UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

(RULE 14a-101)Rule 14A-101)

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

Filed by the Registrant  x                              Filed by a Party other than the Registrant  ¨

Check the appropriate box:

CORTLAND BANCORP

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

Cortland Bancorp

194 West Main Street

Cortland, Ohio 44410

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

PROXY STATEMENT

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 MAY 28, 2013: THE PROXY STATEMENT, INCLUDING NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS, AND FORM 10-K ARE AVAILABLE AT www.cortland-banks.com/invest.

PROXY STATEMENT

TABLE OF CONTENTS

PROXY STATEMENT

Cortland Bancorp, an Ohio corporation (Cortland), is registered as a financial holding company and a bank holding company with the Board of Governors of the Federal Reserve System and owns all of the issued and outstanding common shares of The Cortland Savings and Banking Company (the Bank). Cortland’s principal executive offices are located at 194 West Main Street, Cortland, Ohio 44410. Cortland’s common shares are traded on the Over the Counter Bulletin Board under the symbol CLDB. As used in this proxy statement, the terms “we,” “us,” and “our” refer to Cortland and/or its subsidiaries, depending on the context.

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 20122013 Annual Meeting of Shareholders, including any adjustment or postponement of such meeting (the Annual Meeting). The Annual Meeting will be held on Tuesday, May 22, 2012,28, 2013, at 10:00 a.m., EDT, at Squaw Creek Country Club, 761 Youngstown-Kingsville Road, Vienna, Ohio 44473. The accompanying Notice of Meeting and this proxy statement are first being mailed to shareholders on or about April 6, 2012.19, 2013.

SHARE OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS

The following table furnishes information regarding the beneficial ownership of common shares, as of March 22, 2012,2013, for each of the current directors, each of the director 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, no person beneficially owns more than 5% of the outstanding common shares of Cortland. The mailing address of each of the current executive officers and directors of Cortland is 194 West Main Street, Cortland, Ohio 44410.

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

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

(4)	These common shares are held in a trust of which Mr. Carleton is a co-trustee.

(5)	Includes 13,54719,735 common shares held in Mr. Carney’s 401(k) plan account.

(6)	These common shares are owned by Mr. Carney’s spouse.

Stock Ownership Guidelines. At its May 22, 2012 meeting, the Board adopted stock ownership guidelines for directors, affirming the value that the Board places on directors having a significant personal financial stake in our success and the value that the Board places on the alignment of the interests of directors with the interests of stockholders generally. A director who does not comply with the guidelines will not be nominated for election. If the value of the director’s holdings declines to an amount under the minimum, the director’s annual retainer will be applied toward the purchase of shares, rather than being paid to the director in cash. The minimum value of a nonemployee director’s holdings of our stock is twice the annual retainer paid to directors, which currently is $18,000. For employee directors, the minimum value is four times the annual retainer. Directors are expected to achieve compliance with the stock ownership guidelines within three years after becoming a director or within three years after the May 2012 adoption of the guidelines.

RECORD DATE AND OUTSTANDING SHARES; QUORUM

If you were a shareholder of Cortland at the close of business on April 4, 2012,10, 2013, you are entitled to vote at the Annual Meeting. As of April 4, 2012,10, 2013, there were 4,525,5284,527,851 common shares of Cortland issued and outstanding. When present in person or by proxy at the Annual Meeting, the holders of a majority of the common shares of Cortland issued and outstanding and entitled to vote will constitute a quorum for the conduct of business at the Annual 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. The director nominees receiving the greatest numbers of votes will be elected. The result of the non-binding vote on executive compensation will be taken into consideration by the Board in future executive compensation arrangements. The non-binding frequency with the greatest numbers of votes will be considered for future advisory votes on executive compensation. The affirmative vote of a majority of the issued and outstanding common shares is needed to ratify the appointment of S.R. Snodgrass, A.C. as Cortland’s independent auditor for 2012.2013.

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 areabstentions and broker non-votes will be 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-voteswill have no effect on the election of directors and are not expecteddirectors. Broker non-votes will likewise have no impact on the ratificationany of the appointment of Cortland’s independent auditor.other proposals, but abstentions will have the same effect as votes against.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act), requires Cortland’s executive officers and directors to file reports with the Securities and Exchange Commission (SEC) 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 is required to disclose in this proxy statement any late reports. To Cortland’s knowledge, based solely on a review of reports furnished to Cortland and written representations that no other reports were required, Cortland’s executive officers and directors complied with all Section 16(a) filing requirements during the 20112012 fiscal year.

ELECTION OF DIRECTORS

(Proposal One)

As of the date of this proxy statement, the Board currently has 10eleven (11) members. Directors are divided into three classes, and directors of each class serve for three-year terms. FourThree directors serve in the class whose terms will expire at the Annual Meeting, three directors serve in the class whose terms expire in 2013 and threefour directors serve in the class whose term expires in 2014.2014 and four directors serve in the class whose term expires in 2015. Proxies may not be voted for more than the fourthree nominees.

BOARD NOMINEES

Directors are individuals with knowledge and experience who serve and represent Cortland’s geographic footprint throughout the counties and communities served.served and those counties contiguous to its market. Current Board representation by outside directors demonstrates a background in automotive, law, manufacturing, and the accounting industries, with the expertise of these individuals covering a broad array of skills including corporate management, human resource management, strategic planning, business acquisitions, and small business operations.

The Board proposes that the fourthree nominees identified on the following page be elected for a new term of three years. Each nominee was recommended by the Board’s NominatingCorporate Governance Committee. Each individual elected as a director at the Annual Meeting will hold office until his term expires and thereafter 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 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-

electionre-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 following recommendation by the NominatingCorporate Governance Committee. The Board knows of no reason why any of the nominees named below will be unavailable or unable to serve if elected to the Board.

The biographies of each of the nominees and continuing directors below containscontain information regarding the person’s service as a director, business experience, director positions held currently or at any time during the last five years, information regarding involvement in certain legal or administrative proceedings, if applicable, and the experiences, qualifications, attributes, or skills that caused the NominatingCorporate Governance Committee and the Board to determine that the person should serve as a Cortland director. Director James E. Hoffman, III is a first cousin to Craig M. Phythyon, an officer of the Bank.

Recommendation and Vote

Under Ohio law and Cortland’s Code of Regulations, the nominees receiving the greatest number of votes“FOR” election will be elected to the Board. Shareholders are not entitled to cumulate votes in the election of directors. Common shares represented by properly executed and returned proxy cards will be voted“FOR”the election of the Board’s nominees named above unless authority to vote for one or more nominees is withheld. Common shares as to which the authority to vote is withheld and broker non-votes will be counted for quorum purposes, but will not be counted toward the election of directors or toward the election of the individual nominees specified on the proxy card.

The Board recommends a voteFOR the election of the nominees.

CONTINUING DIRECTORS

THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD

Independence of Directors

The Board has reviewed, considered, and discussed each director’s relationships, both direct or indirect, with Cortland and its subsidiaries and the compensation and other payments, if any, each director has, both directly or indirectly, received from or made to Cortland and its subsidiaries in order to determine whether such director qualifies as independent under Rule 5605(a)(2) of Nasdaq’s Marketplace Rules. The Board has determined that 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 or its subsidiaries (other than compensation as a director of Cortland and its subsidiaries, banking relationships in the ordinary course of business with the Bank, and ownership of 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, Anthony R. Vross and Timothy K. Woofter. Joseph P. Langhenry, a nominee presented in this proxy statement, also qualifies as independent under the NASDAQ rules.

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

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

In 2011,2012, the Board held a total of thirteen (13)twelve (12) meetings. Each incumbent director attended at least 75% of the aggregate of the total number of meetings held by the Board and the total number of meetings held by the board committees on which he served, in each case during the period of his service.

Cortland encourages all incumbent directors and director nominees to attend each annual meeting of shareholders. All of the incumbent directors and director nominees except Neil J. Kaback and Richard B. Thompson, attended Cortland’s last annual meetingAnnual Meeting of shareholdersShareholders held on May17, 2011.May 22, 2012 with the exception of Mr. Vross, who was appointed to the Board on January 1, 2013, and Mr. Langhenry, who is a nominee for election at the 2013 Annual Meeting.

Communications with the Board

Although Cortland does not currently have formal procedures by which shareholders may communicate directly with directors, Cortland believes that its current process has adequately served the needs of the Board and its shareholders. Communications sent to the Board, either generally or in care of the Chief Executive Officer, Secretary, the Investor Relations

Officer, or another corporate officer, are forwarded to all directors. There is no screening process, and all communications that are received by officers for the Board’s attention are forwarded to the Board.

Until other procedures are developed and posted on 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’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’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 directors on 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 has an Audit Committee comprised of Messrs. Cole, Kaback (Chair), and Thompson. The Board has determined that each member of the Audit Committee qualifies as independent under the Nasdaq Marketplace Rules, as well as under Rule 10A-3 promulgated under the Exchange Act.

The Board has determined that the audit committee does not haveMr. Kaback qualifies as an “audit committee financial expert” as that term is defined byin Item 407(d)(5) of Regulation S-K. Mr. Kaback has acquired these attributes through education and experience as a certified public accountant. Mr. Vross became a member of the SEC. The Board has determined that each Audit Committee member has sufficient knowledge in financial and accounting matters to serve effectively on the Committee.January 2013.

The Audit Committee conducts its business pursuant to a written charter adopted by the Board. A current copy of the charter of the Audit Committee is posted on 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 for approval as necessary.

The Audit Committee is responsible for appointing, compensating, and overseeing the independent registered public accounting firm employed by Cortland 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 ten (10)six (6) meetings during 2011.2012. The Audit Committee’s report relating to the 20112012 fiscal year appears on page 1618 of this proxy statement.

Corporate Governance Committee

Effective May 22, 2012, the Board of Directors merged the Executive Compensation Committee and the Nominating Committee into the Corporate Governance Committee, which in the aggregate performs the same functions as the committees did individually. The Corporate Governance Committee is comprised of Messrs. Carleton, Carney, Cole, Gasior, Gessner, Thompson and Woofter (Chair). The Board has determined that each non-employee member of the Corporate Governance Committee qualifies as independent under Nasdaq Marketplace Rules. In addition, each non-employee member of the Corporate Governance Committee qualifies as an “outside director” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the IRC), and as a “non-employee director” for purposes of Section 16b-3 under the Exchange Act. The Corporate Governance Committee held five (5) meetings during 2012.

Executive Compensation Committee

The Bank’sThrough May 21, 2012, the Board of Directors hashad an Executive Compensation Committee which also servesserved as the Compensation Committee of Cortland. This Committee has since combined with the Corporate Governance Committee. The Executive Compensation Committee iswas comprised of Messrs. Carleton, Gessner, and Woofter (Chair). Mr. Cole was a member of the Executive Compensation Committee until May 17, 2011. The Board has determined that each member of the Executive Compensation Committee qualifiesqualified as independent under Nasdaq Marketplace Rules. In addition, each member of the Compensation Committee qualifiesqualified as an “outside director” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the IRC), and as a “non-employee director” for purposes of Section 16b-3 under the Exchange Act.

The Executive Compensation Committee oversees director and 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 –

The Executive Compensation Committee occasionally requests the Chief Executive Officer (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 reviews publicly available peer data to assist with evaluating the overall compensation for the Board. From time to time, the Executive Compensation Committee will recommend changes in compensation to further the goals of the director compensation program, which strives to provide appropriate compensation to directors for their time, efforts and contributions to the Bank.contributions.

The Executive Compensation Committee uses compensation data from similar-sized financial institutions for comparative purposes from time to time to provide input on both Board and executive compensation issues, but it did not engage a consultant in setting 20112012 compensation. The Executive Compensation Committee does not have a formal charter. The Executive Compensation Committee held one (1) meetingtwo (2) meetings in 2011.2012.

Nominating Committee

TheThrough May 21, 2012, the Board hashad a Nominating Committee comprised of Messrs. Cole, Thompson, and Woofter (Chair). This Committee has since combined with the Corporate Governance Committee. The Board has determined that each member of the Nominating Committee qualifiesqualified as independent under Nasdaq Marketplace Rules. The purpose of the Nominating Committee is to:

The Nominating Committee held two (2) meetingsone (1) meeting during 2011.2012. The charter of the Nominating Committee is reviewed annually and is available on 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 has a standing NominatingThe Corporate Governance 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’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 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 NominatingCorporate Governance 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 NominatingCorporate Governance 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, 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 NominatingCorporate Governance Committee. The NominatingCorporate Governance Committee does not have a policy for the consideration of diversity in the nomination process, but 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

Nominating Corporate Governance Committee’s goal is to identify individuals who will enhance and add valuable perspective to the Board’s deliberations and who will assist Cortland in its effort to capitalize on business opportunities in a challenging and highly competitive market.

In considering candidates for the Board, the NominatingCorporate Governance Committee evaluates the entirety of each candidate’s credentials and, other than the eligibility requirements set forth in Cortland’s Code of Regulations, there are no specific minimum qualifications that must be met by a Nominating Committee recommendedCorporate Governance Committee-recommended nominee. However, the NominatingCorporate Governance Committee does believe that each director on 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 NominatingCorporate Governance Committee will consider candidates for the Board from any reasonable source, including shareholder recommendations. The NominatingCorporate Governance Committee will not evaluate candidates differently based on who

has made the recommendation. The NominatingCorporate Governance Committee 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’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 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 mailing notice of the meeting.

The shareholder’s notice of nomination must give:

The NominatingCorporate Governance Committee 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 since 2005. Since November 2, 2009, James M. Gasior has held the office of Chief Executive Officer and effective April 27, 2010, Timothy K. Woofter became Chairman of the Board. Cortland believes that separation of these two offices is consistent with the Board’s responsibility for oversight of management and of Cortland’s affairs generally. The Board and its committees have a significant role in oversight of the risks to which Cortland is subject. Like other community banking organizations, Cortland and the Boardwe 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 and 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.outcome. The full Board, of course, takes these and other risks into account in its deliberations as well.

Code of Ethics

Cortland has adopted a Code of Ethics (the Code) as part of its corporate governance program. The Code applies to all of Cortland’s officers and employees, including its Chief Executive Officer and Chief Financial Officer. The Code is posted on the investor relationsInvestor Relations page of 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 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.

DIRECTOR COMPENSATION IN 20112012

The following table shows the compensation of Cortland directors for their service on the Board in 2011,2012, other than Directors Gasior and Carney. The director compensation information to follow represents compensation for the full year, through December 31, 2011. The majority of the director compensation is paid by the Bank for directors’ service on the Bank’s board and its committees, but compensation2012. Compensation shown in the table is aggregate compensation paid for directors’ service both to Cortland and the Bank.all of its subsidiaries. Information about compensation paid to and earned by Directors Gasior and Carney is included elsewhere in this proxy statement.

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. InCortland dating from December 2007, Cortland entered into amended director retirement agreements with these directors (excluding Director Mahan) for purposes of IRC Section 409A compliance. 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.2007. 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(Mr. 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, the director will receive cash in a single lump sum equal to the retirement benefit expense accrued by 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 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.

Cortland 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 or after retirement. Cortland will receive any death benefits remaining after payment to the director’s beneficiary. 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 approved the form and use of indemnification agreements with directors. On May 24, 2005, Cortland entered into indemnification agreements with each of the current directors, other than Director Koch.Directors Koch and Vross. Director Koch entered into an indemnification agreement with

Cortland in May 2010.2010 and Director Vross only recently joined the Board on January 1, 2013. The indemnification agreements allow a director to select the most favorable indemnification rights provided under:

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’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 and the Board of Directors of the Bank consist of the same individuals. Non-employeeDirectors Koch, Gessner and Woofter are also directors of Cortland serve without retainer or fee for services on the Board. Instead, the directors are paid by the Bank for services rendered in their capacities as directors of Cortland and the Bank.CSB Mortgage Company, Inc.

In 2011, non-employee directors of the Bank received an $18,000The annual retainer except Director Woofter,for the Chairman of the Board who received a $19,500is $20,000, with $675 for each board meeting attended. The annual retainer.retainer for all other directors is $18,000, plus $600 for each board meeting attended. Non-employee directors of the Bank also receivedreceive a fee of either $150 or $450 for each committee meeting attended, depending onattended: $400 for the committeeAudit Committee, $400 for the Corporate Governance Committee, and $250 for other committees. Directors of CSB Mortgage Company, Inc. receive $250 for attending each non-employee directormeeting of the Bank served on in 2011. Employee directors of the Bank received a $7,200 annual retainer.that company’s board. Directors of the Bank (both employee and non-employee directors)non-employee) 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 $600 for each meeting attended, for an annual compensation of $7,200, provided the director emeritus attends at least 75% of 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. In October 2012, the Board elected to discontinue the director emeritus compensation program. There will be no new emeritus director participants in the program, although the former directors currently participating will continue to do so until the end of the ten-year term.

EXECUTIVE COMPENSATION

(Proposals Two and Three)

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

Summary Compensation Table

Administration of Cortland’s Compensation Programs.Cortland’s compensation programs for its executive officers are generally administered by or under the direction and supervision of Cortland’s Corporate Governance Committee, which is responsible for reviewing and recommending to the independent members of the Board of Directors for approval the salary, bonus and all other compensation and benefits to be provided to Cortland’s Chief Executive Officer and other executive officers.

The Company’s Chief Executive Officer and human resources manager annually review the compensation and performance of each executive officer of Cortland (other than the Chief Executive Officer, whose compensation and performance is reviewed by the Corporate Governance Committee). The results of these reviews are communicated to the Corporate Governance Committee, along with recommendations regarding compensation adjustments for the ensuing year. The Corporate Governance Committee either approves the recommended compensation adjustments or makes modifications in its discretion. The Corporate Governance Committee then makes its final recommendations to the independent members of the Board of Directors for approval.

In setting salaries for Cortland’s executive officers, the Corporate Governance Committee and human resources manager use pay ranges that are established based on publicly available market data regarding compensation paid to similarly situated executive officers at other companies. Pay ranges are established and adjusted periodically with reference to market data from publicly available compensation surveys. For each employee position or category within Cortland, the pay range that is established includes a minimum, a mid-point and a maximum salary. Although the Corporate Governance Committee generally does not target a specific point within the pay range for executive officer salaries, the Corporate Governance Committee strives to ensure that its executive officer compensation remains competitive with the compensation provided by other financial institutions with which Cortland competes for executive talent.

Severance Agreements. CortlandWe entered into severance agreements in December 2008 with Messrs. Carney, Feret, and Gasior andin September 2012, superseding their previous agreements. A copy of the September 2012 severance agreement of these executives is included as an exhibit to the Form 8-K Current Report that we filed with the SEC on October 3, 2012.

Messrs. Carney and in June 2010 with Mr. Feret. The initial term of Messrs. Gasior and Carney’s severance agreements 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. Mr. Feret’sare entitled by their 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 and Carney’s severance agreements terminate when the executive attains age 65.

The severance agreements provide that the executive is entitled to severance compensationan immediate lump-sum cash payment if a change in control occurs during the termoccurs. The amount of the agreement, payable in a single lump sum. The change-in-control benefit under the severance agreementspayment 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 purposesmultiple of the severance agreements,sum of their base salary and the term changemost recent annual bonus: 2.99 times the sum of salary and bonus in control means (i) an occurrence of a changeMr. Gasior’s case and 2.50 in ownership of Cortland, (ii) a change in effective control of Cortland, or (iii) a change inMr. Carney’s. If the ownership of a substantial portion of Cortland’s assets as defined consistent with IRC Section 409A. If Messrs. Gasior or Carney’s employment terminates within 24 months after a change in control, Cortland must also continue their life, health, and disability insurance coverage for up to three years, along with fringe benefits such as club memberships. Messrs. Gasior and Carney will also be entitled to out-placement services for one year, and tax and financial planning services for three years after termination. 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’sexecutive’s employment terminates involuntarily but without cause or voluntarily because of an adverse change in employment circumstances to which Mr. Feret hashe did not agreedconsent in advance, in either case beforewith termination occurring within 24 months after a change in control, occurs, he willwould also be entitled to a cash severance benefit in an amount equal to the sum of his salary plus his average cash bonus. Messrs. Gasiorcontinued medical, dental, accident, disability, and Carney’s severance agreements also include a promise on the part of Cortland to pay the executives’ legal fees

associated with the interpretation, enforcement, or defense of the executives’ rights under the severance agreements,life insurance coverage for up to a maximum of $500,000, as adjusted for inflation from time to time.three years. Mr. Feret’s severance agreement doesis similar to that of Messrs. Carney and Gasior, except that (x) the change-in-control benefit of Mr. Feret is 2.00 times compensation and (y) the change-in-control benefit is payable if and only if Mr. Feret’s employment is terminated within 24 months after a change in control, whether because of involuntary termination by Cortland without cause or voluntary termination by Mr. Feret because of a material adverse change in employment circumstances to which he did not containconsent in advance.

The severance agreements of the executives have numerous common provisions, including a provisionprohibition against competition with Cortland in Trumbull, Portage, or Mahoning Counties in Ohio for one year after employment termination. The executives are entitled to a payment equal to 1.0 times compensation after employment termination in exchange for the agreement not to compete, unless (x) they also receive or are entitled to receive change-in-control benefits under the severance agreement or (y) their employment termination occurs after age 65 or on account of retirement. Other common provisions of the severance agreements include these:

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 SectionsInternal Revenue Code sections 280G and 4999 of the IRC (whether under the severance agreement or under any other compensation arrangement), Cortlandwe must also make an adjusted gross-up payment to Messrs. GasiorCarney, Feret, and CarneyGasior, 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 Sectionsection 4999 if the value of an executive’s aggregate change-in-control benefits – calculated according to procedures specified in Sectionsection 280G and accompanying IRS regulations – equals or exceeds three times his or herthe executive’s 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. GasiorCarney, Feret, and CarneyGasior would consist of (i)(1) a payment equal to the initial excise tax and (ii)(2) a gross-up payment that is calculated by determiningequal to 80% of the difference between (x) the full gross-up amount needed to providethat would fully compensate the excise tax payment net ofexecutives for all income, payroll, and excise taxes imposed on the excise tax reimbursement payment and (y) the excise tax payment multiplied by eighty percent (80%).

Mr. Feret’s severance agreement doesitself. The gross-up benefit is 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.deductible compensation.

Salary Continuation Agreements. In June 2010, the Bank entered into fourth amendedMessrs. Carney, Feret, and Gasior are also parties to salary continuation agreements with Messrs.The Cortland Savings and Banking Company. A copy of the agreement of Mr. Carney and Mr. Gasior and Carney (effective– the March 27, 2012 Fifth Amended Salary Continuation Agreement – is included as an exhibit to our Form 10-K Annual Report for the year ended December 31, 2011, which we filed with the SEC on March 29, 2012. A copy of Mr. Feret’s June 1, 2001) and a new salary continuation agreement2010 Salary Continuation Agreement is included as an exhibit to the Form 8-K Current Report that we filed with Mr. Feret. the SEC on June 2, 2010.

The salary continuation agreements provide Messrs. Carney, Feret, and Gasior Carney and Feret with an annual normal retirement benefitsbenefit payable for 15 years, beginning at age 65 and payable regardless of $109,700, $112,500 and $92,000, respectively. Upon reaching their specified normal retirementwhether the executives continue working past age of 65, the Bank will make these65. The annual benefit payments to the executivesamount is $112,500 for 15 years even if separation from service does not occur at age 65.Mr. Carney, $92,000 for Mr. Feret, and $109,700 for Mr. Gasior. A reduced

The 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. 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. Mr. Feret’s salary continuation agreements also provide a reduced benefit for termination before normal retirement age. However,attaining age 65, the amount of the reduced benefit being the amount that amortizes over 15 years the liability accrual balance existing when termination occurs. Mr. Feret’s early termination benefit is also subject to a vesting requirement, vesting in equal 10% annual vesting, with eliminationincrements on the first ten anniversaries of the vestingagreement’s June 1, 2010 effective date, but becoming fully vested if a change in control first occurs. No benefit is payable and an executive’s severance agreement terminates if his employment terminates for cause. Under generally accepted accounting principles, the Bank must accrue a liability on its books for the obligation under the 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.

IfFor termination before full vesting, Mr. Feret’s service withearly termination would be based on the Bank terminates involuntarily without cause or voluntarily for good reason within 24 months aftervested accrual balance. If a change in control occurs the Bank will pay him a change-in-controlbefore attaining age 65, instead of an annual retirement-age benefit calculated as described in his salary continuation agreement. Because Mr. Feret’s benefit is payable immediately after his separation from service, it is a double-trigger change-in-control benefitCarney and is subjectMr. Gasior would be entitled to an immediate lump-sum payment equal to the six-month payment delay imposed by IRC Section 409A. Conversely, Messrs. Gasior and Carney’s fourth amended salary continuation agreements provide a single trigger change-in-control benefit, which is a benefit payable upon the mere occurrence of a change in control, regardless of whether employment termination also occurs. Messrs. Gasior and Carney’s change-in-control design allows them to avoid the six-month delay imposed by IRC Section 409A for benefits payable on account of a separation from service. IRC Section 409A imposes a six-month payment delay on termination benefits payable to a so-called specified employee, meaning an executive of a publicly traded company whose annual compensation is $165,000 or more (the $165,000 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 theliability accrual balance projected to exist at these executives’their age 65 normal retirement age, but the payment would be discounted to present value. The payment forAfter a change in control Mr. Feret iswould be entitled to a lump-sum payment equal to the existing liability accrual balance, existing when separation from service occurs.but only if within 24 months after the change in control Mr. Feret’s employment termination occurs involuntarily but without cause or voluntarily on account of an adverse change in employment circumstances to which he did not consent in advance. The salary continuation agreements alsoemploy the definition of the term change in control that is contained in Internal Revenue Code section 409A and implementing regulations.

The salary continuation agreements of Messrs. Carney and Gasior were amended in March of 2012, with the Fifth Amended Salary Continuation Agreements replacing the Fourth Amended agreements. The Fifth Amended agreements eliminated the vesting condition that applied to the early termination benefits of Messrs. Carney and Gasior. However, the Fifth Amended agreements add a promise on their part that for two years after employment termination they will not compete with Cortland. Like the severance agreements, the salary continuation agreements provide that the Bank must reimbursefor reimbursement of up to $500,000 in legal expenses incurred by each offor the executives if the agreements are challenged after a change in control occurs.

If either of Messrs. Carney and Gasior or Carney diesdie before age 65 in active service to the Bank, instead of salary continuation agreement benefits these individuals’payable to Messrs. Carney and Gasior, their beneficiaries will receive a life insurance death benefit in a fixed amount. As informal financing for the salary continuation agreement payment obligation arising out of an executive’s death before retirement, the Bank hasCortland Savings and Banking Company purchased life insurance policies on certain officers’ lives, including Messrs. GasiorCarney and Carney.Gasior. 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. Messrs. Gasior or Carney’s and Gasior’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 finance the expense for the payment obligations under the fourth amended salary continuation agreements of Messrs. Carney and Gasior, 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 and Carney, at the executive’s death before retirement at age 65, a portion A copy of the total death benefits underagreement of Mr. Carney and Mr. Gasior – the insurance policies will be paidApril 19, 2011 Fourth Amended Split Dollar Agreement and Endorsement – is included as an exhibit to the executive’s designated beneficiary. The death benefitForm 8-K Current Report that would have been payable as of December 31, 2011, towe filed with the beneficiaries of Messrs. Gasior and Carney would be $678,977 and $632,833, respectively. The split dollar agreements and endorsements terminate upon the first to occur of any of the 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, (v) upon the executive’s separation from service or (vi) the occurrence of a change in control for which benefits are paid to the executives under their salary continuation agreements.

Neither the premium amounts attributable to the policiesSEC 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 2011, 2010 and 2009 of the portions of the life insurance premium paid by the Bank are included in the Summary Compensation Table.April 22, 2011.

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. TheA number of the original 22 officers covered by the planhave since terminated, but those who remain include Messrs. Gasior and 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:

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; 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.

Employees also have life insurance benefits under the Bank’s group term life insurance program, paying benefits up to 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, but limited to $50,000 for participants in the Group Term Carve Out Plan. Messrs. Gasior and Carney are limited to the $50,000 cap, while Mr. Feret’s benefit is twice his salary.

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 2011.2012. As a result, no profit-sharingprofit-

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 CompensationCorporate Governance Committee annually reviews the perquisites that the management team receives. In the case of Messrs. Gasior, Carney and Feret, 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.

IRC Limits.Cortland 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 paid in 20112012 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 Cortland.

Recommendation and Vote (Proposal Two)

The Dodd-Frank Wall Street Reform and Consumer Protection Act and the SEC rules issued thereunder require shareholders of public companies to vote, on an advisory basis, to approve executive compensation as disclosed in this proxy statement. Accordingly, Cortland’s shareholders are being asked to approve the compensation of Cortland’s executives as disclosed in this proxy statement, including the executive compensation table and related narrative disclosures.

Common shares represented by properly executed and returned proxy cards will be voted“FOR”the approval of executive compensation as disclosed in this proxy statement. Because the shareholder vote is advisory, it will not be binding upon the Board of Directors. However, the Corporate Governance Committee will take into account the outcome of the vote when considering future executive compensation arrangements.

The Board recommends a voteFORthe approval of compensation of executive officers.

Recommendation and Vote (Proposal Three)

The Dodd-Frank Wall Street Reform and Consumer Protection Act and the SEC rules issued thereunder require shareholders of public companies to vote, on an advisory basis, on how often Cortland should include in its proxy materials the advisory vote on executive compensation described in Proposal Two. The advisory vote on executive compensation described in Proposal Two is referred to as a “Say-on-Pay” vote. Proposal Three affords shareholders the opportunity to cast an advisory vote on how often Cortland should include a Say-on-Pay vote in its proxy materials in the future. Under Proposal Three, shareholders may vote to have the Say-on-Pay vote every year, every two years or every three years.

The Board of Directors believes that its Say-on-Pay vote should be conducted every year so that shareholders may annually express their views on Cortland’s executive compensation program. The Corporate Governance Committee, which administers the executive compensation program, values the opinions expressed by shareholders in these votes, and even though non-binding, will continue to consider the outcome of these votes in making its decisions on executive compensation.

With respect to Proposal Three, we will consider to have been approved by shareholders the option of one year, two years or three years that receives the highest number of votes cast“FOR.”Because this shareholder vote is advisory, it will not be binding upon the Board of Directors. However, the Board will take into consideration the outcome of the vote.

The Board recommends a voteFOR“One Year” as the preferred frequency for advisory votes on executive compensation.

TRANSACTIONS WITH RELATED PERSONS

During the 20112012 fiscal year, executive officers and directors of Cortland, members of their immediate families, and corporations or organizations as to which directors of Cortland 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. 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 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 or its subsidiaries. These loans have been subject to and are presently subject to no more than a normal risk of collectability 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 Two)Four)

Cortland’s independent auditor for the year ended December 31, 2011,2012, 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, 2012.2013. 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 20112012 fiscal year and the 20102011 fiscal year were as follows:

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 Audit Committee is unable to do so. The Chairman must report all such pre-approvals to the entire Audit Committee at its next meeting. All of the services rendered by S.R. Snodgrass, A.C. to Cortland and its subsidiaries for the 20112012 and the 20102011 fiscal years 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, 2011,2012, is attributable to work performed by persons other than full-time, permanent employees of S.R. Snodgrass, A.C.

Cortland’s Code of Regulations 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 voteFORratification of the appointment of S.R. Snodgrass, A.C. as Cortland’s independent auditor for the fiscal year ending December 31, 2012.2013.

AUDIT COMMITTEE MATTERS

Audit Committee Report for the Fiscal Year Ended December 31, 20112012

The Audit Committee has reviewed the audited financial statements for the year ended December 31, 2011,2012, and has discussed the audited financial statements with management. The Audit Committee has also discussed with S.R. Snodgrass, A.C., 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’s audited consolidated financial statements be included in Cortland’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011,2012, for filing with the Securities and Exchange Commission.

Submitted by the Audit Committee

David C. Cole, Neil J. Kaback, and Richard B. Thompson

SUBMISSION OF SHAREHOLDER PROPOSALS

If any Cortland shareholder wishes to submit a proposal to be included in next year’s proxy statement and acted upon at Cortland’s annual meeting to be held in 2013,2014, the proposal must be received by Cortland’s Secretary prior to the close of business on December 7, 2012.20, 2013. Upon receipt of a shareholder proposal, Cortland 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 20132014 annual meeting, but has not sought the inclusion of such proposal in Cortland’s proxy materials, such proposal must be received by the Secretary of Cortland prior to February 20, 2013,March 5, 2014, or the management proxies for the 20132014 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’s proxy material.

DELIVERY OF PROXY MATERIALS TO SHAREHOLDERS SHARING AN ADDRESS

SEC rules provide for “householding,” which permits Cortland to send a single annual report and a single proxy statement to any household at which two or more different shareholders reside if Cortland 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’s expense. Cortland 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 Cortland, 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 20112012 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 knows of no other matters that will be presented for action at the 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 have the discretionary authority to vote in accordance with their best judgement.

By Order of the Board of Directors,

Timothy Carney

Secretary

April 6, 201217, 2013

			COMMON

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

The undersigned hereby appoints Neil J. Kaback, Anthony Vross and David C. Cole as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated below, all of the shares of common stock of Cortland Bancorp which the undersigned is entitled to vote at the Annual Meeting of Shareholders to be held at the Squaw Creek Country Club, 761 Youngstown-Kingsville Road, Vienna, Ohio 44473 on Tuesday, May 28, 2013 at 10:00 a.m. EDT, or any adjournment thereof.

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 the nominees listed in proposal 1 and FOR proposals 2, 3 and 4. Management and the Boardrecommend a vote FOR each of the proposals presented above.

		SIGNATURE		DATE				SIGNATURE		DATE

NOTE: PLEASE DATE PROXY AND SIGN IT EXACTLY AS NAME OR NAMES APPEAR ON THIS CARD. ALL JOINT OWNERS OF SHARES SHOULD SIGN. STATE FULL TITLE WHEN SIGNING AS EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN, ETC. PLEASE PROMPTLY RETURN SIGNED PROXY IN THE ENCLOSED ENVELOPE.