PROXY STATEMENT

TABLE OF CONTENTS

PROXY STATEMENT

Cortland Bancorp (Cortland), an Ohio corporation, 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 Nasdaq Capital Market 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.

Notice is hereby given that, due to the public health impact of the coronavirus pandemic and to support the health and well-being of our shareholders, this year’s Annual Meeting will be held in a virtual meeting format only on May 18, 2021 at 10:00 a.m., Eastern Daylight Time. There is no physical location for the Annual Meeting. You can virtually attend the live webcast of the Annual Meeting at https://www.cstproxy.com/cortlandbank/2021.

How do I attend the Virtual Annual Meeting?

Follow the instructions below for either “Registered Shareholders” or “Beneficial Owners” as may be applicable to you.

Registered Shareholders (shareholders having a paper certificate of their shares):

As a registered shareholder, you will receive a Proxy Card from Continental Stock Transfer. The Proxy Card will tell you how you may vote your shares before the virtual Annual Meeting. The Proxy Card also contains instructions on how to attend the virtual Annual Meeting and provides the required URL address, along with your control number. You will need your control number for access. If you do not have your control number, please contact Continental Stock Transfer by telephone at 917-262-2373, or by email to proxy@continentalstock.com. If you wish to listen to the proceedings at the virtual Annual Meeting and do not intend to participate or ask questions, you may call the following telephone numbers:

Within the U.S. and Canada: 1-888-965-8995 (toll-free)

Outside of the U.S. and Canada: +1 415-655-0243 (standard rates apply)

The passcode for telephone access is 11784690#

You can (but are not required to) pre-register to attend the virtual meeting. Pre-registration begins May 13, 2021 at 10:00 a.m., Eastern Daylight Time. Enter this URL address into your browser, https://www.cstproxy.com/cortlandbank/2021, then enter your control number, name, and email address. Once you pre-register you can vote your shares, and if you wish you may also enter questions in the chat box for submittal at the virtual Annual Meeting. At the start of the virtual Annual Meeting, you will need to log in again using your Control Number and you will also be prompted to enter your Control Number if you vote during the meeting. If you have not pre-registered, you may still attend the virtual annual meeting by following the same procedure as for “pre-registering” set out in this paragraph. On the day of the virtual Annual Meeting, you will log in to the virtual Annual Meeting by going to: https://www.cstproxy.com/cortlandbank/2021. You should do this about 15 minutes before the meeting to assure timely entrance to the virtual meeting.

Beneficial Owners of shares (who own their investments through a bank or broker holding the shares in institutional or “street” name):

To vote your shares before the meeting:

You will receive proxy materials forwarded to you by the bank or broker. Although most banks and brokers offer mail and internet voting to vote your shares before the meeting, the availability of voting options and specific procedures to be used to vote will depend on the voting instructions set out in the materials you receive by mail from your bank or broker. Follow those instructions to vote your shares before the meeting.

The forms you receive from the bank or broker will not contain instructions for attending the virtual Annual Meeting. If you vote your shares before the meeting, you are not obliged to attend the virtual Annual Meeting but are welcome to do so. To attend the virtual Annual Meeting and submit any questions to management, follow one of the two choices below:

To attend the Virtual Annual Meeting and vote your shares at the meeting:

To attend the virtual Annual Meeting and vote shares at the meeting, beneficial owners will need to contact Continental Stock Transfer to receive a Control Number. Continental Stock Transfer can be contacted by telephone at 917-262-2373 or by email to proxy@continentalstock.com. If you plan to vote at the virtual Annual Meeting, you will also need to have what is called a “legal proxy” that you must obtain from your bank or broker. This assures your votes will not be double counted. Without the “legal proxy” from your bank or broker, you will not be allowed to vote at the meeting even though you have obtained a control number and are thereby entitled to attend the virtual meeting and ask questions. On the day of the virtual Annual Meeting, you will log in to the virtual annual meeting by going to: https://www.cstproxy.com/cortlandbank/2021.

To attend the Virtual Annual Meeting but not vote your shares at the meeting:

If you are a beneficial owner and would like to join the virtual annual meeting but do not want or need to vote your shares at the meeting, Continental Stock Transfer will issue you a guest control number with proof of your stock ownership. You must contact Continental Stock Transfer for specific instructions on how to receive the guest control number. Continental Stock Transfer can be contacted by telephone at 917-262-2373, or by email to proxy@continentalstock.com. Please submit your request for a guest control number by 6:00 p.m. EDT on Friday May 14, 2021. On the day of the meeting, you will log in to the virtual annual meeting by going to https://www.cstproxy.com/cortlandbank/2021 using the guest control number you receive from Continental Stock Transfer.

The accompanying Notice of Meeting and this proxy statement are first being mailed to shareholders on or about April 5, 2021.

BENEFICIAL OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

The following table furnishes information regarding the beneficial ownership of common shares, as of March 15, 2021, for each of the current directors, each of the director nominees, each of the individuals named in the Summary Compensation Table, all current directors and executive officers as a group, and by each person known to Cortland to own 5% or more of its common shares. Unless otherwise noted, the mailing address of each shareholder listed below is 194 West Main Street, Cortland, Ohio 44410.

Stock Ownership Guidelines. The stock ownership guidelines for directors affirms 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 shareholders 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 will be required to apply up to 100% of his annual retainer to purchase shares sufficiently to meet the minimum requirement. The minimum value of a non-employee director’s holdings of our stock is 3.5 times the annual fees earned and paid in cash. For employee directors, the minimum value is one times the annual base compensation. Directors are expected to achieve compliance with the stock ownership guidelines within three years after becoming a director. In an effort to provide an effective mechanism for satisfying the ownership requirements, the Corporate Compensation Committee enables non-employee directors to participate in the director 10b5-1 program, under which 100% of each month’s retainer can be withheld for purchase of company shares.

RECORD DATE AND OUTSTANDING SHARES; QUORUM

If you were a shareholder of Cortland at the close of business on March 15, 2021, you are entitled to vote at the virtual Annual Meeting. As of March 15, 2021, there were 4,217,117 common shares of Cortland issued and outstanding. When attending virtually or by proxy at the virtual 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 virtual 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. We will consider the non-binding proposal regarding executive compensation to be approved if the proposal receives the affirmative vote of a majority of votes cast on the proposal. We will consider the proposal to ratify the appointment of S.R. Snodgrass, P.C. as independent auditor to be approved if the proposal receives the affirmative vote of a majority of the votes cast on the proposal.

ABSTENTIONS AND BROKER NON-VOTES

Abstention may be specified on all proposals except the election of directors. Abstentions and broker non-votes will be counted for purposes of establishing that a quorum is present at the meeting. A broker non-vote arises when shares held by a broker nominee for a beneficial owner are not voted because the broker nominee does not receive voting instructions from the customer and lacks discretionary authority to vote the shares without instructions.

Brokers normally have authority to vote on routine matters, such as the ratification of independent registered public accounting firms, but not on non-routine matters such as the election of directors and matters relating to executive compensation. Brokers are not allowed to vote uninstructed shares in regard to the election of directors. Pursuant to applicable stock exchange rules, the proposal to ratify the appointment of Cortland’s independent registered public accounting firm (Proposal 3) is the only routine matter.

The election of directors and the advisory vote on executive compensation are not considered routine matters. We urge you to provide instructions to your broker or nominee so that your vote may be counted on these important matters. You should direct the vote of your shares by following the instructions provided on the voting instructions card you received from your broker or other nominee and return the voting instructions card to your broker or other nominee in a timely manner to ensure that your shares are voted on your behalf.

DELINQUENT SECTION 16(a) REPORTS

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 2020 fiscal year, except for the late Form 4 filings to report the equity grants that were awarded to the executive officers and directors on March 17, 2020. These Form 4 filings were filed late due to delays caused by technical difficulties as a result of the COVID-19 pandemic.

ELECTION OF DIRECTORS

(Proposal One)

The Board currently has twelve members. Directors are divided into three classes, and directors of each class serve for three-year terms. Four directors serve in the class whose terms will expire at the Annual Meeting, four directors serve in the class whose term expires in 2022 and four directors serve in the class whose term expires in 2023. Proxies may not be voted for more than the four nominees.

BOARD NOMINEES

Directors are individuals with knowledge and experience who serve and represent Cortland’s geographic footprint throughout the counties and communities served and those counties contiguous to Cortland’s market. Current Board representation by outside directors demonstrates a background in the automotive, law, manufacturing, financial services, construction 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 four nominees identified be elected for a new term of three years. Each nominee was recommended by the Board’s Corporate 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-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 Corporate Governance Committee. The Board knows of no reason any of the nominees named below will be unavailable or unable to serve if elected to the Board.

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 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 in the election of directors.

The Board recommends a vote FOR the election of the nominees.

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 the director is independent. The Board has determined that it has a majority of independent directors and that each of the following directors qualifies as independent under Nasdaq Rule 5605(a)(2): Hicham Chahine, David C. Cole, James E. Hoffman, III, Neil J. Kaback, Joseph E. Koch, Joseph P. Langhenry, Thomas P. Perciak, Richard B. Thompson, Anthony R. Vross, and Timothy K. Woofter. The Board has determined that all of the directors serving on the Corporate Governance Committee, the Audit Committee, and the Compensation Committee are independent directors.

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

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

In 2020, the Board held a total of 7 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 directors attended Cortland’s last Annual Meeting of Shareholders, held on April 29, 2020.

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.cortlandbank.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, this communication 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. Kaback (Chair), Chahine, Hoffman, Thompson, and Vross. The Board has determined that each member and nominee 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 Mr. Kaback qualifies as an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K. Mr. Kaback has acquired these attributes through education and experience as a certified public accountant.

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.cortlandbank.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 four (4) meetings in 2020. The Audit Committee’s report relating to the 2020 fiscal year appears elsewhere in this proxy statement.

Compensation Committee

The Compensation Committee is currently comprised of Messrs. Cole, Langhenry, Perciak, Thompson, and Woofter (Chair). The Board determined that each member of the Compensation Committee qualified as independent under Nasdaq Marketplace Rules. In addition, each member of the Compensation Committee qualified as a “non-employee director” for purposes of Section 16b-3 under the Exchange Act.

The Compensation Committee oversees director and executive officer compensation as well as compensation under the Profit Sharing Program and the Employee Benefit 401(k) Plan. The Compensation Committee is also responsible for administration of other executive benefits and plans, including the 2015 Omnibus Equity Plan. The Compensation Committee reviews and recommends officer compensation levels and benefit plans. In evaluating executive officer performance, the Compensation Committee takes into account the following factors: (i) the attraction and retention of Executive Management; (ii) the motivation of Executive Management to achieve the Company’s business objectives; and (iii) the alignment of the interests of Executive Management with the long-term interests of the Company’s shareholders.

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

The Compensation Committee reviews publicly available peer data to assist with evaluating the overall compensation for the Board. From time to time, the 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.

The 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 and used Newcleus (formerly Compensation Advisors) as a consultant in setting 2020 compensation for the named executive officers. The Compensation Committee conducts its business pursuant to a written charter adopted by the Board. A current copy of the charter of the Compensation Committee is posted on Cortland’s website at www.cortlandbank.com on the investor relations page under Governance Documents, “Compensation Committee Charter.” At least annually, the Compensation Committee reviews and reassesses the adequacy of its charter and recommends any proposed changes to the full Board for approval as necessary. The Compensation Committee held three (3) meetings in 2020.

Corporate Governance Committee

The Corporate Governance Committee is comprised of Messrs. Cole, Koch, Perciak (Chair), Thompson, Vross, and Woofter. The Board has determined that each member of the Corporate Governance Committee qualifies as independent under Nasdaq Marketplace Rules. In addition, each member of the Corporate Governance Committee qualifies as a “non-employee director” for purposes of Section 16b-3 under the Exchange Act. The Corporate Governance Committee held two (2) meetings during 2020. The charter of the Corporate Governance Committee is reviewed annually and is available on Cortland’s website at www.cortlandbank.com on the investor relations page under Governance Documents, “Nominating and Corporate Governance Committee Charter.”

The Corporate Governance Committee is charged with the following responsibilities:

Executive Committee

At a meeting of the Company’s Board of Directors on September 24, 2019, the Board approved a newly formed Executive Committee of the Board of Directors. The Executive Committee is comprised of Messrs. Gasior, Carney, Kaback, Perciak, Thompson, and Woofter (Chair). This Committee held nine (9) meetings in 2020. The Executive Committee is empowered to act in place of the full Board, with certain exceptions, between meetings of the full Board. In addition, the Executive Committee will perform general control and supervision functions subject to the discretion of the full Board.

Nominating Procedures

The Corporate Governance Committee 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,” and in guidelines adopted by the Board from time to time. A director is eligible for one additional term after he has first attained the age of 70 or above.

When considering potential candidates for the Board, the Corporate 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 Corporate 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 Corporate Governance Committee. While the Corporate Governance Committee does not have a formal policy for the consideration of diversity in the nomination process, the Corporate Governance Committee generally views and values diversity from the perspective of professional and life experiences, as well as geographic location, representative of the markets in which we do business. The Corporate Governance Committee recognizes that diversity in professional and life experiences may include consideration of gender, race or national origin, in identifying individuals who possess the qualifications that the Corporate Governance Committee believes are important to be represented on the Board. In its deliberations, the Corporate Governance Committee takes into account all facets of a potential nominee’s background, including the potential nominee’s educational background, business and professional experience, and his or her particular skills and other qualities. The 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 efforts to capitalize on business opportunities in a challenging and highly competitive market.

In considering candidates for the Board, the Corporate Governance Committee evaluates the entirety of each candidate’s credentials and, other than the eligibility requirements set forth in Cortland’s Code of Regulations and other than the stock ownership guidelines, there are no specific minimum qualifications that must be met by a Corporate Governance Committee-recommended nominee. However, the Corporate 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 Corporate Governance Committee will consider candidates for the Board from any reasonable source, including shareholder recommendations. The Corporate Governance Committee will not evaluate candidates differently based on who has made the recommendation. The Corporate 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 Corporate 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’s bank subsidiary exercises 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. The Bank’s asset and liability committee and loan committee are each comprised of management and Board members, thus ensuring that key decisions are made at the highest level. The Bank’s audit committee and loan review committee focus on our most significant risks in the areas of liquidity, credit, interest rate and general risk management strategy. The Board sets policy guidelines in the areas of loans and asset/liability management that are reviewed on an on-going basis. The full Cortland Board takes these and other risks into account in the Board’s deliberations to supervise the policies of the Bank. Management, the Board, and the Board’s committees also utilize third-party consultants and advisors to help them examine and assess the Bank’s and Cortland’s enterprise risk management. While the Board oversees our risk management, management is responsible for day-to-day risk management following the dictates of the Board’s policy decisions.

The Board recognizes that management succession planning is an ongoing part of its responsibilities. The full Board is responsible for overseeing CEO succession planning and assesses both expected and emergency CEO succession at least annually. The Board regularly works with its committees and members of management to evaluate potential successors to the CEO. The Board discusses potential successors with the CEO and together with the CEO reviews any development plans recommended for such individuals. A similar process is also followed with regard to the other executive officers.

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, directors, and employees, including its Chief Executive Officer and Chief Financial Officer. The Code is posted on the Investor Relations page of Cortland’s website at www.cortlandbank.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, Corporate 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.

Anti-Hedging Policy

Cortland’s Insider Trading Policy discourages hedging transactions involving Cortland’s securities by directors, executive officers and employees of Cortland or the Bank. The anti-hedging policy: