COMMERCIAL NATIONAL FINANCIAL CORP /PA - CNAF Proxy Statement (definitive) (DEF 14A) PROXY STATEMENT

This proxy statement is provided for the solicitation of proxies by the board of directors of Commercial National Financial Corporation (the corporation), a Pennsylvania business corporation and bank holding company, for use at the annual meeting of shareholders on May 21, 2002, and at any and all adjournments or postponements thereof. This proxy statement and the form of proxy, together with the annual report to shareholders for 2001, are being mailed on April 15, 2002, or as soon thereafter as possible, to all shareholders entitled to vote at the annual meeting.

The only class of stock of the corporation presently issued and outstanding is common stock. The total number of shares of common stock entitled to vote at the annual meeting is 3,426,096, and only those shareholders of record at the close of business on April 12, 2002, are entitled to vote.

The shares of stock represented by each proxy properly signed and returned to the corporation prior to the date of the annual meeting will be voted in the manner set forth in this proxy statement and in accordance with the instructions marked on the proxy enclosed.

A shareholder who returns a proxy may revoke it at any time before it is voted by delivering a written notice of revocation to Wendy S. Schmucker, secretary of the corporation, or by executing a later dated proxy and giving written notice thereof to the secretary of the corporation, or by voting in person at the meeting after giving written notice to the secretary of the corporation.

The cost of preparing, printing, and soliciting proxies will be paid by the corporation. In addition to the use of the mails, certain directors, officers and employees of th e corporation may solicit proxies personally. Arrangements will be made with brokerage houses and other custodians, fiduciaries and nominees to forward proxy solicitation materials to the beneficial owners of stock held of record by these persons, and, upon request therefor, the corporation will reimburse them for reasonable forwarding expenses.

At the meeting, the shareholders will

act upon the proposal to elect as directors the five persons set forth in this proxy statement, each in a class of directors as set forth in the following pages;

ratify the appointment of Beard Miller Company LLP, as independent auditors for the corporation; and

act upon any other business as may be properly brought before the meeting.

The board of directors of the corporation recommends the election, as directors, of the five nominees listed in this proxy statement. The five nominees receiving the highest number of votes cast, including votes cast cumulatively, shall be elected directors. For all other purposes, other than election of directors, each share of stock is entitled to one vote.

Under the bylaws of the corporation, the presence, in person or by proxy, of shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast, shall constitute a quorum. Abstentions will be counted as present for purposes of determining the existence of a quorum. Abstentions and broker non-votes will be treated as shares that neither are capable of being voted nor have been voted and, accordingly, will have no effect on the outcome of the vote on the election of directors or on the outcome of the proposal to ratify the appointment of Beard Miller Company LLP.

The bylaws of the corporation provide that the board of directors shall consist of not less than three directors, and shall be classified into three classes, each class to be elected for a term of three years. The board of directors, within the limits set in the bylaws, may from time to time fix the number of directors and the respective classifications.

The number of directors to constitute the entire board has been fixed by the board of directors at fifteen with five directors in each of three classes. At the annual meeting, there shall be elected five directors as a class to serve until the annual meeting of shareholders in the year 2005. If the enclosed proxy card is properly executed and returned prior to voting at the annual meeting, the shares represented thereby will be voted in accordance with the instructions marked thereon. In the absence of instructions, shares represented by executed proxies will be voted as recommended by the board of directors, that is, in favor of the election of the nominees listed on the proxy and in this proxy statement. All of the nominees are now and have been directors of the corporation and of Commercial National Bank of Pennsylvania (the bank).

Other nominations for director may be made in accordance with procedures set forth in section 9.1 of the bylaws of the corporation which require written notice to the secretary of the corporation of any such nomination at least sixty days prior to the date of any meeting of the shareholders for the election of directors. Such notice shall contain the following information to the extent known by the notifying shareholder:

the name, address, and age of each proposed nominee;

the principal occupation of each proposed nominee;

the number of shares of the corporation owned by each proposed nominee;

435: the total number of shares of the corporation that will be voted for each proposed nominee;

the name and address of the notifying shareholder; and

the number of shares of common stock of the corporation owned by the notifying shareholder.

Nominations not made within the foregoing procedures may be dis regarded by the chairman at the annual shareholders' meeting.

Each nominee has consented to be named and to serve as a director, if elected. If any nominee becomes unable to serve as a director, the proxies named in the proxy will vote for a substitute nominee selected and recommended by the board of directors of the corporation.

The names and ages of the nominees, and the year each nominee began continuous service as a director of the corporation, together with the principal occupation of each at present and for at least the previous five years, are as follows:

DIRECTOR NOMINEES

Name	Age; Principal Occupation For The Past Five Years	Term Expires	Director Since

Richmond H. Ferguson	70, attorney at law	2005	1990

Dorothy S. Hunter	77, vice president Latrobe Foundry Machine & Supply Company	2005	1990

John C. McClatchey	64, chief executive officer JCM Industries, Inc. manufacturer of hardwood lumber and pallets	2005	1990

Joseph A. Mosso	70, retired former president, Mosso's Pharmacy, Inc.	2005	1990

Louis T. Steiner	40, vice chairman, president and chief executive officer of the corporation and the bank (1998 ‑ present); vice chairman and chief executive officer of the corporation and the bank (1997‑ 1998); vice chairman of the corporation and the bank (1995 ‑ 1997)	2005	1995

Dorothy S. Hunter, director and nominee, is the sister of Louis A. Steiner, director; mother of Gregg E. Hunter, director; and aunt of Louis T. Steiner, director and nominee.

Louis T. Steiner, director and nominee, is the son of Louis A. Steiner, director; nephew of Dorothy S. Hunter, director and nominee; and cousin of Gregg E. Hunter, director.

No nominee is a director of any company, other than the corporation, that is required to file reports with the Securities and Exchange Commission.

On September 20, 2001, JCM Industries, Inc. filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the Western District of Pennsylvania. On February 12, 2002, the filing was converted to a liquidation proceeding under Chapter 7 of the U.S. Bankruptcy Code. John C. McClatchey, a director and nominee, is President, director and principal shareholder of JCM Industries, Inc. The bank is a secured creditor of JCM Industries, Inc. pursuant to a note with an unpaid principal balance of $33,280. The original principal amount of such note was $66,000, the largest aggregate amount outstanding under the note during 2001 was $44,341, and the annual interest rate on the note is 9%.

Name	Age; Principal Occupation For The Past Five Years	Term Expires	Director Since

Gregg E. Hunter	43, vice chairman and chief financial officer of the corporation and the bank (1995 ‑ present)	2003	1995

Joedda M. Sampson	49, president and principal owner Allegheny City Restorations, Inc. a development corporation engaged in restoring and developing historic properties and operating business entities that occupy them	2003	1999

Debra L. Spatola	45, president Laurel Valley Foods, Inc. restaurateur	2003	1997

Louis A. Steiner	71, chairman of the board of the corporation and the bank (1997 ‑ present); chairman of the board and chief executive officer of the corporation and the bank (1990 ‑ 1997) president, Latrobe Foundry Machine & Supply Company	2003	1990

George V. Welty	55, attorney at law	2003	1997

John T. Babilya	42, president, chief executive officer and co-owner Arc Weld, Inc. a precision custom-manufacturing firm servicing steel, drilling, coal, glass, electrical and geo-environmental industries	2004	1999

George A. Conti, Jr.	63, attorney at law	2004	1996

Frank E. Jobe	80, retired former executive vice president of the bank	2004	1990

Roy M. Landers	73, retired former executive vice president R & L Development Company a land development company	2004	1990

C. Edward Wible	56, certified public accountant \| Horner Wible & Associates, Certified Public Accountants	2004	1995

Gregg E. Hunter, director, is the son of Dorothy S. Hunter, director and nominee; nephew of Louis A. Steiner, director; and cousin of Louis T. Steiner, director and nominee.

Louis A. Steiner, director, is the brother of Dorothy S. Hunter, director and nominee; father of Louis T. Steiner, director and nominee; and uncle of Gregg E. Hunter, director.

^{(1) The securities "beneficially owned" by an individual are determined in accordance with the definitions of "beneficial ownership" set forth in the general rules and regulations of the Securities and Exchange Commission and may include securities owned by or for the individual's spouse and minor children and any other relative who has the same home, as well as securities to which the individual has or shares voting or investment power or has the right to acquire beneficial ownership within 60 days after March 22, 2002. Beneficial ownership may be disclaimed as to certain of the securities.}

⁽²⁾ ^{Information furnished by the directors and the corporation.}

^{(3) Includes 93,714 shares held by Mr. Steiner's spouse, Barbara J. Steiner, 240,000 shares held by Latrobe Foundry Machine & Supply Company and 131,760 shares held by Ridge Properties, Inc. Louis A. Steiner is the president of each company.}

^{(4) Includes 120,000 shares held as co-trustee of The Hunter Stock Trust, with shared voting and investment power.}

^{(5) Includes 79,260 shares held as trustee of the Corazzi Trust, 145,740 shares held as trustee of the Iorio Trust, 1,000 shares held as attorney in fact for Robert A. Anderson, and 1,000 shares held as attorney in fact for Letitia A. Anderson, each with sole voting and investment power, and 600 shares held as co-trustee of the Conti Trust, with shared voting and investment power.}

^{(1) The securities "beneficially owned" by an individual are determined in accordance with the definitions of "beneficial ownership" set forth in the general rules and regulations of the Securities and Exchange Commission and may include securities owned by or for the individual's spouse and minor children and any other relative who has the same home, as well as securities to which the individual has or shares voting or investment power or has the right to acquire beneficial ownership within sixty (60) days after March 22, 2002. Beneficial ownership may be disclaimed as to certain of the securities.}

^{(2) Information furnished by the directors and the corporation.}

^{(3) Includes 79,260 shares held as trustee of the Corazzi Trust, 145,740 shares held as trustee of the Iorio Trust, 1,000 shares held as attorney in fact for Robert A. Anderson, and 1,000 shares held as attorney in fact for Letitia A. Anderson, each with sole voting and investment power, and 600 shares held as co-trustee of the Conti Trust, with shared voting and investment power.}

^{(4) Includes 120,000 shares held as co-trustee of The Hunter Stock Trust, with shared voting and investment power.}

^{(5) Includes 93,714 shares held by Mr. Steiner's spouse, Barbara J. Steiner, 240,000 shares held by Latrobe Foundry Machine & Supply Company and 131,760 shares held by Ridge Properties, Inc. Louis A. Steiner is the president of each company.}

CUMULATIVE VOTING FOR DIRECTORS

The Articles of Incorporation of the corporation provide that cumulative voting rights shall exist with respect to the election of directors.

Each shareholder entitled to vote shall have the right to vote the number of shares owned, for as many persons as there are directors to be elected in each class, or to cumulate such shares and give one nominee the whole number of such votes, or distribute the votes among any two or more nominees in each class. For all other purposes, each share is entitled to one vote. Management of the corporation reserves the right to instruct the proxy holders to vote cumulatively.

DIRECTORS' MEETINGS AND COMMITTEES

It is the policy of the corporation that the directors of the corporation also serve as the directors of the bank. During 2001 the board of the corporation met five times and the board of the bank met 12 times.

The board of the corporation has an audit committee that consists of George A. Conti Jr., Debra L. Spatola and C. Edward Wible. The audit committee of the board of directors is responsible for providing independent, objective oversight of the corporation's financial reporting system by overseeing and monitoring management's and the independent auditors' participation in the financial reporting process.

The audit committee meets quarterly, or more often as needed, with the corporation's internal auditor and staff to monitor and review compliance with regulations and internal policies and procedures and provides direct liaison with the audit department and board of directors.

The committee meets with the corporation's independent auditors as it deems necessary, not less often than annually, to facilitate and encourage private communication between the audit committee and the independent auditors.

The audit committee is composed of independent directors and acts under a written charter first adopted and approved by the board of directors on May 16, 2000. Each of the members of the audit committee is independent as defined by the Nasdaq listing standards. The audit committee of the corporation met five times during 2001.

The corporation does not have a nominating committee. The function of a nominating committee is performed by the full board.

The corporation has an executive compensation committee whose functions are described in the following text in the executive compensation report. In 2001 the committee met two times.

ATTENDANCE AT MEETINGS

During 2001 all directors attended at least seventy five percent of the combined total of meetings of the board of directors and each committee of which they were a member.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Based on a review of the applicable forms, there was no director, officer or beneficial owner of more than 10 percent of common stock who failed to file on a timely basis reports required by Section 16(a) of the 1934 Act during the most recent fiscal year.

COMPENSATION OF DIRECTORS

Directors of the corporation and the bank are paid a fee of $800 for attendance at meetings of the board of directors of the corporation and the bank, and in addition, directors who are not also officers of the bank are paid $400 for attendance at monthly board meetings and $400 for attendance at quarterly meetings of the committees of the bank.

PROXY STATEMENT

To Be Held On May 21, 2002

GENERAL