Free Writing Prospectus

Follow-on Offering of Common Shares

$25,000,000

November 2009

Ticker: ALNC

www.alliancebankna.com

ALLIANCE FINANCIAL CORPORATION FREE WRITING PROSPECTUS

Filed pursuant to Rule 433

Registration Statement No. 333-161838

November 2, 2009

Forward Looking Statements

This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking

statements include, but are not limited to, statements about Alliance Financial Corporation’s (“Alliance” or “ALNC”) future financial condition, operating results,

management’s expectations regarding future growth opportunities and business strategy and other statements contained in this presentation that are not historical

facts, as well as other statements identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” or words with similar

meaning. These forward-looking statements are based upon the current beliefs and expectations of Alliance’s management and are inherently subject to

significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking

statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially

from the anticipated results discussed in these forward-looking statements. The following factors, among others, could cause actual results to differ materially

from the anticipated results or other expectations expressed in the forward-looking statements: (1) changes in general economic conditions, either nationally or

locally in the areas in which we conduct or will conduct our business; (2) the interest rate environment may compress margins and adversely affect net interest

income; (3) increases in competitive pressures among financial institutions and businesses offering similar products and services; (4) higher defaults on our loan

portfolio than we expect; (5) changes in management’s estimate of the adequacy of the allowance for loan losses; (6) the risks associated with continued

diversification of assets and adverse changes to credit quality; (7) difficulties associated with achieving expected future financial results; (8) legislative or

regulatory changes, including changes in FDIC assessments, or changes in accounting principles, policies or guidelines; (9) management’s estimates and

projections of interest rates and interest rate policy; and (10) cost savings and accretion to earnings from mergers and acquisitions may not be fully realized or

may take longer to realize than expected. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking

statements are discussed in Alliance’s reports (such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K) filed

on any such forward-looking statements, which speak only as of the date they were made. Except as required by law, Alliance does not undertake any obligation

to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statement is made.

Free Writing Prospectus Statement

The Company has filed a registration statement (including a prospectus and a related prospectus supplement) with the SEC for the offering to which this

communication relates. Before you invest, you should read the prospectus and the prospectus supplement in that registration statement and other documents the

Company has filed with the SEC for more complete information about the Company and this offering. You may get these documents for free by visiting EDGAR

prospectus if you request it by calling Sandler O’Neill & Partners, L.P. toll-free at (866) 805-4128.

Source Information

Information throughout this presentation whose description includes reference to “SNL” was derived from SNL Financial. Final peer information as of and for the

quarter ended 9/30/09 is not yet available, and therefore is omitted in this presentation.

with

the

Securities

and

Exchange

Commission

and

available

the

on the SEC website at www.sec.gov. Alternatively, the Company, any underwriter, or any dealer participating in the offering will arrange to send you the

SEC’s

Internet site (http://www.sec.gov ). Alliance cautions readers not to place undue reliance

Offering Terms

Issuer:

Alliance Financial Corporation

Type of Offering:

Follow-on Public Offering

Type of Security:

Common Stock

Ticker Symbol:

ALNC

Exchange:

The NASDAQ Global Market

Gross Proceeds:

$25.0 Million

Over-Allotment Option:

15%

Use of Proceeds:

General corporate purposes, including

continued organic growth, potential

acquisitions and repayment of debt

Sole Manager:

Sandler O’Neill + Partners, L.P.

Snapshot of Alliance Financial

•

Continuing capital generation through earnings retention

•

Capital ratios comfortably exceed well-capitalized

thresholds

•

Redeemed TARP Senior Preferred Stock; approved by

OCC and Federal Reserve without conditions

Capital

•

Asset quality metrics superior to peer averages

•

Alliance does not originate non-recourse residential or

commercial construction loans

•

Alliance is a conventional residential mortgage lender

No sub-prime, Alt-A or loans to residential or

condo developers

Stayed in our Central New York market

•

Alliance maintains a conservative investment portfolio

High-quality investment grade portfolio

$9.7 million net unrealized gains at 9/30/09

No OTTI issues

Asset Quality

•

Record net income in 2008

•

2009 first nine months earnings exceed analyst consensus

estimates

•

Net income at historical highs 4 of past 6 quarters

Earnings

•

price

outperformed

SNL

index

$1B

$5B

banks

over 1, 3 and 5 year periods

•

Four consecutive years of dividend increases

•

Added to Russell 3000 Index June 2009

Shareholder Value

Summary Statistics –

September 30, 2009

Assets:

$1.5 Billion

Loans:

$927.7 Million

Deposits:

$1.1 Billion

Tangible Common Equity:

$82.3 Million

Tangible Common Book Value per Share:

$17.84

Shares Outstanding (at October 29, 2009):

4,624,635

Banking Offices:

Market Capitalization (at October 29, 2009):

$121.9 Million

Insider Ownership:

8.0%

Alliance Bank, N.A.

Experienced and Seasoned Senior Management Team

Title

Age

Years in

Banking

Years with

Alliance

Jack H. Webb

President & CEO

John H. Watt, Jr.

Executive Vice

President

J. Daniel Mohr

Executive Vice

President & CFO

James W. Getman

Executive Vice

President & Senior

Loan Officer

Steven G. Cacchio

Senior Vice President

Claudia J. Tavernese

Senior Vice President

Risk Management

Alliance Bank N.A. Branch Franchise

•

Strong Earnings Performance Driven by Significant Net Interest Margin Growth and

Diversified Revenue Stream

•

Emphasis on Core Deposits and Relationship Banking

•

Controlled Organic Growth With Continued Opportunity to Exploit Competitive

Market Dislocation

•

Geographic Market Positioning

•

Leading Community Bank in our Footprint, with Strong Brand Recognition

•

Strong Asset Quality, Capital Ratios, and Liquidity

Bank to redeem TARP Senior Preferred Stock; approved by OCC and

Federal Reserve without conditions following review of internal stress tests

Conservative Securities Portfolio

•

Experienced Board and Management Team

•

Insider

Commitment:

Substantially

all

Directors’

Fees

Deferred

Purchase

Alliance

Common Stock

•

Proven Ability to Execute Acquisitions

Why Invest in Alliance Financial Corp.

Alliance Growth History: Seamless Integrations

Alliance has been successful in complementing organic growth with

acquisitions and de-novo expansion.

Acquisitions

•

Q4 2006 –

Bridge Street Financial Corporation

$252 million fair value of assets acquired

$173 million fair value of deposits assumed

7 Branches

Contiguous to existing footprint

Bridge Street cost reductions exceeded 40%

•

Q1 2005 –

HSBC Trust Portfolio

$560MM Portfolio of managed assets -

Buffalo, NY Office

Non-interest sensitive revenue from HSBC acquisition key to diversification

De-novo expansion

•

Onondaga County, NY

2000 to 2006 -

Opened 8 branches in the greater Syracuse area

Rate of growth enhanced by acquisition of Bridge Street Financial in 2006

Greater opportunity for organic growth with competitive dislocations

Consistent Balance Sheet Growth

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009

Total Assets

Historical Stock Price Performance

Through 10/30/09

Stock performance significantly and consistently better than peer indexes

Net Income Growth Driven by Higher Margin

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

(000's)

Quarterly Net Income

Net Income

Tarp Dividend

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

(000's)

Annual and YTD 9/30 Net Income

Net Income

Tarp Dividend

3.47%

2.93%

3.62%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

Tax Equivalent Net Interest Margin

ALNC

SNL

Banks

$1B

$5B

Disciplined community banking philosophy delivers relatively stable return on equity

Performance superior to peer indexes

Return on Average Equity

-20.00%

-16.00%

-12.00%

-8.00%

-4.00%

0.00%

4.00%

8.00%

12.00%

16.00%

2005

2006

2007

2008

2009

Alliance

SNL Banks $1B -

$5B

Loan classifications based on regulatory reporting guidelines

Further detail on CRE included in appendix

Loan Portfolio by Type

Residential

Mortgage

38.3%

Owner

Occupied

CRE

6.3%

Non-Owner

Occupied

CRE

3.9%

Commercial

Construction

0.4%

Commercial

and

Industrial

11.7%

Leases, Net

8.3%

Indirect Auto

21.0%

Home equity

LOC

6.9%

Consumer

3.2%

(Dollars in Thousands)

September 30, 2009

Deposit Type

Amount

% of Total

Residential Mortgage

353,721

38.3%

Owner Occupied CRE

57,930

6.3%

Non-Owner Occupied CRE

36,323

3.9%

Commercial Construction

3,712

0.4%

Commercial and Industrial

108,507

11.7%

Leases, Net

76,117

8.3%

Indirect Auto

194,267

21.0%

Home equity LOC

63,434

6.9%

Consumer

29,519

3.2%

Total

923,530

100.0%

Exceptional asset quality given operating environment

Consistently superior to peer averages

Reflects disciplined underwriting, low volatility of regional economy and real estate market

Asset Quality

(Dollars in Thousands)

6/30/2008

9/30/2008

12/31/2008

3/31/2009

6/30/2009

9/30/2009

30 Days past due

5,915

5,622

11,124

8,938

8,990

9,993

60 days past due

1,019

555

4,736

3,168

3,788

2,141

90 days past due and still accruing

217

126

299

127

Non-accrual

5,776

4,507

4,352

5,620

7,588

10,084

Total non-performing loans and leases

5,828

4,724

4,478

5,919

7,611

10,211

ORE and repossessed assets

138

328

657

829

373

340

Total non-performing assets

5,966

5,052

5,135

6,748

7,984

10,551

Non-performing loans/total loans

0.65%

0.52%

0.49%

0.64%

0.81%

1.10%

Non-performing assets/total assets

0.45%

0.37%

0.38%

0.48%

0.55%

0.72%

SNL

Banks

$1B

$5B

1.78%

2.21%

2.69%

3.45%

3.95%

n/a

Allowance for credit losses

8,651

8,875

9,161

9,707

9,859

10,006

Allowance/total loans

0.96%

0.97%

1.01%

1.05%

1.08%

Allowance/NPL's

148%

188%

205%

164%

130%

98%

SNL

Banks

$1B

$5B

(Allow./NPA's)

60%

52%

47%

41%

38%

n/a

Net charge-offs

844

625

1,690

1,204

1,648

978

Net charge-offs/average loans

0.37%

0.28%

0.74%

0.53%

0.71%

0.42%

SNL

Banks

$1B

$5B

0.83%

0.89%

1.67%

1.20%

2.21%

n/a

Provision/net charge-offs

155%

136%

117%

145%

109%

115%

SNL

Banks

$1B

$5B

154%

151%

150%

153%

123%

n/a

Modest upward trend in NPA’s

reflect general macroeconomic conditions

Non-Performing Assets at 1/5

of $1B -

$5B peer banks

Non-Performing Assets/Total Assets

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

2005 2005 2005 2005 2006 2006 2006 2006 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009

Alliance

SNL Banks $1B -

$5B

Deposit growth a combination of acquisition driven and organic growth

Recent core deposit growth initiatives enhanced by:

Flight to quality/safety

Strong balance sheet

High brand awareness

Upgraded treasury management and internet banking platform

Total Deposits

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

2005

2006

2007

2008

2009

Thousands

(Dollars in Thousands)

September 30, 2009

Deposit Type

Amount

% of Total

Noninterest Bearing Demand

151,998

14.0%

Interest Bearing Demand

119,048

11.0%

Savings

93,329

8.6%

Money Market

330,345

30.4%

CD's, $100,000 or more

109,477

10.1%

CD's, Less than $100,000

168,027

15.5%

Brokered CD's

112,687

10.4%

Total

1,084,911

100.0%

Noninterest

Bearing

Demand

14.0%

Interest

Bearing

Demand

11.0%

Savings

8.6%

Money Market

30.4%

CD's >=

$100,000

10.1%

CD's <

$100,000

15.5%

Brokered

CD's

10.4%

Growing, diversified deposit base

Incentive programs focused on demand account growth

Deposit Composition

Deposit Market Share

Cortland

County

Onondaga

County

2009

Rank

Institution (ST)

Number of

Branches

Total Deposits

in Market

Total Market

Share (%)

2009

Rank

Institution (ST)

Number of

Branches

Total Deposits

in Market

Total Market

Share (%)

Alliance Financial Corp. (NY)

235,792

38.93

M&T Bank Corp. (NY)

2,150,223

27.00

First Niagara Finl

Group (NY)

156,219

25.79

KeyCorp (OH)

1,608,971

20.20

KeyCorp (OH)

64,782

10.70

HSBC Holdings plc

1,025,255

12.87

HSBC Holdings plc

52,258

8.63

JPMorgan Chase & Co. (NY)

603,922

7.58

M&T Bank Corp. (NY)

27,264

4.50

Bank of America Corp. (NC)

548,446

6.89

Total For Institutions In Market

605,620

Alliance Financial Corp. (NY)

328,558

4.13

Total For Institutions In Market

138

7,964,040

Onondaga, NY

Madison

County

Oswego

County

2009

Rank

Institution (ST)

Number of

Branches

Total Deposits

in Market

Total Market

Share (%)

2009

Rank

Institution (ST)

Number of

Branches

Total Deposits

in Market

Total Market

Share (%)

Oneida Financial Corp. (MHC)

(NY)

450,325

44.38

Pathfinder Bancorp Inc. (MHC)

(NY)

316,215

24.69

Alliance Financial Corp. (NY)

357,693

35.25

JPMorgan Chase & Co. (NY)

233,969

18.27

KeyCorp (OH)

91,065

8.97

Fulton Savings Bank (NY)

189,418

14.79

Royal Bank of Scotland Group

63,873

6.29

HSBC Holdings plc

173,963

13.58

M&T Bank Corp. (NY)

28,732

2.83

Alliance Financial Corp. (NY)

133,223

10.40

Total For Institutions In Market

1,014,712

Total For Institutions In Market

1,280,764

Syracuse MSA

2009

Rank

2008

Rank

Institution (ST)

Number of

Branches

Total Deposits

in Market

Total Market

Share (%)

M&T Bank Corp. (NY)

2,178,955

21.24

KeyCorp (OH)

1,832,771

17.86

HSBC Holdings plc

1,199,218

11.69

JPMorgan Chase & Co. (NY)

860,575

8.39

Alliance Financial Corp. (NY)

819,474

7.99

Total For Institutions In Market

197

10,259,516

No. 1 and No. 2, respectively, in legacy counties of Cortland and

Madison

Substantial growth opportunity in Syracuse as locally headquartered

alternative to mega-banks

Sources: SNL Securities, FDIC

2008

Rank

2008

Rank

2008

Rank

2008

Rank

Pro Forma Capital Ratios

5.8%

7.4%

11.5%

12.7%

7.5%

9.2%

13.9%

15.0%

0.0%

4.0%

8.0%

12.0%

16.0%

TCE/TA

Tier 1 Leverage

Tier 1 RB Capital

Total RB Capital

September 30, 2009

Pro-Forma

Strong balance sheet supported by ample tangible common equity

Regulatory capital ratios comfortably above well-capitalized thresholds

Capital levels following $25 million common offering provides support for organic growth and future acquisition opportunities

Note: Pro forma ratios based on Company balance sheet as of 9/30/09 with additional $25 million of common equity. Risk-based ratio assumes

all $25 million immediately invested in 100% risk-weighted assets. No additional asset growth is assumed.

Looking Ahead

•

Focus on Organic Growth

Take advantage of dislocation of competitive market, particularly in commercial lending

Focus on relationships to increase deposit penetration

Strong internet banking platform with unique brand introduced in 2009

•

Profitability

Continued focus on net interest margin

Quality earning-asset growth

Core deposit focus

Diligent expense control

•

Continued Emphasis on Credit Quality

•

Acquisition Opportunities Enhanced by Market Dislocations

Whole bank

Branches

Asset management

Appendices

Experienced Management Team

Jack H. Webb

Chairman and Chief Executive Officer of Alliance Financial Corporation and President and CEO of Alliance Bank, N.A. A career

banker, Mr. Webb joined Alliance Bank, N.A. as President in May of 2000, after a 26-year career with Chase Manhattan Bank and its

predecessors. In May of 2001, he was named Chief Executive Officer of Alliance Bank, N.A. and President of Alliance Financial Corp.

In January of 2002, Webb was named to his current positions of Chairman and CEO of Alliance Financial Corp. and retained the titles

of President and CEO of Alliance Bank, N.A.

John H. Watt, Jr.

Executive Vice President and director of Alliance Financial Corporation. Mr. Watt began at Alexander & Green as an associate

attorney

1984

and

1985,

moved

J.P.

Morgan

Chase

and

its

predecessors

where

worked

various

managerial

roles

as a

Managing Director for 18 years. In June of 2003, Mr. Watt joined Alliance Financial Corporation.

J. Daniel Mohr

Treasurer and Chief Financial Officer for Alliance Financial Corporation, and Executive Vice President and Chief Financial Officer for

its wholly owned subsidiary, Alliance Bank, N.A. Mr. Mohr came to Alliance Financial Corporation in 2006 from Partners Trust

Financial Group, Inc. where he held the position of Senior Vice President and Chief Financial Officer. Prior to joining Partners Trust

Financial Group in 2004, he was Chief Financial Officer for The Pioneer Companies and before that, Vice President, Treasurer and

Chief Financial Officer for Skaneateles Bancorp.

James W. Getman

Executive

Vice

President

and

Senior

Loan

Officer

for

Credit

Management

and

Administration

for

Alliance

Bank,

N.A.

since

1999.

Mr. Getman

began his career in 1970 at Hartford National Bank and from there he moved on to Key Bank until 1972. He held the

position of Assistant Vice President at Walter E. Heller & Company from 1978 to 1980 and Vice President, Senior Team Leader at

Chase Manhattan Bank from 1980 to 1996. He then moved on to Cayuga Bank as Vice President and Senior Credit Officer from

1997 to 1999 and then joined Alliance Bank, N.A. in 1999.

Steven G. Cacchio

Senior

Vice

President

for

Alliance

Bank,

N.A.

Mr.

Cacchio

began

his

career

Bank

Examiner

the

Office

the

Comptroller

the

Currency

June

1994.

Mr.

Cacchio

joined

Alliance

Bank

2000

and

has

served

variety

management

roles

and

currently

responsible for all of the consumer lines of business at Alliance.

Claudia J. Tavernese

Senior

Vice

President

Risk

Management

Alliance

Bank,

N.A.

Ms.

Tavernese

came

Alliance

Bank

2003.

Previously,

she

worked for 18 years in various capacities at two community bank’s in the Central New York area.

Ample Liquidity

Immediate wholesale funding capacity of $363.6 million

Note: Unpledged securities does not include an additional $80.2 million that could be made available by replacing the pledged

security

certain

overpledged

deposit

accounts

with

security

lesser

amount

sufficient

cover

the

deposit

account

balance.

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

Unpledged Securities

FHLB Availability

Federal Reserve Line

Correspondent Lines

Thousands

Wholesale Borrowing Capacity 9/30/09

Active Interest Rate Risk Management

•

Interest rate risk position is measured monthly using net interest income simulation

modeling

•

Conservative philosophy focused on managing risk within acceptable tolerances

•

Impact of gradual 12 month increase in interest rates of 200 bp on net interest income

indicates acceptable risk

Approximately 3% decrease in net interest income over two year simulation period

•

Strategy highlights:

Sell all monthly payment, fixed-rate residential mortgage originations

Retain bi-weekly fixed-rate mortgages and variable rate mortgages

More than $200 million of wholesale funding termed out since 2007 with maturities

between 2 and 5 years

Average maturity of FHLB advances 2.6 years at 9/30/09

Alliance Investment Management

•

Alliance

Investment

Management,

division

Alliance

Bank

with

trust

powers,

had

$778 million of assets under management at 9/30/09.

•

Year to date revenue for this business is $5.3 million. Year end

2008 revenue was

$8.7 million.

•

In 2005 Alliance acquired $560 million in trust assets under management from HSBC

and established a trust administration office in Buffalo New York.

Commercial Real Estate –

Additional Detail

•

Commercial

Construction

loan

balances

$3.7

million

Non-owner

occupied

$2.4

million

$255,000 average

Owner-occupied

$495,000

Commercial

development

$835,000

•

Nonperforming

commercial

mortgages

$2.9

million

Non-owner

occupied

$911,000

$114,000

average

Owner-occupied

$1.9

million

$196,000 average

Loan and Lease Portfolio by Risk

Rating as of 9/30/09

Dollars in Thousands

Total

Commercial

Loans and

Mortgages

Leases

Residential

Mortgages

Indirect and

Consumer

Loans

Pass/Not Rated

885,012

178,495

65,576

353,721

287,220

Special Mention

17,176

16,513

663

Substandard

18,269

9,792

8,477

Impaired

Specific

Allocation

3,046

1,645

1,401

Doubtful

Loss

Total

loans

and

leases,

net

unearned

discount

923,530

206,472

76,117

353,721

287,220

Equipment Lease Portfolio Segmentation

YTD and as of September 30, 2009

($ in Millions)

High Performing Indirect Auto Portfolio

Dollars in Thousands

December

31, 2007

% of Period

end Balance

December

31, 2008

% of Period

end Balance

September

30, 2009

% of Period

end Balance

Credit Score at Date or Origination:

Premium 720+

137,095

77.8%

139,509

76.3%

146,644

75.5%

Level A 719 -

679

21,405

12.2%

23,177

12.7%

17,061

8.8%

Level B 678 -

630

7,668

4.4%

9,921

5.4%

17,683

9.1%

Level C 629 -

600

709

0.4%

781

0.4%

3,497

1.8%

Level D 599 -

1,168

0.7%

1,507

0.8%

0.0%

No Score

8,070

4.6%

7,912

4.3%

9,382

4.8%

176,115

100.0%

182,807

100.0%

194,267

100.0%

Full Year 2007

Full Year 2008

YTD 2009

Amount

% of Portfolio

Amount

% of Portfolio

Amount

% of Portfolio

Net Charge-offs

0.05%

204

0.11%

139

0.07%

Delinquency

887

0.50%

945

0.52%

950

0.49%

Dollars in Thousands

September 30, 2009

June 30, 2009

December 31, 2008

Amortized

Cost

Fair

Value

Amortized

Cost

Fair

Value

Amortized

Cost

Fair

Value

Securities available-for-sale

Debt securities:

U.S. Treasury obligations

$ 100

$ 101

$ 102

Obligations of government-