UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

(Amendment No.     )

x    Filed by the Registrant  

¨    Filed by a Party other than the Registrant  

Check the appropriate box:

Commercial National Financial Corporation

(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):

PROXY STATEMENT

For The Annual Meeting Of Shareholders

To Be Held On May 17, 2005

GENERAL INFORMATION

The Annual Meeting

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, for use at the Annual Meeting of Shareholders on May 17, 2005 at 1:00 PM (the “Annual Meeting”) to be held at 900 Ligonier Street, Latrobe, Pennsylvania, and at any and all adjournments or postponements thereof.  This Proxy Statement and the form of proxy, together with the Corporation’s Annual Report to Shareholders for 2004, are being mailed on April 11, 2005, or as soon as possible thereafter, to all shareholders entitled to vote at the Annual Meeting.

At the Annual Meeting, the shareholders will be asked to consider and take action on the proposals listed below:

election as directors of the four persons set forth in this Proxy Statement, each in a class of directors as set forth in the following pages;

ratification of the audit committee’s appointment of  Beard Miller Company LLP, as independent auditors for the Corporation; and

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

The Board of Directors of the Corporation recommends the election of the four nominees for Directors listed in this Proxy Statement. 

The four nominees receiving the highest number of votes cast shall be elected as Directors.  Each share of stock is entitled to one vote.

Voting Rights and Requirements

Record Date.  The Board has fixed the close of business on April 8, 2005 as the Record Date for the determination of the shareholders entitled to notice of the Annual Meeting (and any postponements or adjournments thereof).  Accordingly, only the shareholders of record on the Record Date will be entitled to receive notice of the Annual Meeting and to vote at the Annual Meeting.  The only class of stock of the Corporation presently issued and outstanding is common stock.  As of the Record Date, 3,413,426 shares of common stock were issued and outstanding and entitled to vote. 

Voting Rights Generally.  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.

Voting and Revocation of Proxy

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 Annual 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 the 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.

ELECTION OF DIRECTORS

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 twelve with five, four and three directors in each of three classes. At the Annual Meeting, there shall be elected four directors as a class to serve until the Annual Meeting of shareholders in the year 2008.  Richmond H. Ferguson, Dorothy S. Hunter, Joseph A. Mosso and Bruce A. Robinson have been designated by the Nominating/Corporate Governance Committee and the Board of Directors as its nominees for election as directors at the Annual Meeting.

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 Bank & Trust of PA (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 and the Nominating/Corporate Governance Guidelines, which require written notice to the Secretary of the Corporation of any such nomination at least 120 days prior to the date of any meeting of the shareholders for the election of directors, but no more than 180 days prior to any such meeting.  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 number of shares of the Corporation owned by each proposed nominee;
• 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;
• a description of all arrangements or understandings between the shareholder and each nominee and the name of any other person or persons that, to the shareholder's knowledge, have arrangements with the nominee or other shareholders relating to such nomination;
• all other information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required pursuant to Regulation 14A under the Securities Exchange Act of 1934 (“Exchange Act”);
• the written consent of each proposed nominee to being named as a nominee and to serve as a Director of the Corporation, if so elected.

the principal occupation of each proposed nominee;

Nominations not made pursuant to the foregoing procedures may be disregarded by the Chairman at the Annual Meeting.

BIOGRAPHICAL INFORMATION FOR DIRECTOR NOMINEES

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:

Nominees

BIOGRAPHICAL INFORMATION FOR CONTINUING DIRECTORS

The remaining eight directors will continue to serve in their respective classes.  The following table, based in part on information received from the respective directors and in part on the records of the Corporation, sets forth information regarding each continuing director as of March 18, 2005.

CONTINUING DIRECTORS

Gregg E. Hunter, director, is the son of director and nominee Dorothy S. Hunter.

CONTINUING DIRECTORS

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

BENEFICIAL OWNERSHIP OF COMMON STOCK

The following table sets forth, as of March 18, 2005, the name and address of each person who owns of record, or who is known by the Corporation, to be the beneficial owner (as defined below) of, more than five percent of the outstanding common stock of the Corporation, the number of shares beneficially owned by such person, and the percentage of the outstanding common stock so owned. 

The information contained herein has been obtained from the Corporation's records and from information furnished to the Corporation by each individual or entity.  Management knows of no person who owns, beneficially or of record, either individually or with associates, more than five percent of the Corporation's common stock, except as set forth below.

^{(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 18, 2005.  Beneficial ownership may be disclaimed as to certain of the securities.}

^{(2)    Includes 200,000 shares held as co-trustee of The Hunter Stock Trust, with shared voting and investment power,  and 131,760 shares held by Ridge Properties, Inc. Gregg E. Hunter is a 10% owner of Ridge Properties, Inc.}

^{(3)    Includes 75,060 shares held by Mr. Steiner’s spouse, Barbara J. Steiner, 120,000 shares held by Latrobe Foundry Machine & Supply Company and 131,760 shares held by Ridge Properties, Inc.  Louis A. Steiner is a director and the president of each company.}

^{(4)    Includes 200,000 shares held as co-trustee of The Hunter Stock Trust, with shared voting and investment power and 131,760 shares held by Ridge Properties, Inc.  Dorothy S. Hunter is a director and officer of Ridge Properties, Inc.}

^{(5)    Includes 79,260 shares held as trustee of the Corazzi Trust, 145,740 shares held as trustee of the Iorio Trust and 2,000 shares held as attorney in fact for Letitia A. Anderson, each with sole voting and investment power, and 1,000 shares held as co-trustee of the Anderson/Conti Trust and 600 shares held as co-trustee of the Conti Family Trust, each with shared voting and investment power.}

BENEFICIAL OWNERSHIP BY OFFICERS, DIRECTORS AND NOMINEES

The following table sets forth as of March 18, 2005, the amount and percentage of the common stock beneficially owned by each continuing director, nominee, named executive officer, and all executive officers and directors of the Corporation as a group.

The information contained herein has been obtained from the Corporation's records and from information furnished to the Corporation by each individual. 

^{(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 18, 2005.  Beneficial ownership may be disclaimed as to certain of the securities.}

^{(2)    Includes 79,260 shares held as trustee of the Corazzi Trust, 145,740 shares held as trustee of the Iorio Trust, and 2,000 shares held as attorney in fact for Letitia A. Anderson, each with sole voting and investment power, and 1,000 shares held as co-trustee of the Anderson/Conti Trust and 600 shares held as co-trustee of the Conti Family Trust, each with shared voting and investment power.}

^{(3)    Includes 200,000 shares held as co-trustee of The Hunter Stock Trust, with shared voting and investment power and 131,760 shares held by Ridge Properties, Inc. Dorothy S. Hunter is a director and officer of Ridge Properties, Inc.}

^{(4)    Includes 200,000 shares held as co-trustee of The Hunter Stock Trust, with shared voting and investment power and 131,760 shares held by Ridge Properties, Inc. Gregg E. Hunter is a 10% owner of that company.}

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 2004, the Board of the Corporation met thirteen times and the Board of the Bank met twelve times.  The Board of the Corporation has standing audit, executive compensation and nominating/corporate governance committees, each of which is more fully described below.

Audit Committee

The Board of the Corporation has an Audit Committee that consists of John T. Babilya, George A. Conti Jr., Debra L. Spatola and C. Edward Wible, each of whom is considered an “independent director” under the rules of NASDAQ and the SEC.  The Board has determined that Mr. Wible qualifies as an audit committee financial expert within the meaning of the SEC regulations.

The role of the Audit Committee is to assist the Board of Directors in preserving the integrity of the financial information published by the Corporation through review of financial and accounting controls and policies, financial reporting systems, alternative accounting principles that could be applied and the quality and effectiveness of the independent auditors.

The Audit Committee meets monthly, 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 Corporation’s audit department and Board of Directors.  The Audit Committee of the Corporation met eleven times during 2004.

The Audit 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 acts under a written charter first adopted and approved by the board of directors on May 16, 2000.  The charter was revised and approved by the Board of Directors on January 18, 2005.  A copy of the Audit Committee’s charter is attached as Appendix A to this Proxy Statement.

Audit Committee Report

The Audit Committee appointed Beard Miller Company LLP (“Beard”) as independent auditors of the Corporation for the fiscal year ended December 31, 2004. In overseeing the preparation of the Corporation’s financial statements, the Audit Committee has reviewed and discussed with both management and Beard all financial statements.  The Audit Committee reviewed with Beard those matters required to be discussed pursuant to Statement on Auditing Standards No. 61 (Communications with Audit Committees), Statement on Auditing Standards No. 89 (Audit Adjustments) and Statement on Auditing Standards No. 90 (Audit Committee Communications).

With respect to the Corporation’s independent auditors, the Audit Committee received from Beard the written disclosures and letter required by Independence Standards Board Standard No. 1. (Independence Discussions with Audit Committees) and discussed with Beard matters relating to Beard’s independence.

In reliance on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004.

                                The Audit Committee

                                C. Edward Wible, Chairman

                                John T. Babilya

                                George A. Conti Jr.

                                Debra L. Spatola

Executive Compensation Committee

The Board of Directors of the Corporation maintains an Executive Compensation Committee that currently consists of Joseph A. Mosso, John T. Babilya, John C. McClatchey and George V. Welty, each of whom is considered an “independent director” under the rules of NASDAQ and the SEC.

The Executive Compensation Committee's primary function is to develop, implement and maintain an effective compensation program for the executives of the Corporation and its subsidiaries.  It is the responsibility of the Committee to balance the interests of the Corporation's “stakeholders,” e.g., shareholders, customers, regulators, public, and related entities with those of the executive officers within the context of the committee’s focus: executive compensation.

The Executive Compensation Committee meets quarterly, or more often as needed, to: monitor, review and act upon Executive Compensation Philosophy and Policy, Chief Executive Officer compensation, officer contracts, succession planning, and regulatory compliance; prepare the Executive Committee Report in the Proxy Statement; and conduct an annual performance review.  Six Executive Compensation Committee meetings were held during 2004 with all members in attendance. 

The Executive Compensation Committee acts under a written charter first adopted and approved by the Board of Directors on May 18, 2004.

Executive Compensation Committee Report

To Our Shareholders:

Compensation for the Chief Executive Officer and other executives of the Corporation and its wholly owned subsidiary, the Bank, was set and paid at the Corporate and Bank level.  The Executive Compensation Committee had the responsibility and authority to establish executive compensation for 2004.

The Executive Compensation Committee is composed of four independent directors, none of whom are former officers or employees of the Corporation or the Bank.  The Committee is responsible for setting the compensation of the Chief Executive Officer and other executives.  The following report describes the actions of the Committee regarding the compensation paid to the Chief Executive Officer of the Bank and other executives during 2004.  Compensation was paid by the Corporation to its executive officers for seven weeks and two days during 2004.  The remainder of 2004 compensation was paid by the Bank, a subsidiary of the Corporation.

The Bank’s salary structure for its Chief Executive Officer and other executives is based upon independent banking industry surveys that focus on financial institutions similar in size, scope and geographic region to the Bank.  Using this data, a base salary, midpoint and range are established for each position.  The midpoint serves as a base salary target for an executive performing his job competently.  Salary increases are based on individual performance and salary level relative to the midpoint of the incumbent’s salary range.

Salary decisions are based on performance criteria that include:  the Corporation’s earnings over the previous five-year period; and the executive’s success in managing risk, optimizing income, controlling operating costs, improving service quality, developing management leadership and strengthening the institution’s competitive position.  The committee also considers the extent to which corporate goals such as after-tax income as a percentage of average total assets, annual total asset growth and the capital ratios were met.

Utilizing the above criteria, the Committee set the annual compensation for Gregg E. Hunter as shown in this Proxy Statement, and set the annual compensation for other executive officers.

All full-time employees, including the Chief Executive Officer, are included in the Employees’ Profit Sharing Retirement Plan described elsewhere in this Proxy Statement.

The compensation reported for the continuing officers consists of base salaries paid and profit sharing earned in 2004 as determined by the Bank’s performance.  Neither the Chief Executive Officer nor any other executive received a bonus for service in 2004.

Executive Compensation Committee

Joseph A. Mosso, Chairman

John T. Babilya

John C. McClatchey

George V. Welty

Compensation Committee Interlocks and Insider Participation

The Executive Compensation Committee of the Board of Directors of the Corporation is currently comprised of John T. Babilya, Joseph A. Mosso, John C. McClatchey and George V. Welty, none of whom is or was at any time an executive officer of the Corporation.

Nominating/Corporate Governance Committee

The Board of the Corporation has a Nominating/Corporate Governance Committee (“Nominating Committee”) that consists of George A. Conti, Jr., Richmond H. Ferguson, Joseph A. Mosso, George V. Welty and C. Edward Wible, all of whom are “independent” as such term is defined in the SEC rules and the NASDAQ listing requirements.  The Nominating Committee met four times during 2004. 

The Nominating Committee adopted a charter on June 15, 2004 that was approved by the Board of Directors and it is available on the Corporation’s website: www.cbthebank.com.

The Nominating Committee acts as the Board’s Nominating Committee and, in addition, reviews and makes recommendations to the Board regarding Board organization, membership, function and effectiveness; and committee structure, membership, function and effectiveness.  The Nominating Committee evaluates the performance of the Board as a whole, the Committees and the individual directors.  The Nominating Committee also administers and oversees all aspects of the Corporation’s corporate governance functions on behalf of the Board, including procedures for compliance with significant applicable legal, ethical and regulatory requirements that may affect corporate governance.

In selecting new Directors of the Corporation, consideration is given to each individual Director’s personal qualities and abilities, the collective Board members’ skills and aptitudes for conducting oversight of the Corporation and its management, and duties imposed by law and regulation.  Important factors include:

Each Director must, as determined by the Board, be qualified to perform duties of a Director as evidenced by the Director’s experience, accomplishments, education, skills and integrity;

Directors must be persons possessing the highest personal values and integrity;

Directors must be able to perform their duties in the best interests of the Corporation and its shareholders, without conflicts of interest;

The majority of Directors will be independent in accordance with the Standards for Determining Independence of Directors as adopted by the Board and in compliance with applicable laws and regulations, including the listing standards of the Securities and Exchange Commission (SEC) and The NASDAQ Stock Market (NASDAQ).

The Corporation will comply fully with all legal and regulatory requirements concerning the composition of the Audit, Nominating and Corporate Governance, and Executive Compensation Board Committees;

Collectively, Board members will bring to the Corporation a broad range of complementary skills, expertise, industry and regulatory knowledge, and diversity of perspectives to build a capable, responsive, and effective Board; and

Directors will have experience in policy-making levels of a business or as a licensed professional and must have an aptitude for evaluating business matters and making practical and mature judgments.

ATTENDANCE AT MEETINGS

During 2004, all Directors attended at least seventy-five percent of the combined totals of meetings of the Board of Directors and each committee of which they were a member.

The Corporation does not have a stated policy with regard to director’s attendance at the annual meeting but expects all of its directors to attend.  All Board members attended last year’s meeting.

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 the Corporation’s 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 are paid $800 for attendance at stand-alone meetings and $400 for attendance at meetings held in conjunction with a Bank Board meeting.  Directors of the Bank are paid a fee of $800 for attendance at meetings of the Board of Directors of the Bank, and in addition, directors who are not also officers of the Bank are paid $400 for attendance at meetings of the committees of the Corporation and the Bank. All committee chairpersons are paid an additional $200 per attendance at a meeting.

In addition, the non-executive Chairman of the Corporation is paid a monthly retainer of $2000 and the Chair of the Audit Committee, as the Financial Expert, is paid a monthly retainer of $1000.

A Directors Call Program was established by the Bank in 2002 as an opportunity for directors to earn shares of common stock of the Corporation.  Directors were awarded shares of common stock based on the number and type of referrals given to the Bank to increase its business volumes.  No shares of common stock were awarded under the program in 2004. The program was discontinued in 2005.