
þ	No fee required.

o	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.


(3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):


o	Fee paid previously with preliminary materials.

o	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

Cortland Bancorp
194 West Main Street
Cortland, Ohio 44410

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

PROXY STATEMENT


Annual	~~April 27, 2010~~May 17, 2011	~~Vernon’s Cafe~~Trumbull Country Club
Meeting:	~~3:00 p.m.~~10:30 a.m., ~~EST~~EDT	~~720 Youngstown-Warren Road~~600 Golf Drive NE
		~~Niles,~~Warren, Ohio ~~44446~~44483


Record Date and Voting:		8:00 a.m., ~~EST,~~EDT, March ~~8, 2010.~~22, 2011. If you were a shareholder at that time, you may vote at the 2011 Annual ~~Meeting.~~Meeting of Shareholders (the “Annual Meeting”). Each common share entitles the holder to one vote on each matter to be voted on by shareholders at the Annual Meeting. On the record date, Cortland Bancorp (“Cortland”) had ~~4,525,550~~4,525,540 common shares outstanding.

Agenda:		1. To elect three directors to serve for terms of ~~three~~two years each until the Annual Meeting in 2013 and until their successors are elected and qualified.

		2. To elect three directors to serve for terms of three years each until the Annual Meeting in 2014 and until their successors are elected and qualified.

		2.3. To ratify the appointment of S.R. Snodgrass, A.C. as Cortland’s independent auditor for the fiscal year ending December 31, 2011.

		4. To transact any other business that may properly come before the meeting.

Proxies:		Unless you specify on the proxy card to vote differently, the management proxies will vote all signed and returned proxies “FOR” election of the Board’s nominees for ~~directors.~~director and “FOR” ratification of Cortland’s independent auditor. The management proxies will use their discretion on any other matters that may arise. If a named nominee cannot or will not serve as a director, the management proxies will vote for a substitute person nominated by the Board to serve as a director.

Proxies Solicited By:		~~The~~Cortland’s Board of ~~Directors of Cortland Bancorp.~~Directors. The cost of the solicitation is being borne by ~~Cortland Bancorp.~~Cortland. Proxies will be solicited by mail and may be further solicited, for no additional compensation, by officers, directors, or employees of Cortland ~~Bancorp~~ and its subsidiaries by mail, telephone, or personal contact. Cortland ~~Bancorp~~ will also pay the standard charges and expenses of brokerage houses, voting trustees, banks, associations, and other custodians, nominees, and fiduciaries who are record holders of common shares not beneficially owned by them, for forwarding proxy materials to, and obtaining proxies from, the beneficial owners of such common shares.

Mailing Date:		We anticipate mailing this proxy statement on or about ~~March 26, 2010.~~April 4, 2011.

Revoking Your ~~Your~~ Proxy:		You may revoke your proxy before it is voted at the Annual Meeting. You may revoke your proxy by:

•
	�� •sending written notice revoking your proxy to Timothy Carney, ~~the~~Cortland’s Secretary, ~~of Cortland Bancorp~~ at 194 West Main Street, Cortland, Ohio 44410, which must be received prior to the Annual Meeting;

•		•sending in another signed proxy card with a later date, which must be received by Cortland ~~Bancorp~~ prior to the Annual Meeting; or

•		•attending the Annual Meeting and revoking your proxy in person if your common shares are held in your name. If your common shares are held in the name of your broker, financial institution, or other holder of record, you must bring an account statement or letter from the broker, financial institution, or other holder of record indicating that you were the beneficial owner of the common shares on the record date.

~~Attendance at the Annual Meeting will not, in and of itself, constitute revocation of a proxy.~~

Attendance at the Annual Meeting will not, in and of itself, constitute revocation of a proxy.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON ~~APRIL 27, 2010:~~MAY 17, 2011: THE PROXY STATEMENT, INCLUDING NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS, AND THE ~~2009~~2010 ANNUAL REPORT TO SHAREHOLDERS ARE AVAILABLE ON THE INTERNET AThttp://www.snl.com/IRWebLinkX/GenPage.aspx?IID=100699&gkp=~~203211~~203211.

PROXY STATEMENT
TABLE OF CONTENTS


~~General Information~~Share Ownership by Directors and Executive Officers			1
Record Date and Outstanding Shares; Quorum			2
~~Share~~Vote Required			2
Abstentions and Broker Non-Votes			2
Section 16(a) Beneficial Ownership byReporting Compliance			2
Election of Directors (Proposals One and ~~Executive Officers~~Two)			2
Board Nominees			3
Continuing Directors			5
~~Section 16(a) Beneficial Ownership Reporting Compliance~~			4

~~Election of Directors~~			4

~~Board Nominees~~			4

~~Continuing Directors~~			7

The Board ~~of Directors~~ and Committees of the Board			6
Director Compensation in 2010			10
Executive Compensation			12
~~Director Compensation in 2009~~ Transactions with Related Persons			1415
Ratification of Independent Auditors (Proposal Three)			15
~~Executive Compensation~~ Audit Committee Matters			16
Submission of Shareholder Proposals			17
~~Transactions with Related Persons~~			20

~~Audit Committee Matters~~			20

~~Submission of Shareholder Proposals~~			21

Delivery of Proxy Materials to Shareholders Sharing an Address			2217
Other Business
~~Other Business~~			2217

PROXY STATEMENT

Cortland Bancorp. (“Cortland”), an Ohio corporation, is registered as a bank holding company with the Federal Reserve Board and owns all the capital stock of The Cortland Savings and Banking Company (the “Bank”). Cortland’s common stock is traded on the Over the Counter Bulletin Board under the symbol “CLDB.” As used in this proxy statement, “we,” “us,” and “our” refer to Cortland and/or its subsidiaries, depending on the context. The term “annual meeting,” as used in this proxy statement, includes any adjournment or postponement of such meeting.

This proxy statement is furnished in connection with the solicitation by Cortland’s Board of Directors (the “Board”) of proxies to be voted at the 2011 Annual Meeting of Shareholders. The annual meeting will be held on Tuesday, May 17, 2011, at 10:30 a.m., EDT, at Trumbull Country Club, 600 Golf Drive NE, Warren, Ohio 44483. The accompanying Notice of Meeting and this Proxy Statement are first being mailed to shareholders on or about April 4, 2011.

SHARE OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS

The following table furnishes information regarding the beneficial ownership of common shares, as of March ~~8, 2010,~~22, 2011, for each of the current directors, each of the nominees for re-election as a director, each of the individuals named in the Summary Compensation Table, and all current directors and executive officers as a group. To the knowledge of Cortland, ~~Bancorp,~~ no person beneficially owns more than 5% of the outstanding common shares.


Name of Beneficial	Number of		Percentage of			Number of		Percentage of
Owner (1)	Shares		Outstanding Shares (2)			Shares		Outstanding Shares (2)
Jerry A. Carleton		3,949.180		(3	)		8,152.1800		(3	)

Timothy Carney (4)							10,298.2641		(3	)
David C. Cole		4,040.090		(3	)		4,040.0900		(3	)

Lawrence A. Fantauzzi (4)		12,958.721		(3	)

Stanley P. Feret (4)							1,000.0000		(3	)
James M. Gasior (4)		6,798.765		(3	)		7,980.8113		(3	)

George E. Gessner		29,220.762		(3	)		29,220.7620		(3	)

James E. Hoffman, III		4,484.433		(3	)		4,484.4330		(3	)

Neil J. Kaback		191.000		(3	)		191.0000		(3	)

Joseph E. Koch							700.0000		(3	)
David J. Lucido (4)							3,702.6967		(3	)
K. Ray Mahan		111,661.617		2.47	%		111,661.6140		2.47	%

Rodger W. Platt (4)		25,623.000		(3	)

Richard B. Thompson		104,093.694		2.30	%		134,344.6940		2.97	%

Timothy K. Woofter		58,162.700		1.29	%		78,276.8700		1.73	%

Timothy Carney (4)		6,418.897		(3	)

Stephen A. Telego, Sr. (4)		2,190.439		(3	)

All directors and executive officers as a group (20 persons)		394,937.876		8.73	%
All directors and executive officers as a group (19 persons)							410,046.3715		9.06	%

RECORD DATE AND OUTSTANDING SHARES; QUORUM

If you were a shareholder at the close of business on March 22, 2011, you are entitled to vote at the annual meeting. As of March 22, 2011, there were 4,525,540 shares of Cortland common stock issued and outstanding. When present in person or by proxy at the annual meeting, the holders of a majority of the shares of Cortland common stock issued and outstanding and entitled to vote will constitute a quorum for the conduct of business at the meeting.

VOTE REQUIRED

Shareholders are entitled to one vote for each share held. Shareholders are not entitled to cumulate their votes in the election or removal of directors or otherwise. Directors are elected by a plurality vote of shareholders present in person or by proxy and constituting a quorum, meaning the nominees receiving the greatest numbers of votes will be elected. The affirmative vote of a majority of the votes cast is needed to ratify the appointment of S.R. Snodgrass, A.C. as Cortland’s independent auditor for 2011.

ABSTENTIONS AND BROKER NON-VOTES

Abstention may be specified on all proposals except the election of directors. Broker non-votes generally occur when shares held by a broker nominee for a beneficial owner are not voted with respect to a proposal because the nominee has not received voting instructions from the beneficial owner and lacks discretionary authority to vote the shares. Brokers normally have discretion to vote on “routine matters,” such as the ratification of independent registered public accounting firms, but not on non-routine matters, such as amendments to charter documents, executive compensation proposals, and the election of directors. Although they are counted for purposes of establishing that a quorum is present, abstentions and broker non-votes are not counted as votes cast. Accordingly, abstentions and broker non-votes have no effect on the election of directors or ratification of the appointment of Cortland’s independent auditor.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires ~~the Company’s~~Cortland’s executive officers and directors to file reports with the Securities and Exchange Commission (“SEC”) ~~reporting~~disclosing their initial beneficial ownership of common shares and any subsequent changes in their beneficial ownership. Specific due dates have been established by the SEC, and Cortland ~~Bancorp~~ is required to disclose in this proxy statement any late reports. To ~~Cortland Bancorp’s~~Cortland’s knowledge, based solely on a review of reports furnished to Cortland ~~Bancorp~~ and written representations that no other reports were required, ~~during the 2009 fiscal year, Cortland Bancorp’s~~Cortland’s executive officers and directors complied with all Section 16(a) filing ~~requirements.~~

requirements during the 2010 fiscal year, with two exceptions. One Form 4, reporting the sale of 1,849.3196 shares of Cortland stock by Danny L. White, was filed late. Additionally, a second Form 4, reporting the sale of Mr. White’s remaining 9,443.5422 shares of Cortland stock, was also filed late. Mr. White’s employment with the Bank terminated on March 31, 2010.

ELECTION OF DIRECTORS
(Proposals One and Two)

As of the date of this proxy statement, ~~Cortland Bancorp’s~~Cortland’s Board ~~of Directors~~ currently has ~~ten~~11 members. The Board ~~of Directors~~ is divided into three classes, and directors of each class serve for three-year terms. ~~Four~~Directors Jerry A. Carleton, James M. Gasior, and Richard B. Thompson are nominated as directors ~~serve in the class whose~~for two-year terms ~~will expire~~ending at the ~~Annual Meeting but only three~~2013 annual meeting or until their successors are ~~seeking re-election,~~elected and qualified. These three directors ~~serve~~were originally nominated last year for reelection at the April 27, 2010 annual meeting. However, because a quorum was not obtained at the 2010 annual meeting, no action except adjournment was taken at the 2010 annual meeting. For that reason, the election of directors at the 2010 annual meeting did not occur. Instead, as explained in Cortland’s Form 8-K Current Report filed with the ~~class whose terms expire in 2011~~SEC on May 3, 2010, all of Cortland’s directors simply continued serving as directors after the 2010 annual meeting, including Directors Carleton, Gasior, and ~~three directors serve in the class whose terms expire in 2012.~~Thompson. Director K. Ray Mahan, former Chairman of the Board, ~~will not seek re-election at~~also continued to serve as a director after adjournment of the ~~Annual Meeting in~~2010 annual meeting although he turned 70 on January 24, 2010. ~~The Code of Regulations of Cortland Bancorp,~~ Article Two, Section 2.01 ~~Authority and Qualifications~~of Cortland’s Code of Regulations stipulates ~~“No~~that “no person who has attained the age of seventy (70) shall be eligible for election as a director.” Accordingly, Mr. ~~Mahan’s date of birth is January 24, 1940.~~Mahan will not seek re-election at the Annual Meeting in 2011. The Board ~~of Directors of Cortland Bancorp have~~has elected to eliminate Mr. Mahan’s director position upon his ~~retirement.~~retirement thereby reducing the size of the Board from 11 to 10 directors.

Directors David C. Cole, Timothy Carney, and Neil J. Kaback are also nominated as directors for three-year terms ending at the 2014 annual meeting or until their successors are elected and qualified. Proxies may not be voted for more than the three ~~nominees.~~nominees in each class presented.

The Board ~~of Directors~~ proposes that Directors Carleton, Gasior, and Thompson be elected for a new term of two years. Each of these three directors appeared as nominees in the proxy statement for the 2010 annual meeting; however, a quorum was not reached. Therefore, these three individuals are presented as nominees ~~identified~~with the two years remaining on ~~the following page~~their originally intended terms. The Board also proposes that Directors Cole, Carney, and Kaback be elected for a new term of three years. Each nominee was recommended by the Nominating Committee. Each individual elected as a director at the ~~Annual Meeting~~annual meeting will hold office ~~for a~~until his term ~~to expire at the Annual Meeting of Shareholders to be held in 2013~~expires and until his successor is duly elected and qualified, or until his earlier resignation, removal from office, or death. While it is contemplated that all nominees ~~other than Mr. Mahan,~~ will stand for re-election, if a nominee who would otherwise receive the required number of votes becomes unavailable or unable to serve as a candidate for re-election as a director, the individuals designated as proxies on the proxy card will have full discretion to vote the common shares represented by the proxies they hold for the election of the remaining nominees and for the election of any substitute nominee or nominees designated by the Board ~~of Directors~~ following recommendation by the Nominating Committee. The Board ~~of Directors~~ knows of no reason why any of the nominees named below will be unavailable or unable to serve if elected to the Board.

Director of

Nominee

Cortland

for Term

Nominee

Age

Biography

Since

Expiring In

Richard B. Thompson

Owner and executive of Therm-O-Link, Inc., Vulkor, Inc., and Therm-O-Link of Texas, Inc., all manufacturers of electrical wire and cable. Owner and executive of Geneva Partners, a condominium development company which is no longer active. Executive of Kinsman IGA, a grocery store. Partner in Dana Partners, a real estate holding company, and Dana Gas, a gas well operation. Owner of the Heritage Hill Grain Company and Heritage Hill Enterprises, agricultural businesses, since 2003. Partner in Stratton Creek Woodworks, a maker of wood products, and Smearcase, a real estate holding company, each since 2005. Partner in Goodview, a Brazilian agricultural business. Partner in Kinsman Hardware LLC, a home improvement store. Mr. Thompson is a private investor with an extensive background in manufacturing. His knowledge and expertise provide assistance in understanding and evaluating manufacturing business relationships. He has owned and managed numerous small businesses in several industries in the bank’s current market area, as well as outside the immediate area.

2001

2013

David C. Cole

Partner and President of Cole Valley Motor Company, an automobile dealership. President of JDT, Inc., Cole Valley Chevrolet, CJB Properties, and David Tom LTD, automobile sales, since 2001. As President of a family-owned automobile dealership located in Warren, Ohio, Mr. Cole is responsible for the management and day-to-day operations of the business. He has a Bachelor of Science degree in business administration and has extensive experience and understanding of small business and retail needs. Mr. Cole serves on the board of Forum Health.

1989

2014

Timothy Carney

Executive Vice President and Chief Operating Officer of Cortland and the Bank and Secretary of Cortland and the Bank since November 2, 2009. Senior Vice President and Chief Operations Officer of the Bank and Cortland since April 2008. Senior Vice President and Chief Operations Officer of the Bank since April 2005. Prior to joining the bank, Mr. Carney was employed by a major accounting firm and had experience in all financial activities and financial reporting, audit preparation, budgeting, and knowledge of government regulatory requirements.

2009

2014

Director of the
Position(s) Held with the Company Nominee
Company and its Subsidiaries Continuously for Term
Nominee Age and Principal Occupation(s) Since Expiring In
Jerry A. Carleton 67 Owner of Jerry Carleton Enterprises, Inc., a general contracting and development company, since 1972. Limited Partner in Eagle Ridge Properties LLC in Brown’s Farm, a development company. Professor Emeritus and advisor for campus planning and development at Kent State University Trumbull Campus, since 1995. In addition to his experience with the building and construction trades, Mr. Carleton is involved in growth, development and planning. His expertise is utilized in reviewing customer business plans and facilities development as well as the bank’s business plans. 2004 2013

James M. Gasior 50 President and Chief Executive Officer of Cortland Bank and Cortland Bancorp since November 2, 2009, Senior Vice President, Chief Financial Officer and Secretary of Cortland Bancorp and Cortland Bank since 2005. Senior Vice President and Senior Lending Officer of Cortland Bank. Certified Public Accountant and member of the American Institute of CPAs and the Ohio Society of CPAs. His professional affiliation includes a background in all financial activities and financial reporting, audit preparation, budgeting, compensation reviews, and knowledge of government regulatory requirements. 2005 2013

Director of the

Position(s) Held with the

Company

Nominee

Director of

Nominee

Company and its Subsidiaries

Continuously

for Term

Cortland

for Term

Nominee

Age

and Principal Occupation(s)

Since

Expiring In

Age

Biography

Since

Expiring In

Richard B. Thompson

Owner and executive of Therm-O-Link, Inc., Vulkor, Inc. and Therm-O-Link of Texas, Inc., all manufacturers of electrical wire and cable. Owner and executive of Geneva Partners, a condominium development company which is no longer active. Partner in Kinsman Land Company, a grocery store. Partner in Dana Partners and Dana Gas, a gas well operation. Owner of the Heritage Hill Grain Company and Heritage Hill Enterprises, agricultural businesses, since 2003. Partner in Stratton Creek Woodworks, a maker of wood products, and Smearcase, a real estate holding company, each since 2005. Partner in Goodview, a Brazilian agricultural business. Mr. Thompson is a private investor with an extensive background in manufacturing. His knowledge and expertise provide assistance in understanding and evaluating manufacturing business relationships. He has owned and managed numerous small businesses in several industries in the bank’s current market area, as well as outside the immediate area.

2001

2013

Neil J. Kaback

Mr. Kaback is Vice President of Cohen & Company, Inc., a firm that provides marketing for Cohen & Company LTD (an accounting firm where Mr. Kaback is also a Vice President). Mr. Kaback is a partner in Cohen & Company Investment Partnership, a financial planning firm and Vice President of Cohen Fund Audit Services, a mutual fund auditing firm. A member of the American Institute of CPAs and the Ohio Society of CPAs. Mr. Kaback has varied responsibilities. He focuses on high level business succession, tax, estate, and family business planning, as well as the supervision and planning of financial statement and tax return engagements. He heads the firm’s Automotive Dealers Group and provides managerial, operational, financing, and tax consulting advice. He serves as Finance Chairman for the Trumbull Memorial Hospital Foundation and was the Campaign Chairman of Operation: Save our Airbase Reservists. He was a member of the Leadership Youngstown Class of 92-93, and is actively involved with the Mahoning County United Way, Trumbull 100, Youngstown Area Jewish Federation, and American Red Cross.

2004

2014

CONTINUING DIRECTORS

~~The following information, as~~Effective May 18, 2010, Joseph E. Koch was appointed to Cortland’s and the Bank’s Board of ~~March 8, 2010, concerning~~Directors. Mr. Koch was appointed to fill a newly created vacancy and serves in the ~~age, principal occupation or employment, other affiliations and business experience~~class of ~~each continuing director has been furnished to Cortland Bancorp by each director. Unless otherwise indicated, each individual has had his principal occupation for more than five years.~~directors whose terms will expire in 2012.

Director of the
Position(s) Held with the Company
Company and its Subsidiaries Continuously Term Expires
Name Age and Principal Occupation(s) Since In
David C. Cole 51 Partner and President of Cole Valley Pontiac-Cadillac, an automobile dealership. President of JDT, Inc., Cole Valley Chevrolet, CJB Properties and David Tom LTD, automobile sales, since 2001. He has served as President of a family-owned automobile dealership located in Warren Ohio. Mr. Cole is responsible for the management and day-to-day operations of the business. He has Bachelor of Science degree in business administration and has extensive experience and understanding of small business and retail needs. Mr. Cole serves on the board of Forum Health. 1989 2011

Timothy Carney 44 Executive Vice President and Chief Operating Officer of the Company and the Bank and Secretary of the Company and the Bank since November 2, 2009. Senior Vice President and Chief Operations Officer of the Bank and Bancorp since April 2008. Senior Vice President and Chief Operations Officer of the Bank since April 2005. Prior to joining the bank. Mr. Carney was employed by a major accounting firm and had experience in all financial activities and financial reporting, audit preparation, budgeting, and knowledge of government regulatory requirements. 2009 2011

Director of

Cortland

Term

Nominee

Age

Biography

Since

Expires In

George E. Gessner

Attorney. Partner, Director, and Corporate Secretary in the law firm of Gessner & Platt Co., L.P.A. Mr. Gessner has been a general practitioner of law for over 40 years and is a partner in a local law firm. He received his undergraduate (B.A.) degree at Hiram College and his Juris Doctorate (J.D.) degree from the University of Akron Law School. He became a member of the Bar in 1969.

1987

2012

Director of the
Position(s) Held with the Company
Company and its Subsidiaries Continuously Term Expires
Name Age and Principal Occupation(s) Since In
Neil J. Kaback 49 Mr. Kaback is Vice President of Cohen & Company, Inc. a firm that provides marketing for Cohen & Company LTD which is an accounting firm where Mr. Kaback is also a Vice President. Mr. Kaback is a partner in Cohen & Company Investment Partnership, a financial planning firm and Vice President of Cohen Fund Audit Services, a mutual fund auditing firm. Member of the American Institute of CPAs and the Ohio Society of CPAs. Mr. Kaback has varied responsibilities. He focuses on high level business succession, tax, estate, and family business planning as well as the supervision and planning of financial statement and tax return engagements. He heads the firm’s Automotive Dealers Group and provides managerial, operational, financing, and tax consulting. He serves as Finance Chairman for the Trumbull Memorial Hospital Foundation and was the Campaign Chairman of Operation: Save our Airbase Reservists. He was a member of the Leadership Youngstown Class of 92-93, and is actively involved with the Mahoning County United Way, Trumbull 100, Youngstown Area Jewish Federation and American Red Cross. 2004 2011

George E. Gessner 65 Attorney. Partner, Director and Corporate Secretary in the law firm of Gessner & Platt Co., L.P.A. Mr. Gessner has been a general practitioner of law for over 40 years and is a partner in a local law firm. He received his undergraduate (B.A.) degree at Hiram College and his juris doctorate (J.D.) degree from the University of Akron Law School. He became a member of the Bar in 1969. 1987 2012

James E. Hoffman, III 58 Attorney. President of Hoffman & Walker Co., L.P.A. Mr. Hoffman has been a general practitioner of law for over 33 years and is a partner in a local law firm. He received his undergraduate (B.A.) degree at Ohio State University in 1973 and his juris doctorate (J.D.) degree from the University of Akron Law School in 1976. 1984 2012

Director of

Cortland

Term

Nominee

Age

Biography

Since

Expires In

James E. Hoffman, III

Attorney. President of Hoffman & Walker Co., L.P.A. Mr. Hoffman has been a general practitioner of law for over 33 years and is a partner in a local law firm. He received his undergraduate (B.A.) degree at The Ohio State University in 1973 and his Juris Doctorate (J.D.) degree from the University of Akron Law School in 1976.

1984

2012

Timothy K. Woofter

President, CEO, and Director of Stanwade Metal Products, a manufacturer of tanks and distributor of oil equipment, and Lucky Oil Equipment, a distributor of oil equipment. Partner in the Woofter Family Limited Partnership. Owner, Jester Investments, a residential and commercial property rental company. Part owner and Vice President of Northern Ventures, a real estate rental company. Manager of Hartford Land LLC, a Real Estate Holding Company. Director of the Trade Association, Steel Tank Institute. Mr. Woofter has managed and owned a business that manufactures steel storage tanks and distributes oil-handling equipment for 40 years. He currently is the president of the Steel Tank Institute, a national trade association. He has owned and managed real estate, both residential and commercial, for over 30 years and is familiar with properties of these types and their values.

1985

2012

Joseph E. Koch

President, Joe Koch Construction, Inc., a homebuilding, developing and remodeling company since 1988. President, Joe Koch Realty, Inc., a real estate brokerage firm. Owner of Better Living of the Mahoning Valley, a dealer for sunrooms and installations. Member of Eagle Ridge Properties, LLC since 2002. President of Koch Family Charitable Foundation, a 501(c)3 organization.

2010

2012

THE BOARD ~~OF DIRECTORS~~ AND COMMITTEES OF THE BOARD

Independence of Directors

The Board ~~of Directors~~ has reviewed, considered, and discussed each director’s relationships, both direct or indirect, with Cortland ~~Bancorp~~ and its subsidiaries and the compensation and other payments, if any, each director has, both directly or indirectly, received from or made to Cortland ~~Bancorp~~ and its subsidiaries in order to determine whether such director qualifies as independent under Rule 5605(a)(2) of ~~the Corporate Governance Rules of~~Nasdaq’s Marketplace Rules. The ~~Nasdaq Stock Market, Inc. (“Nasdaq”). The~~ Board ~~of Directors~~ has determined that ~~the Board of Directors~~it has at least a majority of independent directors, and that each of the following directors has no financial or personal ties, either directly or indirectly, with Cortland ~~Bancorp~~ or its subsidiaries (other than compensation as a director of Cortland ~~Bancorp~~ and its subsidiaries, banking relationships in the ordinary course of business with the Bank, and ownership of ~~Cortland Bancorp’s~~Cortland’s common shares as described in this proxy statement) and thus qualifies as independent under Nasdaq Corporate Governance Rule 5605(a)(2): Jerry A. Carleton, David C. Cole, George E. Gessner, James E. Hoffman, III, Neil J. Kaback, Joseph E. Koch, K. Ray Mahan, Richard B. Thompson, and Timothy K. Woofter.

James M. Gasior and Timothy Carney do not qualify as independent directors because they currently serve as executive officers of Cortland ~~Bancorp~~ and the Bank.

Meetings of the Board ~~of Directors~~ and Attendance at the Annual Meeting of Shareholders

In ~~2009, the~~2010, Cortland’s Board ~~of Directors of Cortland Bancorp~~ held a total of fifteen (15) meetings. Each incumbent director, except for Richard B. Thompson, attended at least 75% of the aggregate of the total number of meetings held by the Board ~~of Directors~~ and the total number of meetings held by the ~~Board~~board committees on which he served, in each case during the period of his service.

Cortland ~~Bancorp~~ encourages all incumbent directors and director nominees to attend each annual meeting of shareholders. All of the incumbent directors and director nominees attended ~~Cortland Bancorp’s~~Cortland’s last annual meeting of shareholders held on April ~~21, 2009.~~27, 2010.

Communications with the Board ~~of Directors~~

Although Cortland ~~Bancorp~~ has not to date adopted formal procedures by which shareholders may communicate directly with directors, itCortland believes that its current process ~~wherein any communication~~has adequately served the needs of the Board and its shareholders. Communication sent to the Board, either generally or in care of the Chief Executive Officer, Secretary, the Investor Relations Officer, or another corporate officer, is forwarded to all members of the ~~Board, has adequately served the needs of the Board and shareholders.~~Board. There is no screening process, and all communications that are received by officers for the Board’s attention are forwarded to the Board.

Until ~~any~~ other procedures are developed and posted on ~~Cortland Bancorp’s~~Cortland’s website at www.cortland-banks.com, any communication to the Board may be mailed to the Board, in care of the Investor Relations Officer, at ~~Cortland Bancorp’s~~Cortland’s headquarters in Cortland, Ohio. The mailing envelope must contain a clear notation indicating that the enclosed letter is a “Shareholder-Board Communication” or a “Shareholder-Director Communication.” In addition, communication via ~~Cortland Bancorp’s~~Cortland’s website may be used. Correspondence through the investor relations page of the website should also be directed to the Investor Relations Officer and indicate that the communication is a “Shareholder-Board Communication” or a “Shareholder-Director Communication.” All such communications, whether via mail or website, must identify the author as a shareholder and clearly state whether the intended recipients are all members of the Board or just certain specified individual directors or committee members. The Investor Relations Officer will make copies of all such communications and circulate them to the appropriate director or directors.

Board Committees

Audit Committee

The Board ~~of Directors~~ has an Audit Committee comprised of Messrs. Kaback (Chair), ~~Thompson~~Cole (effective on April 27, 2010), and ~~Woofter.~~Thompson. Mr. Woofter preceded Mr. Cole as a member of the audit committee until April 27, 2010. The Board ~~of Directors~~ has determined that each member of the Audit Committee qualifies as independent under the Nasdaq Marketplace Rules, ~~4200(a)(15) and 4350(d)(2)~~ as well as under Rule 10A-3 promulgated under the Securities Exchange ~~Act.~~Act of 1934 (the “Exchange Act”).

The Board ~~of Directors~~ has determined that the audit committee does not have an “audit committee financial expert” as that term is defined by the ~~Securities and Exchange Commission.~~SEC. The Board ~~of Directors~~ has determined that each Audit Committee member has sufficient knowledge in financial and accounting matters to serve effectively on the Committee.

The Audit Committee conducts its business pursuant to a written charter adopted by the ~~Board of Directors.~~Board. A current copy of the charter of the Audit Committee is posted on ~~Cortland Bancorp’s~~Cortland’s website at www.cortland-banks.com on the investor relations page under Governance Documents “Audit Committee Charter.” At least annually, the Audit Committee reviews and reassesses the adequacy of its charter and recommends any proposed changes to the full Board ~~of Directors~~ for approval as necessary.

The Audit Committee is responsible for appointing, compensating, and overseeing the independent registered public accounting firm employed by Cortland ~~Bancorp~~ for the purpose of preparing and issuing an audit report or other audit, review, or attestation services. The Audit Committee evaluates the independence of the independent registered public accounting firm on an ongoing basis. The Audit Committee also approves audit reports and plans, accounting policies, and audit outsource arrangements, including audit scope, internal audit reports, audit fees, and certain other expenses. The Audit Committee is responsible for developing procedures for the receipt, retention, and treatment of complaints regarding accounting, internal auditing controls, or auditing matters, including procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.

The Audit Committee held ~~seven (7)~~eight meetings during ~~2009.~~2010. The Audit Committee’s report relating to the ~~2009~~2010 fiscal year appears on page ~~17.~~16.

Executive Compensation Committee

The Board ~~of Directors~~ of the Bank has an Executive Compensation Committee which also serves as the compensation committee of ~~Cortland Bancorp.~~Cortland. The Executive Compensation Committee is comprised of Messrs. Carleton, Cole, Gessner, and Woofter (Chair). The Board ~~of Directors~~ has determined that each member of the Executive Compensation Committee qualifies as independent under ~~Rule 4200(a)(15) of the~~ Nasdaq Marketplace Rules. In addition, each member of the Compensation Committee qualifies as an “outside director” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the ~~“Internal Revenue Code”~~“IRC”), and as a “non-employee director” for purposes of Section 16b-3 under the Exchange Act.

The Executive Compensation Committee oversees executive officer compensation as well as compensation under the Profit Sharing Program and the Employee Benefit Plan 401(k). The Executive Compensation Committee reviews and

recommends officer compensation levels and benefit plans. In evaluating executive officer performance, the Executive Compensation Committee takes into account –—

	•		job knowledge, initiative, and originality;

	•		quality and accuracy of work performed and priority setting;

	•		customer relations;

	•		subordinate feedback and ability to provide instruction to staff; and

	•		the relationship of these factors to Cortland ~~Bancorp~~ and the Bank’s achievement of strategic objectives and profitability.

The Executive Compensation Committee occasionally requests the Chief Executive Officer ~~(CEO)~~(“CEO”) to be present at Executive Compensation Committee meetings to discuss executive compensation and evaluate individual performance.

The Executive Compensation Committee discusses the CEO’s compensation with him, but final deliberations and all votes regarding his compensation are made in executive session, without the CEO present. The Executive Compensation Committee also approves the compensation for other executive officers based on the CEO’s recommendations with input from outside advisors and counsel and then makes its recommendation to the Board.

The Executive Compensation Committee has engaged compensation consultants and advisors from time to time to provide input on both Board and executive compensation issues. The Executive Compensation Committee does not have a formal charter.

The Executive Compensation Committee held ~~one (1) meeting~~three meetings in ~~2009.~~2010.

Nominating Committee

The Board ~~of Directors~~ has a Nominating Committee comprised of Messrs. Cole, ~~Mahan~~Thompson, and Woofter (Chair). Mr. Mahan was a nominating committee member until April 27, 2010. The Board ~~of Directors~~ has determined that each member of the ~~Governance and~~ Nominating Committee qualifies as independent under Nasdaq ~~Corporate Governance Rule 5605(a)(2).~~Marketplace Rules. The purpose of the Nominating Committee is to:

	•		identify qualified candidates for election, nomination, or appointment to the Board and recommend to the full Board a slate of director nominees for each annual meeting ~~of the shareholders of Cortland Bancorp~~ or as vacancies occur;

	•		make recommendations to the full Board and the Chairman of the Board regarding assignment and rotation of members and chairs of committees of the Board;

	•		recommend the number of directors to serve on the Board; and

	•		undertake such other responsibilities as may be referred to the Nominating Committee by the full Board or the Chairman of the Board.

The Nominating Committee held ~~one (1) meeting~~three meetings during ~~2009.~~2010. The charter of the Nominating Committee is reviewed annually and is available on ~~Cortland Bancorp’s~~Cortland’s website at www.cortland-banks.com on the investor relations page under Governance Documents “Nominating and Corporate Governance Committee Charter.”

Nominating Procedures

As described previously, Cortland ~~Bancorp~~ has a standing Nominating Committee that has the responsibility to identify and recommend individuals qualified to become directors. Each candidate must satisfy the eligibility requirements set forth in ~~Cortland Bancorp’s~~Cortland’s Code of Regulations, Article Two, Section 2.01 “Authority and Qualifications.” No person who has attained the age of 70 shall be eligible for election as a director, and each director must hold shares of stock of Cortland ~~Bancorp~~ with an aggregate par value or stated value of $500, an aggregate shareholder equity of at least $500, or an aggregate fair market value of at least $500.

When considering potential candidates for the Board, the Nominating Committee strives to assure that the composition of the Board, as well as its practices and operation, contributes to an effective representation and advocacy of shareholders’ interest. The Nominating Committee may consider those factors it deems appropriate in evaluating director candidates, including judgment, skill, strength of character, experience with business and organizations comparable in size and scope to Cortland, ~~Bancorp,~~ experience and skills relative to other Board members, and specialized knowledge or experience. Depending upon the current needs of the Board, certain factors may be weighed more heavily than others by the Nominating Committee. The committee does not have a policy for the consideration of diversity in the nomination process, but the committee takes into account in its deliberations all facets of a potential nominee’s background, including the potential nominee’s educational background, gender, business and professional experience, and his or her particular skills and other qualities. The committee’s goal is to identify individuals who will enhance and add valuable perspective to the ~~board’s~~ Board’s

deliberations and who will assist ~~the company~~Cortland in its effort to capitalize on business opportunities in a challenging and highly competitive market.

In considering candidates for the Board, the Nominating Committee evaluates the entirety of each candidate’s credentials and, other than the eligibility requirements set forth in ~~Cortland Bancorp’s~~Cortland’s Code of Regulations, there are no specific minimum qualifications that must be met by a Nominating Committee recommended nominee. However, the Nominating Committee does believe that each member of the Board should be of the highest character and integrity; possess a reputation for working constructively with others; have sufficient time to devote to Board matters; and be without any conflict of interest that would impede the individual’s performance as a director.

The Nominating Committee will consider candidates for the Board from any reasonable source, including shareholder recommendations. The Nominating Committee will not evaluate candidates differently based on who has made the recommendation. The Nominating Committee ~~will have~~has the authority to hire and pay a fee to consultants or search firms for the purpose of identifying and evaluating candidates. No such consultants or search firms have been used to date and, accordingly, no fees have been paid to consultants, search firms, or any other individuals.

According to Section 2.03(B) of ~~Cortland Bancorp’s regulations,~~Cortland’s Code of Regulations, any shareholder who desires to nominate an individual to the Board must provide timely written notice. To be timely, the notice must be mailed to the President of Cortland ~~Bancorp~~ at least 14 days but no more than 50 days before the meeting at which directors will be elected, or 7 days after notice of the meeting is mailed to shareholders if the meeting is held within 21 days of Cortland ~~Bancorp~~ mailing notice of the meeting.

The shareholder’s notice of nomination must give:

	•		the name and address of the nominee;

	•		the principal occupation of the nominee;

	•		the approximate number of shares the shareholder making the nomination reasonably anticipates will be voted in favor of the proposed nominee;

	•		the name and address of the shareholder making the nomination; and

	•		the number of shares beneficially owned by the shareholder making the nomination.

We will disregard a shareholder’s nomination if it is not made in compliance with these rules and standards.

Board Leadership Structure and Role in Risk Oversight

The office of Chairman of the Board and the office of Chief Executive Officer have been separate at Cortland ~~Bancorp~~ since 2005. Since November 2, 2009, James M. Gasior has held the office of Chief Executive Officer and effective April 27, 2010, ~~upon the retirement of K. Ray Mahan,~~ Timothy K. Woofter ~~will become~~became Chairman of the Board. Cortland ~~Bancorp~~ believes that separation of these two offices is consistent with the ~~board’s~~Board’s responsibility for oversight of management and of ~~the company’s~~Cortland’s affairs generally. The ~~board~~Board and its committees have a significant role in oversight of the risks to which ~~the company~~Cortland is subject. Like other community banking organizations, Cortland ~~Bancorp’s board~~ and the ~~board of The Cortland Savings and Banking Company~~Bank’s Boards exercise oversight of common banking risks through a loan committee that considers loan applications and credit risk, an asset and liability committee whose routine responsibilities require consideration of interest rate and liquidity risk, an audit committee that takes into account audit and regulatory compliance risks, a loan review committee that monitors non-performing assets and their ultimate outcome, and an investment management committee that sets investment strategy and monitors compliance therewith. The full ~~board~~Board, of course, takes these and other risks into account in its deliberations as well.

Code of Ethics

Cortland ~~Bancorp~~ has adopted a ~~code~~Code of ~~ethics~~Ethics (the “Code”) as part of its corporate governance program. The ~~code of ethics~~Code applies to all of ~~the Cortland Bancorp’s~~Cortland’s officers and employees, including its Chief Executive Officer and Chief Financial Officer. The Code ~~of Ethics~~ is posted on the investor relations page of ~~the Company’s~~Cortland’s website at www.cortland-banks.com under Governance Documents “Code of Business Conduct and Ethics.” Any amendments to, or waivers from, this ~~code of ethics~~Code will be posted on this same website. In addition, a copy of the Code is available to shareholders upon request. Shareholders desiring a copy of the Code should address written requests to Mr. Timothy Carney, Executive Vice President, Chief Operating Officer and Secretary of Cortland Bancorp, 194 West Main Street, Cortland, Ohio 44410 and are asked to mark “Code of Business Conduct and Ethics” on the outside of the envelope containing the request.

139

DIRECTOR COMPENSATION IN ~~2009~~2010

The following table shows the compensation of Cortland ~~Bancorp~~ directors for their service in ~~2009,~~2010, other than Directors ~~Fantauzzi,~~ Gasior and Carney. The director compensation information to follow represents compensation for the full year, through December 31, ~~2009.~~2010. The majority of the director compensation is paid by the Bank for directors’ service on the Bank’s board and the Bank’s board committees, but compensation shown in the table is aggregate compensation paid for directors’ service both to Cortland ~~Bancorp~~ and the Bank. Information about compensation paid to and earned by ~~former Director Fantauzzi and~~ Directors Gasior and Carney is included elsewhere in this proxy statement.


					Nonqualified										Nonqualified
			Non-Equity		Deferred								Non-Equity		Deferred
	Fees Earned or		Incentive Plan		Compensation		All Other				Fees Earned or		Incentive Plan		Compensation		All Other
	Paid in Cash⁽¹⁾		Compensation		Earnings		Compensation⁽²⁾		Total		Paid in Cash⁽¹⁾		Compensation		Earnings		Compensation⁽²⁾		Total
Name	($)		($)		($)		($)		($)		($)		($)		($)		($)		($)
Jerry A. Carleton		18,000		n/a		0		10,501		28,501		18,000		n/a		—		11,448		29,448

David C. Cole		18,000		n/a		0		4,120		22,120		18,000		n/a		—		4,489		22,489

George E. Gessner		18,000		n/a		0		10,394		28,394		18,000		n/a		—		7,879		25,879

James E. Hoffman, III		18,000		n/a		0		7,511		25,511		18,000		n/a		—		8,295		26,295

Neil J. Kaback		18,000		n/a		0		2,332		20,332		18,000		n/a		—		2,398		20,398

Joseph E. Koch												10,500		n/a		—		—		10,500
K. Ray Mahan		18,000		n/a		0		554		18,554		18,000		n/a		—		4,069		22,069

Richard B. Thompson		18,000		n/a		0		4,456		22,456		18,000		n/a		—		4,989		22,989

Timothy K. Woofter		18,000		n/a		0		7,738		25,738		18,000		n/a		—		8,479		26,479

Retirement Agreements and Insurance for Non-Employee Directors. Directors Carleton, Cole, Gessner, Hoffman, Kaback, Mahan, Thompson, and Woofter are parties to director retirement agreements with ~~Cortland Bancorp.~~Cortland. In December 2007, Cortland entered into amended director retirement agreements with these directors (excluding Director Mahan) for purposes of Internal Revenue Code (“IRC”) Section 409A compliance. If a nonqualified deferred compensation plan fails to comply with IRC Section 409A, either in form or in operation, the tax consequences are immediate inclusion in income of amounts previously deferred, plus an interest penalty, plus a 20% federal excise tax penalty. Cortland did not enter into an amended director retirement agreement with Mr. Mahan because his director retirement agreement was fully accrued and vested before the enactment of IRC Section 409A. The amended director retirement agreements promise a post-retirement benefit of $10,000 payable annually for 10 years if the director retires after reaching his normal retirement age, which is a function of years of service on the Board and attained age. Normal retirement ages for these directors are age 61 (Mr. Cole), age 62 (Mr. Hoffman), age 63 (Messrs. Mahan and Woofter), age 66 (Mr. Gessner), age 67 (Mr. Kaback), and age 70 (Messrs. Carleton and Thompson). A reduced annual retirement benefit is payable if the director terminates service or becomes disabled before reaching the normal retirement age, but the benefit is not paid until the director reaches the normal retirement age. Mr. Mahan has reached his normal retirement age. If termination of the director’s service occurs within one year after a change in control of Cortland, ~~Bancorp,~~ the director will receive cash in a single lump sum equal to the retirement benefit expense accrued by ~~Cortland Bancorp.~~Cortland. The amended director retirement agreement benefits to which a director is entitled are payable to his beneficiary after the director’s death, but

if the director dies in active service to Cortland ~~Bancorp~~ before reaching his normal

retirement age, his beneficiary will be entitled to cash in a single lump sum equal to the retirement benefit expense accrued by ~~Cortland Bancorp.~~Cortland.

Cortland ~~Bancorp~~ purchased insurance on the lives of directors who are parties to the amended director retirement agreements and entered into split dollar agreements with them, promising to share a portion of the life insurance death benefits with the directors’ designated beneficiaries. Each director’s portion of the policy’s death benefit is $100,000, payable to the director’s beneficiary whether the director’s death occurs while in active service to Cortland ~~Bancorp~~ or after retirement. Cortland ~~Bancorp~~ will receive any death benefits remaining after payment to the director’s beneficiary. Although Cortland Bancorp expects the life insurance benefits to ultimately offset the premium payment obligations, the directors’ contractual entitlements under the amended director retirement agreements are not funded and remain contractual liabilities of Cortland Bancorp. In December 2007, Cortland entered into an amended split dollar agreement and endorsement with Mr. Carleton to add a Section 2.4 pursuant to which Cortland promises to maintain the split dollar policy in full force and effect similar to the other directors’ split dollar agreements.

Director Indemnification. At the 2005 annual meeting, the shareholders of Cortland ~~Bancorp~~ approved the form and use of indemnification agreements with directors. On May 24, 2005, Cortland ~~Bancorp~~ entered into indemnification agreements with each of the current ~~directors.~~directors, other than Director Koch. Director Koch entered into an indemnification agreement with Cortland in May 2010. The indemnification agreements allow a director to select the most favorable indemnification rights provided under:

	•		~~Cortland Bancorp’s~~Cortland’s Articles of Incorporation or Code of Regulations in effect on the date of the indemnification agreement or on the date expenses are incurred;

	•		state law in effect on the date of the indemnification agreement or on the date expenses are incurred;

	•		any liability insurance policy in effect when a claim is made against the director or on the date expenses are incurred; and

	•		any other indemnification arrangement otherwise available.

The indemnification agreements cover all fees, expenses, judgments, fines, penalties, and settlement amounts paid in any matter relating to the director’s role as director, officer, employee, agent, or when serving as ~~Cortland Bancorp’s~~Cortland’s representative with another entity. Each indemnification agreement provides for the prompt advancement of all expenses incurred in a proceeding, subject to the director’s obligation to repay those advances if it is determined later that the director is not entitled to indemnification.

Retainer and Fees. Currently, the Board ~~of Directors of Cortland Bancorp~~ and the Board of Directors of the Bank consist of the same individuals. Non-employee directors of Cortland ~~Bancorp~~ serve without retainer or fee for services on the ~~Board of Directors of Cortland Bancorp.~~Board. Instead, the directors are paid by the Bank for services rendered in their capacities as directors of Cortland ~~Bancorp~~ and the Bank.

In ~~2009,~~2010, non-employee directors of the Bank received an $18,000 annual retainer and employee directors of the Bank received a $7,200 annual retainer. Directors of the Bank (both employee and non-employee directors) may also elect to participate in the Bank’s health care plans at substantially the same rates as all employees.

Director Emeritus Compensation. For up to ten years after retirement as a director, an emeritus director of the Bank is paid ~~$300~~$600 for each meeting attended, ~~up to $6,000 annually,~~for an annual compensation of $7,200, provided the director emeritus attends at least 75% of ~~board~~Board meetings. Emeritus directors are also entitled to continue participation in the Bank’s health care plan, although the former director is responsible for paying 100% of the Bank’s cost to maintain health care coverage. After the emeritus director’s death, his or her spouse may similarly maintain health care coverage, at the spouse’s cost. Emeritus directors participate in Board meetings, but are not entitled to vote on any matters coming before the Board.

1511

EXECUTIVE COMPENSATION

Cortland ~~Bancorp~~ does not provide any monetary compensation directly to its executive officers. Instead, the executive officers of Cortland ~~Bancorp~~ are paid by the Bank for services rendered in their capacity as executive officers of Cortland ~~Bancorp~~ and the Bank.

Summary Compensation Table

All Other
Salary⁽¹⁾ Compensation⁽²⁾⁽³⁾ Total
Name and Principal Position Year ($) ($) ($)
Lawrence A. Fantauzzi 2009 152,250 275,679 427,929
President and Chief Executive Officer of Cortland Bancorp and the Bank through October 2, 2009. 2008 202,200 116,283 318,483

Rodger W. Platt 2009 25,000 32,467 57,467
Management Consultant August 2009 through October 2, 2009. Interim President October 2, 2009 through November 2, 2009. Management Consultant November 2, 2009 through November 30, 2009.

James M. Gasior 2009 171,200 48,283 219,483
Senior Vice President, Chief Financial Officer and Secretary of Cortland Bancorp and the Bank through November 1, 2009. November 2, 2009 to present President and Chief Executive Officer of Cortland Bancorp and the Bank. 2008 153,200 44,303 197,503

Timothy Carney 2009 144,200 34,109 178,309
Senior Vice President and Chief Operations Officer of Cortland Bancorp and the Bank through November 1, 2009 and from November 2, 2009 to present. Executive Vice President and Chief Operating Officer of Cortland Bancorp and the Bank 2008 125,000 34,901 159,901

Stephen A. Telego, Sr. 2009 115,000 55,061 170,061
Vice President and Director of Human Resources and Corporate Administration of the Bank. 2008 115,000 54,510 169,510


					All Other
			Salary⁽¹⁾		Compensation⁽²⁾		Total
Name and Principal Position	Year		($)		($)		($)
James M. Gasior		2010		205,200		62,027		267,227
President and Chief Executive Officer of Cortland and the Bank		2009		171,200		48,283		219,483

Timothy Carney		2010		193,200		43,466		236,666
Executive Vice President and Chief Operating Officer of Cortland and the Bank		2009		144,200		34,109		178,309

Stanley P. Feret*		2010		117,870		33,453		151,323
Senior Vice President and Chief Lending Officer of the Bank		n/a		n/a		n/a		n/a

David J. Lucido+		2010		123,232		44,696		167,928
Senior Vice President and Chief Financial Officer of the Bank		n/a		n/a		n/a		n/a


n/a		means not applicable

*		Mr. Feret was appointed Senior Vice President and Chief Lending Officer of the Bank on March 10, 2010.

+		Mr. Lucido was appointed Senior Vice President and Chief Financial Officer of the Bank on January 18, 2010.

(1)		Includes salary deferred at the election of the executive under the Bank’s 401(k) retirement plan. Also includes fees for service as a director of Cortland ~~Bancorp~~ and the Bank. ~~Mr. Fantauzzi’s director~~In 2010, directors’ fees ~~in 2009~~for Messrs. Gasior and Carney were $6,000 and Mr. Gasior’s director fees in 2009 were $7,200. Mr. Carney’s director fees in 2009 were $1,200 and Mr. Platt’s were $6,000 for serving as a Director Emeritus. No Director Emeritus fess were paid during Mr. Platt’s tenure as acting President.$7,200 each.

(2)		Perquisites and other personal benefits provided to each of the named executive officers in ~~2009~~2010 exceeded $10,000. The figures in the “all other compensation” column consist of the Bank’s contribution to the 401(k) plan accounts for the named executive officers, the imputed monetary value of life insurance policies, ~~bank-owned vehicle~~vehicle-related expenses, club memberships, ~~for the named executive officers,~~ and accrual expense for benefits payable under the executives’ salary continuation agreements. For ~~2009,~~2010, the Bank made contributions of ~~$7,986~~$10,365 to the 401(k) plan account of Mr. ~~Fantauzzi, $8,317 to the account of Mr.~~ Gasior, ~~$7,391~~$9,543 to the account of Mr. Carney, ~~and $2,531~~$5,894 to the account of Mr. ~~Telego.~~Feret, and $6,392 to the account of Mr. Lucido. The imputed value of life insurance policies for income tax purposes in ~~2009~~2010 was ~~$4,581 for Mr. Fantauzzi, $1,333~~$1,923 for Mr. Gasior, ~~$770~~$1,179 for Mr. Carney, ~~and $1,348~~$442 for Mr. ~~Telego. Bank-owned vehicle~~Feret, and $479 for Mr. Lucido. Vehicle-related expenses in ~~2009~~2010 were ~~$8,235 for Mr. Fantauzzi,~~ $9,300 for Mr. Gasior, $4,800 for Mr. Carney and ~~$6,492~~$4,600 for Mr. ~~Telego.~~Lucido. Club membership dues in ~~2009~~2010 were ~~$5,705 for Mr. Fantauzzi, $5,191~~$4,610 for Mr. Gasior, ~~$6,457~~$4,990 for Mr. Carney, ~~and $55~~$3,694 for Mr. ~~Telego.~~Feret and $4,563 for Mr. Lucido. The addition to the liability accrual balance to account for the salary continuation agreements in ~~2009~~2010 was ~~$93,922 for Mr. Fantauzzi, $24,142~~$35,829 for Mr. Gasior, ~~$14,691~~$22,954 for Mr. Carney, ~~and $44,635~~$23,423 for Mr. ~~Telego~~Feret, and ~~$32,467~~$28,662 for Mr. ~~Platt.~~

~~(3)~~		In addition to the Bank’s contribution to Mr. Fantauzzi’s 401(k) plan account, the imputed monetary value of insurance on his life, bank-owned vehicle expense, his club membership, and accrual expense for benefits payable under his Third Amended Salary Continuation Agreement, Mr. Fantauzzi’s “All Other Compensation” for 2009 includes severance and other termination benefits payable under the Agreement and General Release he entered into with Cortland in October 2009, consisting of (x~~) cash severance of $120,000, payable monthly in the amount of $5,000 for 24 months, with the first six monthly payments deferred and paid in a single lump sum in April 2010, (~~y~~) reimbursement of family health care coverage until age 65, but with an annual reimbursement limit of $15,000, and (~~z) lump-sum payment of accrued but unused vacation and personal time, with a value of approximately $5,250. The severance and termination benefit figures included in the table consist of the entire amount of the lump-sum payment of $5,250 for accrued but unused vacation and personal time, but the present value at termination in October 2009 of the $120,000 cash severance benefit (present value of approximately $113,000 assuming a discount rate of 5.75%) and the health care reimbursement benefit (present value of approximately $37,000 assuming a 5.75% discount rate). Mr. Fantauzzi also remains entitled to retirement benefits payable under his Third Amended Salary Continuation Agreement and life insurance benefits under the Bank’s Group Term Carve Out Plan.Lucido.

Severance Agreements. Cortland ~~Bancorp and the Bank~~ entered into severance agreements in December ~~2000~~2008 with ~~seven officers, including~~Messrs. Gasior and Carney and in June 2010 with Messrs. Lucido and Feret. The initial term of Messrs. Gasior, Carney, and Telego. In December 2008, Cortland entered into revised severance agreements with these seven officers, and into a new severance agreement with an eighth officer. The principal reason for replacement of the existing severance agreements was to ensure compliance with the requirements of IRC Section 409A. The initial term of eachLucido’s severance agreement is three years, renewing each year for an additional one-year term unless the Board gives advance written notice that the agreement will not automatically renew. ~~The~~Mr. Feret’s severance agreement, on the other hand, provides a fixed, two-year term. However, Section 4(b) of Mr. Feret’s severance agreement provides that he and Cortland will use best efforts to finalize a new severance agreement by the end of the fixed, two-year term. Messrs. Gasior, Carney, and Lucido’s severance agreements terminate when anthe executive attains age 65.

The severance agreements provide that the executive is entitled to severance compensation if a change in control occurs during the term of the agreement, payable in a single lump sum. The change-in-control benefit under the severance agreements is a single-trigger benefit, in contrast to a double-trigger benefit payable solely after employment termination following a change in control. The severance compensation equals the executive’s annual salary when the change in control occurs, plus the amount of any bonus earned for the last whole calendar year. For purposes of the severance agreements, the term change in control means (i) an occurrence of a change in ownership of Cortland, ~~Bancorp,~~ (ii) a change in effective control of Cortland, ~~Bancorp,~~ or (iii) a change in the ownership of a substantial portion of ~~the Cortland Bancorp’s~~Cortland’s assets as defined consistent with IRC Section 409A. If ~~an executive’s~~Messrs. Gasior, Carney, or Lucido’s employment terminates within 24 months after a change in control, Cortland ~~Bancorp~~ must also continue ~~his~~their life, health, and disability insurance coverage for up to three years, along with fringe benefits such as club memberships. ~~The executive~~Messrs. Gasior, Carney, and Lucido will also be entitled to out-placement services for one year, and tax

and financial planning services for three years after termination. ~~The~~Mr. Feret’s severance agreement does not provide insurance or other miscellaneous benefits for termination occurring after a change in control. However, unlike the other severance agreements, Mr. Feret’s agreement alone provides for a cash severance benefit for termination outside of the context of a change in control. That is, if Mr. Feret’s employment terminates involuntarily but without cause or voluntarily because of an adverse change in employment circumstances to which Mr. Feret has not agreed in advance, in either case before a change in control occurs, he will be entitled to a cash severance benefit in an amount equal to the sum of his salary plus his average cash bonus. Messrs. Gasior, Carney, and Lucido’s severance agreements also include a promise on the part of Cortland ~~Bancorp and the Bank~~ to pay the executives’ legal fees associated with the interpretation, enforcement, or defense of the executives’ rights under the severance agreements, up to a maximum of $500,000, as adjusted for inflation from time to time. Mr. Feret’s severance agreement does not contain a provision for reimbursement of legal expenses.

If a change in control occurs and the total benefits or payments to which an executive is entitled constitute so-called “excess parachute payments” and are therefore subject to the 20% excise tax under Sections 280G and 4999 of the IRC (whether under the severance agreement or under any other compensation arrangement), Cortland ~~Bancorp~~ must also make an adjusted gross-up payment to Messrs. Gasior, Carney, and ~~Telego~~Lucido compensating them for the excise tax as well as for income, payroll, and excise taxes imposed on that parachute payment excise tax reimbursement payment. A 20% excise tax is imposed under Section 4999 if the value of an executive’s aggregate change-in-control benefits –— calculated according to procedures specified in Section 280G and accompanying IRS regulations –— equals or exceeds three times his or her five-year average taxable compensation. The five-year average is known as the so-called base amount. If the value of the aggregate change-in-control benefits equals or exceeds three times the base amount, a 20% excise tax is imposed on all benefits exceeding the base amount and the employer forfeits its compensation deduction for those same benefits. The total adjusted gross-up payment to Messrs. Gasior, Carney, and ~~Telego~~Lucido would consist of (i) a payment equal to the initial excise tax and (ii) a gross-up payment that is calculated by determining the difference between the full gross-up amount needed to provide the excise tax payment net of all income, payroll, and excise taxes and the excise tax payment multiplied by eighty percent (80%).

Mr. Feret’s severance agreement does not contain a Section 280G gross-up benefit. However, Section 15 of Mr. Feret’s severance agreement provides that benefits will not be reduced or “cut back” if total change-in-control benefits cause the 20% excess parachute payment excise tax to be imposed on him under IRC Section 4999, with associated loss of Cortland’s compensation deduction under IRC Section 280G for payments on which the 20% excise tax is imposed.

Salary Continuation Agreements. ~~On March 1, 2001,~~In June 2010, the Bank entered into fourth amended salary continuation agreements with ~~eight officers, including~~ Messrs. Gasior and Carney (effective as of June 1, 2001) and ~~Telego. The March 1, 2001~~new salary continuation agreements ~~were amended in December 2003,~~with Messrs. Lucido and ~~again in December 2008.~~Feret. The ~~salary continuation agreements were amended in December 2008 for purposes of compliance with IRC Section 409A. The third amended~~ salary continuation agreements provide Messrs. Gasior, Carney, Lucido, and ~~Telego~~Feret with annual normal retirement benefits at age 65 of ~~$72,100, $67,200~~$109,700, $112,500, $80,900, and ~~$74,500,~~$92,000, respectively. Upon reaching their specified normal retirement age of 65, the Bank will make these annual benefit payments to the executives for 15 years even if separation from service does not ~~occur.~~occur at age 65.

The ~~third amended~~ salary continuation agreements are intended to reinforce the executives’ long-term commitment to the Bank. The full normal retirement benefit is payable if and only if the executive remains employed with the Bank to the normal retirement age. ~~The third~~Messrs. Gasior and Carney’s fourth amended salary continuation agreements provide for reduced benefits in the case of early termination on or after reaching the early retirement age (age 62), or in the case of termination due to disability occurring at any age, but early termination benefits are not payable before age 62 unless early termination is because of involuntary termination without cause or voluntary termination with good reason. Messrs. Lucido and ~~disability benefits do not become payable until the executive reaches the~~Feret’s salary continuation agreements also provide a reduced benefit for termination before normal retirement age. However, Messrs. Lucido and Feret’s early termination benefit is subject to 10% annual vesting, with elimination of the vesting if a change in control occurs. No benefit is payable and an executive’s severance agreement terminates if his ~~or her~~ employment terminates for cause. Under generally accepted accounting principles, the Bank must accrue a liability on its books for the obligation under the ~~third amended salary continuation~~current agreements. By the time the executive attains the normal retirement age, the total liability amount accrued by the Bank must equal the present value of the Bank’s obligation to the executive. Each executive’s accrual balance is calculated using a level principal amount, with interest computed at a reasonable discount rate under generally accepted accounting principles.

If ~~Mr. Carney’s~~Messrs. Lucido or ~~Mr. Telego’s~~Feret’s service with the Bank terminates involuntarily without cause or voluntarily for good reason within 24 months after a change in control occurs, the Bank will pay ~~him~~them a change-in-control benefit calculated as

an executive of a publicly traded company whose annual compensation is $160,000 or more (the $160,000 figure is annually adjusted for inflation by the Internal Revenue Service). The term “change in control” is defined in the agreements in a manner identical to the way a “change of control” is defined under the executives’ severance agreements (i.e., consistent with IRC Section 409A). The payment for Messrs. Gasior and Carney is the accrual balance projected to exist at these executives’ normal retirement age discounted to present value. The ~~third amended~~payment for Messrs. Lucido and Feret is the accrual balance existing when separation from service occurs. The salary continuation agreements also provide that the Bank must reimburse up to $500,000 in legal expenses incurred by each of the executives if the agreements are challenged after a change in control occurs.

If ~~an executive~~either of Messrs. Gasior or Carney dies before age 65 in active service to the Bank, instead of salary continuation agreement benefits, ~~the executive’s~~these individuals’ beneficiaries will receive a life insurance death benefit in a fixed amount. With a single premium payment of $2.3 million, the Bank purchased life insurance policies on the eight officers who were parties to the March 1, 2001 salary continuation agreements, including Messrs. Gasior, Carney and Telego. With an additional single premium payment of $2.5 million in July 2003, the Bank purchased additional life insurance policies. The Bank purchased these life insurance policies asAs informal financing for the salary continuation agreement payment obligation arising out of an executive’s death before ~~retirement.~~retirement, the Bank has purchased life insurance policies on certain officers’ lives, including Messrs. Gasior and Carney. The life insurance policies are owned by the Bank, but the Bank entered into endorsement split dollar arrangements allowing the executives to designate the beneficiary of a portion of the policy death benefits. The Bank will receive the remainder of the death benefits. Because the 2008 third amended salary continuation agreements provide that the normal retirement benefit is payable at the time an executive attains age 65 and the intent of the split dollar agreements was to provide a split dollar life insurance benefit for death occurring before the salary continuation agreement obligation was fully accrued, the Bank entered into amended split dollar agreements with seven executives (including Messrs. Gasior ~~Carney and Telego) in December 2008. The amended~~or Carney’s split dollar agreements provide that the split dollar life insurance benefit expires when the nonqualified deferred compensation obligation is fully accrued at age 65, even if the executive is still working for the Bank. Although the Bank expects the split dollar life insurance policy benefits to ~~support~~finance the expense for the payment obligations under the ~~third~~fourth amended salary continuation agreements, the executives’ contractual entitlements under the agreements are not funded and remain contractual liabilities of the Bank.

Under the split dollar agreements and endorsements entered into with each of Messrs. Gasior ~~Carney~~ and ~~Telego,~~Carney, at the executive’s death before retirement at age 65, a portion of the total death benefits under the insurance policies will be paid to the executive’s designated beneficiary. The death benefit that would have been payable as of December 31, ~~2008,~~2010, to the beneficiaries of Messrs. Gasior ~~Carney~~ and ~~Telego~~Carney would be $678,977 ~~$632,833~~ and ~~$701,578,~~$632,833, respectively. The split dollar agreements and endorsements terminate upon the first to occur of any of the ~~following~~following: (i) surrender, lapse, or other termination of the policy by the Bank, (ii) distribution of the death benefit proceeds, (iii) termination of the salary continuation agreement due to cause, misstatement, removal, bank default, or FDIC open-bank assistance, (iv) upon the executive’s 65^th birthday, or (v) upon the executive’s separation from service.

Neither the premium amounts attributable to the policies on the executives’ lives nor the potential split dollar death benefits payable to their beneficiaries are reflected in the Summary Compensation Table. The imputed dollar values of the benefit to the executives for ~~2009~~2010 and ~~2008~~2009 of the portions of the life insurance premium paid by the Bank ~~related to death benefits payable to their respective beneficiaries~~ are included in the Summary Compensation Table.

Group Term Carve Out Plan.In December 2000, the Bank purchased with a single premium payment approximately $2.8 million in life insurance on the lives of 22 officers for the group term carve out plan. The 22 officers covered by the plan include Messrs. Gasior ~~Carney~~ and ~~Telego. In August 2002, the plan was amended to reflect changes in ERISA regulations.~~Carney. Under group term split dollar endorsements, the Bank and the executives share the rights to death benefits payable under the life insurance policies. An executive’s beneficiaries are entitled to one of the following death benefit ~~amounts—~~amounts:

Pre-Retirement Death Benefit. If the executive dies before retirement, the death benefit is the lesser of (a) $500,000 or (b) twice the executive’s current annual salary at the time of death, less ~~$50,000,~~$50,000; or

Post-Retirement Death Benefit. If the executive was no longer employed by the Bank at the time of death, but had terminated employment (i) within one year after a change in control, (ii) due to disability, or (iii) on or after the early retirement age of 62, the death benefit is the lesser of (a) $500,000 or (b) the Executive’s most recent salary at the time of death.

The Bank receives the remainder of the life insurance policy death benefits, which should be sufficient to recover in full the Bank’s life insurance investment. No benefits are payable under the plan to any executive whose employment terminates before the age of 62, unless termination is due to disability or unless termination occurs within one year after a change in control. Benefits are payable to the executives’ beneficiaries in a lump sum.

In December 2003, Mr. Telego entered into a revised group term split dollar endorsement limiting his pre-retirement death benefit under the plan at $350,000. Mr. Telego’s revised endorsement accounts for the fact that a portion of the life insurance under the group term carve out plan is dedicated to providing him with a pre-retirement death benefit under the split dollar agreement accompanying his third amended salary continuation agreement.

~~Messrs. Gasior, Carney and Telego~~Employees also have life insurance benefits under the Bank’s group term life insurance program, ~~for all employees,~~ paying benefits up to ~~$50,000~~twice the executive’s current annual salary at the time of death to the executive’s beneficiaries if the executive dies while employed by the Bank. ~~The Bank’s costs for the insurance purchased on the executives’ lives for the group term carve out plan are not reflected in the Summary Compensation Table included~~Messrs. Gasior, Carney, Lucido, and Feret participate in this ~~proxy statement.~~program.

~~On September 20, 2006, the Financial Accounting Standards Board (“FASB”) ratified Emerging Issues Task Force (“EITF”) Issue No. 06-04,~~~~Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements.~~This guidance was subsequently codified into Financial Accounting Standards Board ASC topic 715-60, Compensation – Retirement Benefits. EITF No. 06-04 requires employers to start accruing costs and liabilities for postretirement benefits provided by endorsement split dollar life insurance arrangements in fiscal years beginning after December 15, 2007. The Bank began recognizing compensation expense associated with these post-retirement split dollar insurance arrangements in 2008.

Profit Sharing Program. If the Bank achieves its profit goal for the fiscal year, the Board may (but is not required to) approve profit sharing. The Bank’s profit goal for profit sharing purposes was not achieved in ~~2009.~~2010. As a result, no ~~profit-sharing~~profit-

sharing distributions were made. Should the Bank achieve its profit goal in the future, the Board may (but is not required to) approve profit sharing. If the Board does approve profit sharing, all employees in good standing are eligible.

Employee Benefit Plan 401(k). The Bank maintains a traditional 401(k) retirement plan for employees. In general, the Bank matches participants’ voluntary contributions up to 5% of gross pay. Employee contributions and matching contributions under the plan accumulate tax free until distributions begin at the employee’s normal retirement age. The goal of the 401(k) plan is to enable employees to provide for their own retirement and, combined with Social Security benefits, to ensure that their aggregate post-retirement income is maintained at a percentage of pre-retirement income sufficient to sustain a long-term retirement.

Perquisites and Other Compensation. The Executive Compensation Committee annually reviews the perquisites that the management team receives. In the case of Messrs. Gasior, Carney, Feret and ~~Carney,~~Lucido, membership in a golf or social club is encouraged to provide an appropriate forum for entertaining existing customers, developing and promoting new business and generally interacting with influential members of the local community.

~~Internal Revenue Code~~IRC Limits.Cortland ~~Bancorp~~ considers tax and accounting implications in the design of its compensation programs. Section 162(m) of the IRC places a limit on the tax deduction for compensation in excess of $1 million paid to the chief executive officer and four most highly compensated executive officers of a corporation in a taxable year. All of the compensation Cortland ~~Bancorp~~ paid in ~~2009~~2010 to the named executive officers is expected to be deductible under Section 162(m). The Executive Compensation Committee retains the flexibility, however, to pay non-deductible compensation if it believes doing so is in the best interests of ~~the Company.~~

~~Former Chief Executive Officers~~. Effective October 16, 2009, Lawrence A. Fantauzzi resigned from his position as President, Chief Executive Officer, and Director. Mr. Fantauzzi entered into an Agreement and General Release with Cortland Bancorp and The Cortland Savings and Banking Company that memorializes the terms of Mr. Fantauzzi’s separation, including a mutual release of claims. The Agreement and General Release provides that Mr. Fantauzzi is entitled to the severance and termination benefits specified in the “All Other Compensation” column of the Summary Compensation Table, specifically (x~~) cash severance of $120,000, payable monthly in the amount of $5,000 for 24 months, with the first six monthly payments deferred and paid in a single lump sum in April 2010, (~~y~~) reimbursement of family health care coverage until age 65, but with an annual reimbursement limit of $15,000, and (~~z~~) lump-sum payment of accrued but unused vacation and personal time, with a value of approximately $5,250.~~

Mr. Fantauzzi is also entitled to an annual early retirement benefit of approximately $53,474 under his December 3, 2008 Third Amended Salary Continuation Agreement with the Cortland Savings and Banking Company, payable for 15 years beginning in 2010. Because Mr. Fantauzzi is entitled to an early retirement benefit under the Third Amended Salary

Continuation Agreement, at Mr. Fantauzzi’s death his beneficiaries will be entitled to no death benefits under the December 3, 2008 Third Amended Split Dollar Agreement and Endorsement. The Third Amended Split Dollar Agreement and Endorsement with Mr. Fantauzzi has terminated. However, at Mr. Fantauzzi’s death his beneficiaries will be entitled under The Cortland Savings and Banking Company’s Group Term Carve Out Plan to a death benefit in the amount of $195,000, Mr. Fantauzzi’s salary at termination.

After Mr. Fantauzzi’s termination our former Chief Executive Officer Rodger W. Platt served as interim President until Mr. James M. Gasior’s appointment as President and Chief Executive Officer became effective. Mr. Platt passed away in early 2010. His beneficiaries will continue to receive the remaining $60,000 annual normal retirement benefits payable under Mr. Platt’s Amended Salary Continuation Agreement, as well as a death benefit under split dollar life insurance agreements in the aggregate amount of approximately $460,000.

Cortland.

TRANSACTIONS WITH RELATED PERSONS

During the ~~2009~~2010 fiscal year, executive officers and directors of Cortland, ~~Bancorp,~~ members of their immediate families, and corporations or organizations as to which directors of Cortland ~~Bancorp~~ serve as executive officers or beneficially own more than 10% of the equity interest, were involved in banking transactions with the Bank in the ordinary course of their respective businesses and in compliance with applicable federal and state laws and regulations. It is expected that similar banking transactions will be entered into in the future. ~~Payments from the Bank to~~Transactions with such persons in connection with the deposit of funds or the Bank acting in an agency capacity have been made on substantially the same terms as those prevailing at the time for comparable transactions with persons not affiliated with Cortland ~~Bancorp~~ or its subsidiaries. Loans to these persons have been made on substantially the same terms, including the interest rate charged and collateral required, as those prevailing at the time for comparable transactions with persons not affiliated with Cortland ~~Bancorp~~ or its subsidiaries. These loans have been subject to and are presently subject to no more than a normal risk of collectibility and present no other unfavorable features. As of the date of this proxy statement, all of the loans described in this paragraph were performing in accordance with their original terms.

RATIFICATION OF INDEPENDENT AUDITORS
(Proposal Three)

Cortland’s independent auditor for the year ended December 31, 2010, was S.R. Snodgrass, A.C. The audit committee has selected, subject to shareholder ratification, S.R. Snodgrass, A.C. to be Cortland’s independent auditor for the fiscal year ending December 31, 2011. We expect one or more representatives of S.R. Snodgrass, A.C. to be present at the annual meeting. The representative of S.R. Snodgrass, A.C. will have the opportunity to make a statement if desired, and will be available to respond to appropriate questions.

Fees of Independent Registered Public Accounting Firm. Fees contracted for services by S. R. Snodgrass, A.C. for each of the 2010 fiscal year and the 2009 fiscal year were as follows:


	2010		2009
Audit Fees (1)	$	102,153	$	109,850
Audit-Related Fees (2)		7,500		14,296
Tax Fees (3)		8,974		10,114
All Other Fees (4)		11,142		15,920


(1)		Audit fees consist of fees for professional services rendered for the audits of the consolidated financial statements of Cortland and quarterly reviews of the financial statements included in Cortland’s Quarterly Reports on Form 10-Q.

(2)		Audit-related fees include the financial statement audit of an employee benefit plan and agreed upon procedures related to the FHLB collateral review. S.R. Snodgrass, A.C. did not perform the FHLB collateral review in 2010.

(3)		Tax fees include U.S. federal, state and local tax planning and advice, and U.S. federal, state and local tax compliance.

(4)		Strategic planning consulting fees.

Pre-Approval of Services Performed by Independent Registered Public Accounting Firm. The Audit Committee pre-approves all audit and non-audit services provided by the independent auditors prior to the engagement of the independent auditors with respect to such services. The Chairman of the Audit Committee has been designated the authority by the Committee to pre-approve the engagement of the independent auditors when the entire Committee is unable to do so. The Chairman must report all such pre-approvals to the entire Audit Committee at the next committee meeting. All of the services rendered by S.R. Snodgrass, A.C. to Cortland and its subsidiaries for the 2010 and the 2009 fiscal year were pre-approved by the Audit Committee.

Auditor Independence. The Audit Committee believes that the non-audit services provided by S.R. Snodgrass, A.C. are compatible with maintaining the auditor’s independence. To the best of Cortland’s knowledge, none of the time devoted by S.R. Snodgrass, A.C. on its engagement to audit Cortland’s financial statements for the year ended December 31, 2010, is attributable to work performed by persons other than full-time, permanent employees of S.R. Snodgrass, A.C.

Cortland’s Bylaws do not require the submission of the selection of independent auditors to shareholders for approval. However, the Board believes it is appropriate to give shareholders the opportunity to ratify the decision of the Audit Committee to appoint S.R. Snodgrass, A.C. as Cortland’s principal accountant. Neither the Audit Committee nor the Board will be bound by the shareholders’ vote at the annual meeting, but may take the shareholders’ vote into account in future determinations regarding the retention of an independent auditor.

Recommendation and Vote

The Board recommends a voteFOR ratification of the appointment of S.R. Snodgrass, A.C. as Cortland’s independent auditor for the fiscal year ending December 31, 2011.

AUDIT COMMITTEE MATTERS

Audit Committee Report for the Fiscal Year Ended December 31, ~~2009~~2010

The Audit Committee has reviewed the audited financial statements for the year ended December 31, ~~2009~~2010, and has discussed the audited financial statements with management. The Audit Committee has also discussed with S.R. Snodgrass, A.C., ~~Cortland Bancorp’s~~Cortland’s independent registered public accounting firm, the matters required to be discussed by Statement on Auditing Standards No. 61 (having to do with accounting methods used in the financial statements). The Audit Committee has received the written disclosures and the letter from S.R. Snodgrass, A.C. required by Independence Standards Board Standard No. 1 (having to do with matters that could affect the independent registered accounting firm’s independence), and has discussed with S.R. Snodgrass, A.C. the independent registered accounting firm’s independence. Based on this, the Audit Committee

recommended to the Board that ~~Cortland Bancorp’s~~Cortland’s audited consolidated financial statements be included in ~~Cortland Bancorp’s~~Cortland’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2009~~2010, for filing with the Securities and Exchange Commission.

Submitted by the Audit Committee

David C. Cole, Neil J. Kaback, and Richard B. Thompson ~~and Timothy K. Woofter~~

~~Pre-Approval of Services Performed by Independent Registered Public Accounting Firm~~

The Audit Committee pre-approves all audit and non-audit services provided by the independent auditors prior to the engagement of the independent auditors with respect to such services. The Chairman of the Audit Committee has been designated the authority by the Committee to pre-approve the engagement of the independent auditors when the entire Committee is unable to do so. The Chairman must report all such pre-approvals to the entire Audit Committee at the next committee meeting. All of the services rendered by S. R. Snodgrass A.C. to Cortland Bancorp and its subsidiaries for the 2009 and the 2008 fiscal year were pre-approved by the Audit Committee.

~~Fees of Independent Registered Public Accounting Firm~~

The Audit Committee appointed S. R. Snodgrass A.C. to serve as the registered public accounting firm for Cortland Bancorp for the periods ending December 31, 2008 and December 31, 2009, and for the 2010 fiscal year. Fees contracted for services by S. R. Snodgrass A.C. for each of the 2009 fiscal year and the 2008 fiscal year were as follows:

2009 2008
Audit Fees (1) $ 109,850 $ 109,500
Audit-Related Fees (2) 14,296 9,000
Tax Fees (3) 10,114 6,500
All Other Fees (4) 15,920 -0-

(1) Audit fees consist of fees for professional services rendered for the audits of the consolidated financial statements of Cortland Bancorp and quarterly reviews of the financial statements included in Cortland Bancorp’s Quarterly Reports on Form 10-Q.

~~(2) Audit-related fees include the financial statement audit of an employee benefit plan and agreed upon procedures related to the FHLB collateral review.~~

~~(3) Tax fees include U.S. federal, state and local tax planning and advice, and U.S. federal, state and local tax compliance.~~

~~(4) Strategic planning consulting fees.~~

~~Notification of Appointment of Independent Registered Public Accounting Firm~~

Packer Thomas, the independent accounting firm engaged as the principal accounts to audit Cortland Bancorp’s financial statements for the year ended December 31, 2007, declined to stand for re-election after completion of their audit of the December 31, 2007 financial statements.

On December 18, 2007, the Audit Committee initiated the search process to appoint a new accounting firm. On March 18, 2008, the Audit Committee engaged the accounting firm of S.R. Snodgrass, A.C. to serve as independent public accountants for Cortland Bancorp for the twelve month period ended December 31, 2008. S.R. Snodgrass A.C. was not consulted prior to its engagement on the application of any accounting principles to a specified transaction, the type of audit opinion that might be rendered on Cortland Bancorp’s financial statements, or any matter that was either the subject of a disagreement with Packer Thomas on accounting principles or practices, financial statement disclosure or auditing scope or procedures, which, if not resolved to the satisfaction of Packer Thomas to make reference to the matter in their report or a “reportable event” as described in Item 304(a)(1)(v) of Regulation S-K.

Representatives of S.R. Snodgrass A.C., are expected to be present at the Annual Meeting, and will be given the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions. S.R. Snodgrass’ report on financial statements for the year ending December 31, 2009 did not contain any adverse opinions, disclaimers nor were they qualified as to uncertainty, audit scope or accounting principles.

There were no disagreements with S. R. Snodgrass A.C. on any matters of accounting principles or practices, financial statement disclosure, or auditing scope and procedure, which disagreements, if not resolved to the satisfaction of the former accountant, would have caused it to make reference in connection with its report to the subject matter of the disagreement.

SUBMISSION OF SHAREHOLDER PROPOSALS

If any Cortland shareholder ~~of the Corporation~~ wishes to submit a proposal to be included in next year’s ~~Proxy Statement~~proxy statement and acted upon at ~~the~~Cortland’s annual meeting ~~of the Corporation~~ to be held in ~~2011,~~2012, the proposal must be received by ~~the~~Cortland’s Secretary ~~of Cortland Bancorp~~ prior to the close of business on ~~November 26, 2010.~~December 6, 2011. Upon receipt of a shareholder proposal, Cortland ~~Bancorp~~ will determine whether or not to include the proposal in the proxy materials in accordance with applicable SEC Rules.

If a shareholder intends to present a proposal at the ~~2011 Annual Meeting,~~2012 annual meeting, but has not sought the inclusion of such proposal in ~~Cortland Bancorp’s~~Cortland’s proxy materials, such proposal must be received by the Secretary of Cortland ~~Bancorp~~ prior to

February ~~9, 2011,~~19, 2012, or the management proxies for the ~~2011 Annual Meeting~~2012 annual meeting will be entitled to use their discretionary voting authority, should such proposal then be raised, without any discussion of the matter in ~~Cortland Bancorp’s~~Cortland’s proxy material.

DELIVERY OF PROXY MATERIALS TO SHAREHOLDERS SHARING AN ADDRESS

SEC rules provide for “householding,” which permits ~~the~~ Cortland ~~Bancorp~~ to send a single annual report and a single proxy statement to any household at which two or more different shareholders reside if Cortland ~~Bancorp~~ believes such shareholders are members of the same family or otherwise share the same address or in which one shareholder has multiple accounts, if in each case such shareholder(s) have not opted out of the householding process. Each shareholder would continue to receive a separate notice of any meeting of shareholders and a separate proxy card. The householding procedure reduces the volume of duplicate information that shareholders may receive and reduces ~~Cortland Bancorp’s~~Cortland’s expense. Cortland ~~Bancorp~~ may institute householding in the future, and will notify those registered shareholders who will be affected by householding at that time.

Many brokerage firms and other holders of record have instituted householding. If your family has one or more “street name” accounts under which you beneficially own common shares of ~~the~~ Cortland, ~~Bancorp,~~ you may have received householding information from your broker, bank, or other nominee in the past. Please contact the holder of record directly if you have any questions, require additional copies of the proxy statement or our annual report to shareholders for the ~~2009~~2010 fiscal year, or to revoke your consent to household and, thereby, receive multiple copies once again. These options are available to you at any time.

OTHER BUSINESS

As of the date of this proxy statement, the Board ~~of Directors~~ knows of no other matters that will be presented for action at the ~~Annual Meeting~~annual meeting other than those discussed in this proxy statement. If any other business should properly arise, the persons acting under the proxies solicited by the Board ~~of Directors~~ have the discretionary authority to vote in accordance with their best judgement.

By Order of the Board of Directors.

Timothy Carney
Secretary
~~March 26, 2010~~April 4, 2011

2217

~~FORM OF PROXY~~

CORTLAND BANCORP

~~THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS~~194 W. Main St.
Cortland, Ohio 44410

The undersigned holder(s) of common shares of Cortland Bancorp hereby appoints Jerry A. Carleton, David C. Cole, and Neil J. Kaback, or any one of them with full power of substitution, to serve as my(our) proxy to attend the Annual Meeting of Shareholders
May 17, 2011
at 10:30 a.m. Eastern Time

You can vote in one of three ways:
1) By Internet, 2) By Telephone
3) By Mail

See below for instructions.

IF YOU ARENOT VOTING BY INTERNET, OR
BY TELEPHONE, COMPLETE THE REVERSE
SIDE OF PROXY CARD, DETACH AND
RETURN IN THE ENCLOSED ENVELOPE TO:

IST Shareholder Services
209 West Jackson Boulevard, Suite 903,
Chicago, Illinois 60606



		DETACH PROXY CARD HERE		(continued on reverse side)


		VOTER CONTROL NUMBER


					TO VOTE BY INTERNET
					TO VOTE BY INTERNET
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			1.	Read the accompanying Proxy material.

			2.	Visit our Internet voting site atwww.ilstk.com,click on “Shareholder Services,” select the “Internet Voting” tab, enter your Voter Control Number and the last four digits of your Tax Identification Number that is associated with the account you are voting in the designated fields. Your Voter Control Number is shown above.

		Please note that all votes cast by Internet must becompleted andsubmittedprior to Sunday, May 15, 2011 at 11:59 p.m. Central Time.

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					TO VOTE BY TELEPHONE
					TO VOTE BY TELEPHONE

	Your telephone vote is quick, confidential and immediate. Just follow these easy steps:

			1.	Read the accompanying Proxy material.

			2.	Using a Touch-Tone telephone, call Toll Free 1-800-555-8140 and follow the instructions.

			3.	When asked for your Voter Control Number, enter the number printed above.

			4.	You will also be asked to enter the last four digits of your Tax Identification Number that is associated with the account you are now voting.

	Please note that all votes cast by telephone must becompletedand submittedprior to Sunday, May 15, 2011 at 11:59 p.m. Central Time.

	Your telephone vote authorizes the named proxies to vote your shares to the same extent as if you marked, signed, dated and returned the proxy card.

If You Vote By TELEPHONE, Please Do Not Return Your Proxy Card By Mail

					TO VOTE BY MAIL
					TO VOTE BY MAIL

	To vote by mail, complete both sides of the proxy card, sign and date on the reverse side, detach and return the card in the envelope provided.

CORTLAND BANCORP



Proxy		Cortland Bancorp

The undersigned hereby appointsGeorge E. Gessner, James E. Hoffman, IIIand Timothy K. Woofteras proxies, each with the ~~Cortland Bancorp~~power to ~~be held on Tuesday, April 27, 2009 at 3:00 p.m. at Vernon’s Cafe, 720 Youngstown–Warren Road, Niles, Ohio 44446,~~appoint his substitute, and hereby authorizes them to represent and to vote, as designated below, all of the shares of common ~~shares~~stock of Cortland Bancorp which the undersigned is entitled to vote at ~~such~~the Annual Meeting of Shareholders to be held at the Trumbull Country Club, 600 Golf Drive N.E., Warren, Ohio 44483 on Tuesday, May 17, 2011 at 10:30 a.m. EDT, or any adjournment ~~as follows:~~thereof.

~~(1)~~1.

~~Election~~To elect three directors to serve for terms of ~~Directors~~two years each until the Annual Meeting in 2013 and until their successors are elected and qualified.


	FOR	AGAINST	ABSTAIN

01 Jerry A. Carleton	o	o	o

02 James M. Gasior	o	o	o

03 Richard B. Thompson	o	o	o

To elect three directors to serve for terms of three years each until the Annual Meeting in 2014 and until their successors are elected and qualified.


	FOR	AGAINST	ABSTAIN

04 Timothy Carney	o	o	o

05 David C. Cole	o	o	o

06 Neil J. Kaback	o	o	o

To ratify the appointment of S.R. Snodgrass, A.C. as Cortland’s independent auditor for fiscal year ending December 31, 2011.


~~JERRY A. CARLETON~~	~~[___]~~	~~[___]~~
	oFOR	~~WITHHOLD AUTHORITY~~o AGAINST	o ABSTAIN

To transact any other business that may properly come before the meeting.

This proxy when properly executed will be voted in the manner directed herein by the undersigned shareholder(s). If no direction is made, this proxy will be voted for proposals 1, 2 and 3.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS.


	~~JAMES M. GASIOR~~	~~[___]~~	~~[___]~~
		~~FOR~~	~~WITHHOLD AUTHORITY~~

SIGNATURE	~~RICHARD B. THOMPSON~~DATE	~~[___]~~SIGNATURE	~~[___]~~DATE

Shareholder should sign here exactly as shown on the label affixed hereto. Administrator, Trustee, or Guardian, please give full title. If more than one Trustee, all should sign. All Joint Owners should sign.

DETACH PROXY CARD HERE

ATTENTION SHAREHOLDERS
INTERNET VOTING

You can now submit your Proxy via the Internet and have your vote recorded.

Why use the Internet

	–		Internet Voting is timelier.

	–		It saves the Company the ever-rising costs of business reply postage.

	~~FOR~~–		~~WITHHOLD AUTHORITY~~You can change your vote by re-voting at any time.

	–		It is simple and easy to use.

(INSTRUCTIONS: To vote for an individual nominee, place an ‘X’ in the box marked “FOR” following his name. If you prefer not to vote for an individual nominee, place an ‘X’ in the box marked “WITHHOLD AUTHORITY” following his name.)

~~(2)~~	•	Instructions for Internet Voting can be found on the reverse side.

	•	The Board of Directors of Cortland Bancorp was not aware of any other matters to be presented for action at the Annual Meeting. However, should any such matters properly come before the Annual Meeting, I authorize the above appointed proxies to vote in their discretion:Internet Voting Website is:


~~[___]~~ ~~GRANT AUTHORITY~~		~~[___]~~ ~~WITHHOLD AUTHORITY~~http://www.ilstk.com- click on “Shareholder Services” and select “Internet Voting”.

SHARES WILL BE VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, SHARES WILL BE VOTED FOR THE ELECTION OF ALL OF THE NOMINEES LISTED IN ITEM (1), AND FOR ITEM (2), AND, AT THE DISCRETION OF THE PROXIES, ON ANY OTHER MATTER WHICH PROPERLY COMES BEFORE THE ANNUAL MEETING.

~~Receipt of the accompanying Proxy Statement is acknowledged. Please sign, date, and return this proxy promptly in the enclosed envelope.~~

~~Dated:, 2010~~

~~Signature~~

~~Please sign exactly as the name appears. If~~
~~executor, trustee, etc., give full title. If shares~~
~~are registered in two names, both should sign.~~


o Preliminary Proxy Statement




o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-12


(1)	Title of each class of securities to which transaction applies:


(2)	Aggregate number of securities to which transaction applies:


(1)		Unless otherwise indicated in the footnotes to this table, each beneficial owner has sole voting and investment power with respect to all of the common shares reflected in the table for such beneficial owner. The mailing address of each of the current executive officers and directors of Cortland Bancorp is 194 West Main Street, Cortland, Ohio 44410.

(2)		The “Percent of Class” computation is based upon the sum of ~~4,525,550~~4,525,540 common shares outstanding as of March ~~8, 2010.~~22, 2011.

(3)		Represents beneficial ownership of less than 1% of the outstanding common shares.

(4)		Individual named in the Summary Compensation ~~Table.~~Table under Executive Compensation.


					All Other
			Salary⁽¹⁾		Compensation⁽²⁾⁽³⁾		Total
Name and Principal Position	Year		($)		($)		($)
Lawrence A. Fantauzzi		2009		152,250		275,679		427,929
President and Chief Executive Officer of Cortland Bancorp and the Bank through October 2, 2009.		2008		202,200		116,283		318,483

Rodger W. Platt		2009		25,000		32,467		57,467
Management Consultant August 2009 through October 2, 2009. Interim President October 2, 2009 through November 2, 2009. Management Consultant November 2, 2009 through November 30, 2009.

James M. Gasior		2009		171,200		48,283		219,483
Senior Vice President, Chief Financial Officer and Secretary of Cortland Bancorp and the Bank through November 1, 2009. November 2, 2009 to present President and Chief Executive Officer of Cortland Bancorp and the Bank.		2008		153,200		44,303		197,503

Timothy Carney		2009		144,200		34,109		178,309
Senior Vice President and Chief Operations Officer of Cortland Bancorp and the Bank through November 1, 2009 and from November 2, 2009 to present. Executive Vice President and Chief Operating Officer of Cortland Bancorp and the Bank		2008		125,000		34,901		159,901

Stephen A. Telego, Sr.		2009		115,000		55,061		170,061
Vice President and Director of Human Resources and Corporate Administration of the Bank.		2008		115,000		54,510		169,510


(5)	Total fee paid:


(1)	Amount Previously Paid:


(2)	Form, Schedule or Registration Statement No.:


(3)	Filing Party: