly , as we’re out talking to customers every day, 2% growth in the economy coupled with

the strong dollar, it’s not without challenges. Hav ing said that, our clients are sitting on more cash than ev er.

We’re hav ing more strategic discussions than we ever had with our clients. In a 2% loan growth, y ou have to either

– they hav e the same challenges we do, y ou have to either figure out how you can take share or how you can grow

externally. And so in a way , that’s a bit of a cataly st for our business. So it certainly isn’t rosy. Growth is, as I said,

probably 2%, but the companies are in good shape. They have a lot of cash and they ‘re looking to do things

strategically.

Broadly , when y ou have sales of $ 17 .5 million cars and trucks at retail, that has a positive impact on a lot of

business banking clients, middle market clients, and other clients, because a lot of the folks obv iously are part of

the supply chain.

John Pancari Q

Evercore ISI

Okay . And then, lastly , just going back to the strong 3Q, y ou said, that you saw a loan growth. So, is it fair to think

– fair to focus more on the end of period balances here as we model out in terms of the real trends you’re seeing in

loan growth?

Donald R. Kimble A

Chief Financial Officer

I don’t know that I’d ev er wanted to just stay on the period-end balances, but it happens to work out this quarter

that if y ou look at our av erage balances in the fourth quarter, they’re lower than the period end. And so if we

continue that kind of momentum going forward, it would imply a mid -single digit kind of y ear -over-year growth.

So I would say that’s reflective this quarter but not necessarily every quarter.

John Pancari Q

Evercore ISI

Y eah. Got it. Okay . Thanks, Don.

Donald R. Kimble A

Chief Financial Officer

Thank y ou.

Operator: And we’ll go to Dav id Eads with UBS. Please go ahead.

David Eads Q

UBS Securities LLC

Hi. Good morning.

Donald R. Kimble A

Chief Financial Officer

Good morning.

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

David Eads Q

UBS Securities LLC

Curious if any color y ou guys might have on what y ou’re seeing in the energy v ertical in y our Capital Markets

business in terms of where people are going for capital, what the discussions are, whether people – whether y ou

guy s are inv olved in restructuring discussions or asset sale discussions? Just, kind of, what’s the state of play from

where y ou stand there?

Christopher M. Gorman A

President-Key Corporate Bank

So, this is Chris. I think the answer is all the abov e. I think depending on where, sort of, the capital stack

companies are, clearly, the amount of high y ield debt that was raised, when the cycle first started to turn over, that

has dissipated. The amount of private equity that has come in, I think, that has started to dissipate. And I do think

people are looking at asset sales, whole company sales, and other forms of restructuring. So I think with oil

trading at $ 26 or $ 27 a barrel, I think people are looking at all options and we are part of those discussions.

David Eads Q

UBS Securities LLC

Has there been a change to the percentage of capital raised [indiscernible] (26:25)? I think it dipped in 3Q and I’m

just curious whether that shook out here in 4Q.

Christopher M. Gorman A

President-Key Corporate Bank

The actual capital raised in the oil and gas sector was actually down in the fourth quarter.

David Eads Q

UBS Securities LLC

Okay . Hav e y ou giv en a number more broadly for this? Sorry, it’s a little bit unclear. For the broader

[indiscernible] (26:44) business?

Christopher M. Gorman A

President-Key Corporate Bank

Oh, I’m sorry. Broadly, for the y ear, in our entire Corporate Bank platform, we raised $ 57 billion across all the

v erticals and about $ 9.3 billion or, say, 16% actually went on to our balance sheet.

David Eads Q

UBS Securities LLC

Okay . Thanks for the color.

Donald R. Kimble A

Chief Financial Officer

Thank y ou.

Operator: Our next question is with Bob Ramsey with FBR. Please go ahead.

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Q4 2015 Earnings Call 21-Jan-2016

Bob H. Ramsey

FBR Capital Markets & Co.

Hey . Good morning, everyone. I just – credit trends look good in all the numbers of y ours I see out there. I’m just

curious as y ou guys think about credit, if y ou’re incrementally more or less cautious than maybe a quarter or y ear

ago .

William L. Hartmann

Chief Risk Officer

Bob, this is Bill Hartmann. I think, as we look at credit in our portfolio, we hav e a v ery, very granular portfolio,

which is one of the way s that we like to balance things out. I would pick up on Chris’ comments about the general

ov erall trend in a low growth economy. We’re being diligent to look for any signs of weakness. And what we’re

seeing is really reflective in Chris’ comments, which is, there are certain sectors where we’re seeing weakness, but

ov erall, the trends that we’re showing in our numbers say that the overall portfolio quality remains high.

Bob H. Ramsey

FBR Capital Markets & Co.

Okay . And I guess, sectors where y ou are seeing weakness, I know y ou mentioned manufacturing a little bit, but

bey ond that and may be energy, where else would you be seeing some weakness?

William L. Hartmann

Chief Risk Officer

We’re not seeing any weakness per se, but we hav e been cautious for a while now in talking about multi -family and

being cautious about where we inv est and how we do that, and then student housing was another area.

Bob H. Ramsey

FBR Capital Markets & Co.

Okay . Great. Thank y ou.

Operator: And next, we go to Gerard Cassidy with RBC. Please go ahead.

Gerard Cassidy

RBC Capital Markets LLC

Thank y ou. Good morning everyone.

Beth Elaine Mooney

Chairman & Chief Executive Officer

Good morning.

Gerard Cassidy

RBC Capital Markets LLC

Don, y ou mentioned that on the other commercial lending areas, those balances obviously are down and y ou guys

are sticking to y our credit disciplines. There’s been some talk about multi -family

and student loan. Housing

markets that y ou’re seeing some weakness. Can y ou share with us the some of the underwriting criterias that

y ou’re seeing out there that makes y ou hesitant to get inv olved? Or is it just ov erbuilding that has y ou concerned

in these markets?

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

Christopher M. Gorman

President-Key Corporate Bank

Gerard, it’s Chris. We look at a lot of metrics. You can start with some of the cap rates. And they range from, in

large gateway cities, 5%, in some instances, even 4% and those are sort of priced to perfection. We spend a lot of

time looking at what the rent to wage ratio is, i.e., the affordability of these class A multi -family apartment

buildings. Those are some of the metrics we look at and then we also spend a lot of time looking at what people are

doing out in the market, how far out are they going? Are they doing non -recourse loans? What percent of our

book, for example, is non-stabilized? We’re now down to 13% of our total commitments in real estate are non -

stable. So those are some of the metrics we’re looking at.

Gerard Cassidy

RBC Capital Markets LLC

And, Chris, when y ou mentioned the cap rates of 4% to 5% priced to perfection, what are y ou, guys, more

comfortable with ev en with that specific metric of a cap rate?

Christopher M. Gorman

President-Key Corporate Bank

Well, it’s really – y ou hav e to look at market -by-market and really what the opportunity is but I can tell y ou when

y ou get to a 4% cap rate, that has built in into those assumptions that it will lease up, that it will lease up quickly

and y ou’ll be able to get rent increases going forward and we just think that

– we just think those are a lot of

v ariables.

Gerard Cassidy

RBC Capital Markets LLC

And just finally on this commercial real estate, have you, guys, seen any evidence the regulators came out late last

y ear with concerns about the commercial real estate market underwriting? Is there any ev idence y et that that’s

sinking into banks to kind of be a little more conservative?

Christopher M. Gorman

President-Key Corporate Bank

We aren’t seeing that in the marketplace. I am, we – of course, we’re familiar with, sort of, the prudent lending

memo that came out I think in the fourth quarter. E.J. is sitting next to me. I think the last time the regulator sent

out such a memo in real estate, it was when?

Edward J. Burke

Co-President-Key Community Bank , Commercial & Private Bank

2005 .

Christopher M. Gorman

President-Key Corporate Bank

2005 . And so I think – we actually think the regulators are right. We think the market is a little hot in certain

areas and that’s why , by strategy, we’v e been really toggling more agent per principal.

Gerard Cassidy

RBC Capital Markets LLC

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

Great. And then, my final question is, in the Community Bank, y ou guys show that the assets under management

dropped I think 13% may be y ear-over-year. Can y ou just giv e us some color on what’s going on in that part of the

business?

Edward J. Burke

Co-President-Key Community Bank , Commercial & Private Bank

I think – this is E.J. Burke. Included in the $ 39 billion from 2014 is a sub -line of business that we call institutional

asset serv ices. And in that business, they do – there is a securities lending function, which has been – is not

something we’v e been growing. We had a couple of clients exit, so about $ 4 billion of that drop, where two clients

that left that we’re doing securities lending for. Not much. You’ll note that our

– the drop in our – or the difference

in our trust and inv estment services revenue wasn’t nearly that big.

Gerard Cassidy

RBC Capital Markets LLC

Thank y ou.

Donald R. Kimble

Chief Financial Officer

Thank y ou.

Operator: [Operator Instructions] And next, we go to Terry McEvoy with Stephens. Please go ahead.

Terry J. McEvoy

Stephens, Inc.

Hi. Good morning.

Donald R. Kimble

Chief Financial Officer

Hi, Terry .

Beth Elaine Mooney

Chairman & Chief Executive Officer

Good morning.

Terry J. McEvoy

Stephens, Inc.

Hi. Don, y ou talked about higher deposit rates in y our NIM outlook. Could y ou provide maybe y our deposit beta

assumption? Do they differ at all by region? And do y ou know how that would compare to past cycles?

Donald R. Kimble

Chief Financial Officer

Y eah. What our base assumption is that about a 55% deposit beta and there isn’t a whole lot of fluctuation by

region. That’s more of a general assumption and it does get more granular at the product level so we use that. And

essentially, what we’ve included in our guidance is that our assumptions here include the outlook that our deposit

rates would increase that same deposit beta level for future rate increases. So there is some potential opportunity

there. That would lag initially.

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

Terry J. McEvoy Q

Stephens, Inc.

Okay . And then, just a follow -up for Beth. Ev ery time I read my hometown newspaper in Western New Y ork, it

seems like a politician or business leader is say ing something against the First Niagara deal. And I guess my

question is, is this ty pe – or was this expected? Is a little bit more than y ou expected? And could there be any

additional cost or concessions that y ou have to make to get the deal done in terms of expenses and/or divestitures

of branches and deposits?

Beth Elaine Mooney A

Chairman & Chief Executive Officer

Y es, Terry, it is clearly an area where it is a large acquisition in an env ironment, where there have not been many

significant acquisitions in the last sev eral years. So it has garnered a fair amount of atten tion, but we have been

v ery diligent and consistent in our outreach to community leaders and public officials and I believe we’re having

v ery, v ery constructive dialogues.

In part, Key is a v ery good partner for this franchise and as we look at the story we hav e to tell and our long -

standing track record in community investment, community development, eight straight CRA Outstanding

ratings, which no other top banking company has ev er received, I think we’v e gone a long way to setting a v ery

constructive tone for the kind of neighbor, the kind of bank and the kind of partner we will be. So we’v e made a lot

of commitments, not only about achieving our financial targets but also about doing the right things for clients,

employees, communities and shareholders. And I believe that we’re obviously in the process with the Department

of Justice, who will make the determinations on the div estiture numbers and working through our plans and our

progress, and I think we will be a good and significant partner and good fo r those communities and those

customers.

Terry J. McEvoy Q

Stephens, Inc.

Thank y ou for taking my questions.

Donald R. Kimble A

Chief Financial Officer

Thank y ou.

Operator: Next, we’ll go to Matt O’Connor with Deutsche Bank. Please go ahead.

Matthew Derek O’Connor Q

Deutsche Bank Securities, Inc.

Good morning.

Donald R. Kimble A

Chief Financial Officer

Good morning.

Beth Elaine Mooney A

Chairman & Chief Executive Officer

Good morning.

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

Matthew Derek O’Connor Q

Deutsche Bank Securities, Inc.

As we think about the expense progression throughout the y ear, should we expect any meaningful lumpiness? So

stable for the full y ear but first half on a y ear -over-year basis or second half on a y ear -over-year basis should be

relativ ely stable, [ph] I guess, for both (35:51) periods?

Donald R. Kimble A

Chief Financial Officer

Just from a seasonal trend, our first quarter tends to be our lowest point, as far as expense levels, and so we would

expect a meaningful or, we said, significant reduction from our fourth quarter level. And y ou would typically

expect the fourth quarter to be one of the higher quarters as far as the expenses. So I think y ou would see a similar

trend ov erall as far as the expense levels. Keep in mind that first quarter of l ast y ear, our inv estment banking debt

placement fees were low, and so our incentive compensation would’v e been low last y ear compared to probably

what y ou would expect in the first quarter of next y ear because we would expect to have a nice increase in

inv estment banking and debt placement fees for the first quarter compared to a y ear ago .

Matthew Derek O’Connor Q

Deutsche Bank Securities, Inc.

Okay . That partially answered the question. I guess what I’m try ing to get at is, as we think about keeping

expenses flat, do we see some increase on a y ear -over-year basis in the first half of the y ear and then some of the

efficiencies kick in, in the back half of the y ear? Y ou kind of just said 1Q might be up on a y ear -over-year basis

because of the incentives, but just conceptually, kind of first half, second half?

Donald R. Kimble A

Chief Financial Officer

Y eah, I would say that our expense initiatives are continuous throughout the y ear, so I don’t think there’s going to

be any lumpiness there. I think, as y ou just repeated, we would expect first quarter expenses in 2016 to be higher

than 2015, reflecting the overall performance outlook and expectations, higher revenue during that quarter from

those business lines.

Matthew Derek O’Connor Q

Deutsche Bank Securities, Inc.

Okay . All right. Thank y ou.

Donald R. Kimble A

Chief Financial Officer

Thank y ou.

Operator: Our next question is from Dav id Darst with Guggenheim Securities. Please go ahead.

David Darst Q

Guggenheim Securities LLC

Good morning.

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

Donald R. Kimble A

Chief Financial Officer

Good morning.

Beth Elaine Mooney A

Chairman & Chief Executive Officer

Good morning.

David Darst Q

Guggenheim Securities LLC

Could y ou just speak to the continuous improvement program and where do you think y ou are in percentage

completion and what those expenses could be for the y ear?

Donald R. Kimble A

Chief Financial Officer

As far as continuous improvement, I hope we’re never done. So this is something that we believe is part of our

culture and we’ll continue to focus on that. And we’v e just implemented a number of areas, which created some of

the charges we had in the fourth quarter as it relates to our private banking area and restructuring. And so, that’s

just one example of where we do deeper div es in the specific areas looking from everything from the customer

interface all the way through to the back office and making sure that we’re designing that in a way that can be

more effective for that customer interaction but also more efficient for us from a cost perspective. So we would

expect to see ongoing opportunities at a similar size to what we’v e been experienced in this y ear.

David Darst Q

Guggenheim Securities LLC

Okay . And then on the priv ate investing gains, what’s y our outlook for those this y ear? And then, what’s the

balance in that portfolio?

Donald R. Kimble A

Chief Financial Officer

Y eah, the principal inv esting gains, as we showed, was zero for the current quarter that our outlook is that we

show v ery modest levels of gains for next y ear. So it would be a smaller lev el than clearly what we had throughout

this y ear, and the current balance is around $ 300 million of inv estments and so we would see reductions from

that balance just because we were about $ 450 million starting the year. So we’re down to about two -thirds of the

lev el that we were a y ear ago.

David Darst Q

Guggenheim Securities LLC

Got it. Okay . Thank y ou.

Donald R. Kimble A

Chief Financial Officer

Thank y ou.

Operator: Next, we go to Marty Mosby with Vining Sparks. Please go ahead.

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

Marty Mosby

Vining Sparks IBG LP

Thanks. Chris, I want to ask y ou – y ou did a really good job with debt placement and inv estment banking this

quarter, given all the disruptions in the marketplace. Didn’t really expect you to be able to

kind of just blow

through that like it had no impact. Are there any things that y ou see on the horizon or anything that’s been

happening that would put any pressure on the sense of being able to pull those deals through?

Christopher M. Gorman

President-Key Corporate Bank

Sure, Marty . Obv iously, we, like ev erybody else, are subjected to the markets. And to the extent that the markets

continue as they have been in the last two weeks or three weeks, our ability to pull through our pipeline, the y ield

to our pipeline would be less. We are really proud of the way we nav igated what was a v ery choppy fourth quarter

in the debt markets. So we’re really pleased that we’v e been able to distribute all the paper that we had. But to

y our point, if we were to face v ery, v ery choppy markets going forward, that would have an impact and the first

places y ou would see the impact would be in the M&A area and also y ou’d see obviously a related impact in the

financing areas.

Marty Mosby

Vining Sparks IBG LP

Then, while the inv estment bank, debt placement was good, trust and y our inv estment was down in what ty pically

would be an upturn in the back end of the y ear. Don, I was just curious, was that all market v alue related? And

would we see further impacts as y ou go into the first quarter, given the first couple of weeks and compression

we’re seeing in the market v aluations?

Donald R. Kimble

Chief Financial Officer

The impact there really was in two areas. One was that some of that is commission revenue and that revenue was

down this quarter, reflecting the market -related activities. And then the other piece was that we did see some

pressure on asset value, which created some pressure on the revenues there. First quarter is not off to a great start

as far as asset v alues and so I think that’s an area that would continue to have some pressure throughout 2016, but

our guidance of mid -single digit kind of growth reflected seeing some pressure in that area.

Marty Mosby

Vining Sparks IBG LP

Thanks.

Operator: And we’ll go to Geoffrey Elliott with Autonomous. Please go ahead

Geoffrey Elliott

Autonomous Research LLP

Hello . Thanks for taking the question. I guess, it feels like some companies are starting to get a bit more nervous

on the credit outlook. So what are the early indicators that you ty pically look at to get a sense of whether credit

might be turning a few quarters out, and how they’re performing?

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

William L. Hartmann

Chief Risk Officer

Geoffrey , this is Bill Hartmann. So, in our portfolio monitoring activities, we hav e a number of different metrics

that we look at that we refer to as early warning indicators. Some of them are macro and we take a look at how

those macro indicators might impact our portfolios by industry and by region. And then, we also lo ok at the

performance of the companies themselves and in the conversations that our bankers are having about the way that

the companies prepare themselves for changes in the economic environment.

As Chris mentioned, one of the things that we are noticing and hav e noticed for a while is that many of these

companies are being v ery conservative by carrying larger amounts of cash, which show up in the deposits that we

hav e. And there also, the growth in loans has not necessarily been with the customers that we

hav e because they’re

not going out at inv esting in an env ironment that’s only growing at 2% to 3%.

Geoffrey Elliott

Autonomous Research LLP

So the – just so I understand there, y ou’re saying that y ou think that higher cash balances giv e y ou more

protection – higher cash balance at corporates give y ou more protection than y ou would have had in prior

corporate cycles? That’s kind of the message y ou’re trying to get across?

William L. Hartmann

Chief Risk Officer

I think what we’re say ing is that the customers themselves still remember the last cycle and liquidity became

extremely important in the way in which they manage themselves through a cycle. And so by carrying larger cash

balances, it giv es them more of an ability to manage their companies suc cessfully through the cycle, which benefits

us in their ability to survive.

Geoffrey Elliott

Autonomous Research LLP

Great. Thank y ou.

Donald R. Kimble

Chief Financial Officer

Thank y ou.

Operator: Next, we go to Peter Winter with Sterne Agee. Please go ahead.

Peter J. Winter

Sterne Agee CRT

Good morning.

Beth Elaine Mooney

Chairman & Chief Executive Officer

Good morning.

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

Peter J. Winter Q

Sterne Agee CRT

Don, just one housekeeping item. The FDIC Deposit Insurance surcharge, I’m just wondering, I know it’s

proposed but what the impact could be for y ou guys?

Donald R. Kimble A

Chief Financial Officer

There would be a slight impact it wouldn’t be significant to the overall expense base.

Peter J. Winter Q

Sterne Agee CRT

Okay . Is that included in the 4Q?

Donald R. Kimble A

Chief Financial Officer

It would be included in our guidance, y es.

Peter J. Winter Q

Sterne Agee CRT

Got it. And then just a question for E.J. just on the Community Bank with – I was just wondering if y ou could talk

about the loan trends and what y ou’re seeing in small business loan demand?

Edward J. Burke A

Co-President-Key Community Bank , Commercial & Private Bank

For small business?

Peter J. Winter Q

Sterne Agee CRT

Y es.

Edward J. Burke A

Co-President-Key Community Bank , Commercial & Private Bank

I would turn that to my partner, Dennis Dev ine. He has small business. I can talk to Commercial Banking, which

is kind of our lower end of middle market.

Peter J. Winter Q

Sterne Agee CRT

Okay . Okay . Go ahead.

Beth Elaine Mooney A

Chairman & Chief Executive Officer

[ph] Why don’t y ou take both? (44:46)

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

Edward J. Burke A

Co-President-Key Community Bank , Commercial & Private Bank

Okay . Both? All right. Well, first of all, in the Commercial Banking segment, we had a v ery good quarter from a

loan production standpoint, and then, for the y ear, we’v e had good loan growth. We did see some clients pay us

down in the quarter. They didn’t pay us off. They just paid us down and digging beneath those numbers and

talking to clients, we found that, as Bill alluded to earlier, they’re carrying higher cash balances, paying us down.

So we feel pretty good going into the year around our pipelines. And then, finally, the last thing I’d say is that

we’v e talked for the past couple of quarters about the fact that we’ve hired a number of bankers across the

franchise. Those bankers are ramping up and we’re starting to see good production and new client acquisition

from those bankers. Dennis?

Dennis A. Devine A

Co-President-Key Community Bank, Consumer & Business Banking, KeyCorp

Small business would be comparable. The sentiment would be about the same. The production has been up a little

bit as much focused around our execution as any thing else. The ability to d eliver to small business clients is

important and so both the capabilities of our branches, our business banking RMs hav e some centralized

capabilities we brought to market. So y ou see some year -over-year production increases against the relatively

stable outlook, as both E.J. and Chris hav e spoken to .

Peter J. Winter Q

Sterne Agee CRT

Got it. Thanks v ery much.

Operator: [Operator Instructions] And we’ll go to Matt Burnell with Wells Fargo Securities. Please go ahead.

Matthew Hart Burnell Q

Wells Fargo Securities LLC

Good morning. Thanks for taking my questions. Again, just an administrative question, I guess, on the oil and gas

portfolio. You’v e mentioned what y our outstanding exposures are. I’m curious what y our commitments in that

sector might be and whether or not they’v e changed much over the last quarter or last 12 months?

William L. Hartmann A

Chief Risk Officer

This is Bill Hartmann. So our total commitments to the sector are approximately $ 3 billion. They have been

coming down slightly over the last 12 months or so . I think that’s y our question.

Matthew Hart Burnell Q

Wells Fargo Securities LLC

Y es. Thanks v ery much. And then, Beth, I noted y our commentary about the initial days of the planning for the

First Niagara acquisition. And I guess I’m just curious maybe it’s a matter of just a little bit of color. But, are y ou

suggesting that there could be, if not cost savings above the $ 400 million that y ou’ve targeted, perhaps a faster

ramp-up of the cost sav ings? And are y ou suggesting that the level of confidence in terms of the potential revenue

sy nergies is better than y ou guided, when y ou announced the deal?

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

Beth Elaine Mooney A

Chairman & Chief Executive Officer

Y es, Matt, I’ll go ahead and talk about that. I do believe that our confidence in the cost savings, both the path for

some of the timing as I talked about some of the third -party vendor contracts. There are technology and

operations largely being in an outsourced world gives us a fair amount of certainty around the cost as well as

ability to realize savings in early days of the integration. And as we look at our detailed planning, which, again, is

still early days but our planning would suggest we believe that there are more opportunities over and above the

$ 400 million. So just in general, as we firm up path and plans, I think we’re feeling stronger and better.

And as we look at the rev enue sy nergies, we quoted in our call that we had in late October around $ 300 million in

rev enue sy nergies was the number that we had put o ut there, obviously with some offsetting costs on that number,

something less than that, around $ 200 million. And I think what we’re really seeing is more confidence around

the places in the way that we would realize those revenue synergies. We see the com plementary nature of our

business models. They are accelerating our plans within the mortgage space and as we look generally around the

cultures and the product capabilities and their client base, we see – are getting more confident about the path on

the rev enue sy nergies.

Matthew Hart Burnell Q

Wells Fargo Securities LLC

Okay . Thanks for taking my questions.

Donald R. Kimble A

Chief Financial Officer

Thank y ou.

Operator: And we’ll go to Kev in Barker with Piper Jaffray . Please go ahead.

Kevin James Barker Q

Piper Jaffray & Co (Broker)

Just a follow-up on the energy question. What is the potential criticized assets that y ou have in y our energy

portfolio at this time?

Donald R. Kimble A

Chief Financial Officer

We hav e about 31% of our energy assets are criticized.

Kevin James Barker Q

Piper Jaffray & Co (Broker)

Okay . And then the follow -up on some of y our comments regarding commercial real estate, and some of the

regulatory concerns, could y ou help us – just giv e us a little more color aro und what sectors and what regions of

the country you’re seeing particular softness or just froth in general regarding commercial real estate?

Christopher M. Gorman A

President-Key Corporate Bank

Sure. This is Chris. Specifically, Kevin, we’re really focused on multi-family, class A multi-family and some of the

areas that we’v e identified are places like Houston, Raleigh, DC, Boston, Denv er, Seattle, just to name a few.

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

Kevin James Barker

Piper Jaffray & Co (Broker)

Are y ou seeing anything in regards to the hotel sector or even retail?

Christopher M. Gorman

President-Key Corporate Bank

We don’t participate in the hotel sector so that’s not something we focus on.

Kevin James Barker

Piper Jaffray & Co (Broker)

And then what about in regards to retail?

Christopher M. Gorman

President-Key Corporate Bank

Retail is not a big part of our business either, so we’re not really – what we’re really most dialed in on in terms of

areas of concern is really the froth in the multi -family area.

Kevin James Barker

Piper Jaffray & Co (Broker)

Okay . All right. Thank y ou for taking my

questions.

Operator: And with that, we hav e no further questions in queue.

Beth Elaine Mooney

Chairman & Chief Executive Officer

All right. Thank y ou, operator. And again, to all, we thank y ou for taking time from y our schedule to participate in

our call today. If y ou have any follow-up questions, you can direct them to our Investor Relations team at 216-

689-4221. And that concludes our remarks. Thank y ou, and have a good day.

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KeyCorp (KEY) Corrected Transcript

Q4 2015 Earnings Call 21-Jan-2016

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IMPORTANT ADDITIONAL INFORMATION AND WHERE TO FIND IT

In connection with the proposed merger, KeyCorp has filed with the SEC a Registration Statement on Form S-4 on November 30, 2015 that includes the preliminary Joint Proxy Statement of KeyCorp and First Niagara and a preliminary Prospectus of KeyCorp, as well as other relevant documents concerning the proposed transaction. The information in the preliminary Joint Proxy Statement/Prospectus is not complete and may be changed. The definitive Joint Proxy Statement/Prospectus will be mailed to stockholders of KeyCorp and First Niagara after the Registration Statement is declared effective by the SEC. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. INVESTORS AND SHAREHOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE MERGER AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.

A free copy of the Joint Proxy Statement/Prospectus, as well as other filings containing information about KeyCorp and First Niagara, may be obtained at the SEC’s Internet site (http://www.sec.gov). You will also be able to obtain these documents, free of charge, from KeyCorp at investor.key.com or from First Niagara by accessing First Niagara’s website at www.firstniagara.com. Copies of the Joint Proxy Statement/Prospectus can also be obtained, free of charge, by directing a request to KeyCorp Investor Relations at Investor Relations, KeyCorp, 127 Public Square, Mailcode OH-01-27-0737, Cleveland, Ohio 44114-1306, by calling (216) 689-3000, or by sending an e-mail to investor_relations@keybank.com or to First Niagara Investor Relations at 726 Exchange Street, Suite 618, Buffalo, New York 14210, by calling (716) 819-5669 or by sending an e-mail to investor@fnfg.com. In addition, KeyCorp and First Niagara use their respective Investor Relations websites and social media outlets as channels of distribution of material company information. Such information is accessible on KeyCorp’s and First Niagara’s Investor Relations websites, as well as on their respective Facebook pages and through their Twitter accounts and LinkedIn accounts.

KeyCorp and First Niagara and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the respective shareholders of KeyCorp and First Niagara in respect of the transaction described in the Joint Proxy Statement/Prospectus. Information regarding KeyCorp’s directors and executive officers is contained in KeyCorp’s Proxy Statement on Schedule 14A, dated April 7, 2015, which is filed with the SEC. Information regarding First Niagara’s directors and executive officers is contained in First Niagara’s Proxy Statement on Schedule 14A, dated March 23, 2015, which is filed with the SEC. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the Joint Proxy Statement/Prospectus regarding the proposed merger. Free copies of this document may be obtained as described in the preceding paragraph.

FORWARD-LOOKING STATEMENTS

This communication contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not limited to, KeyCorp’s and First Niagara’s expectations or predictions of future financial or business performance or conditions. Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “target,” “estimate,” “continue,” “positions,” “plan,” “predict,” “project,” “forecast,” “guidance,” “goal,” “objective,” “prospects,” “possible” or “potential,” by future conditional verbs such as “assume,” “will,” “would,”

“should,” “could” or “may”, or by variations of such words or by similar expressions. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made and we assume no duty to update forward-looking statements. Actual results may differ materially from current projections.

In addition to factors previously disclosed in KeyCorp’s and First Niagara’s reports filed with the SEC and those identified elsewhere in this communication, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: ability to obtain regulatory approvals and meet other closing conditions to the merger, including approval by KeyCorp and First Niagara shareholders on the expected terms and schedule, including the risk that regulatory approvals required for the merger are not obtained or are obtained subject to conditions that are not anticipated; delay in closing the merger; difficulties and delays in integrating the First Niagara business or fully realizing cost savings and other benefits; business disruption following the merger; changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer acceptance of KeyCorp’s products and services; customer borrowing, repayment, investment and deposit practices; customer disintermediation; the introduction, withdrawal, success and timing of business initiatives; competitive conditions; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with mergers, acquisitions and divestitures; economic conditions; and the impact, extent and timing of technological changes, capital management activities, and other actions of the Federal Reserve Board and legislative and regulatory actions and reforms.

Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results.