The purchase, from the Canadian holding company Imasco, itself part- owned by BAT, the tobacco giant, adds almost 80 branches to the 330 already operated by Marine Midland in New York state.
However, analysts said yesterday that some rationalisation was inevitable, with job losses highly likely.
HSBC said the asking price, which will hand almost pounds 50m in pre-tax profits to BAT, would be financed by Marine Midland itself.
John Tyce, banking analyst at Societe Generale Strauss Turnbull, said: "It is a lot of money, but not to them."
First Federal has $7.2bn in assets, employs 1,600 employees and has 15 mortgage origination offices in nine states, in addition to its New York State retail operation.
The latest acquisition follows Marine Midland's purchase in 1994 of Spectrum Home Mortgage, which now operates in eight states.
It is also one in a series of purchases which have seen Marine Midland add to its stable of banking outlets in the New York area, sometimes by badging under its own name other parts of HSBC's existing empire.
This latest deal gives Marine Midland almost $30bn in assets, but Jim Cleave, chief executive at Marine Midland, yesterday dampened speculation that more large-scale takeovers by the bank were on the way.
"We're not going to be knocking on any doors for about 12 months," he said. "The acquisition of Federal Savings is another in a series of targeted purchases aimed at expanding the scope of our operations to a wider retail base."
ING, the Dutch financial services giant, saw its own profits boosted by more buoyant financial markets as it announced a 28 per cent rise in first-half net profits to 1.5bn guilders (pounds 587m).
Barings, the UK merchant banking business bought for pounds 1 last year, after it collapsed under the weight of losses incurred by rogue trader Nick Leeson, contributes about 100m guilders in net profits to ING anually and the Dutch group said yesterday that it was hoping to double this amount.
The company said that a large slice of Barings' profits - of which it declined to give any significant details - came from the merchant bank's success in the corporate advisory sector, where it has won a significant share of business. However, ING warned that earnings growth would slow in the second half of the year.