The bank said most of the 195 branches to be sold are in New York Upstate region, while six are in Connecticut. Six others are in New York State - four in northern Westchester County, and two in Putnam County.
HSBC currently owns over 470 bank branches throughout the US The sale to First Niagara is part of new chief executive Stuart Gulliver's strategy to cut back on retail operations in some parts of the world and instead focus on fast growing markets in Mexico and Turkey.
Niall Booker, chief executive of HSBC North America, said the deal fits in with the company's strategy "to align our US business with our global network and meet the local and international needs of domestic and overseas clients."
The bank is still dealing with the legacy of bad loans in the US from the 2003 acquisition of consumer lender Household International Inc. The acquisition made HSBC the biggest subprime lender in the United States at the time, which resulted in billions of losses to HSBC.
The sale will be carried out through HSBC's wholly owned subsidiary HSBC Bank USA, N.A.
As of 31 May, the branches held approximately USD 15 billion in deposits, USD 15 billion in gross assets - including USD 2.8 billion in loans - and USD 4.3 billion in assets under management.
HSBC shares were up around 1.6 per cent at 604 pence (USD 9.90) on the news.