<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-Q

[  X  ]  QUARTERLY  REPORT  PURSUANT  TO  SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE  ACT  OF  1934
For  the  quarterly  period  ended  June  30,  1998
                                    ---------------

or

[    ]  TRANSITION  REPORT  PURSUANT  TO  SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE  ACT  OF  1934
For  the  transition  period  from  ________________  to  ______________

Commission  File  Number:  2-94863
                           -------



                        CANANDAIGUA NATIONAL CORPORATION
                        --------------------------------
             (Exact name of registrant as specified in its charter)

                        New York                      16-1234823
                        --------                      ----------
              (State or other jurisdiction of      (I.R.S. Employer
            Incorporation or organization)     Identification Number)


              72 South Main Street, Canandaigua, New York     14424
              -------------------------------------------     -----
             (Address of principal executive offices)     (Zip Code)


                                 (716) 394-4260
                                 --------------
               Registrant's telephone number, including area code


     Indicate  by  check  mark  whether the registrant (1) has filed all reports
required  to  be  filed by Section 13 or 15(d) of the Securities Exchange Act of
1934  during  the  preceding  12  months  (or  for  such shorter period that the
registrant  was required to file such reports), and (2) has been subject to such
filing  requirements  for  the  past  90  days.  [X]  Yes   [  ]  No


     Indicate  the  number of shares outstanding of each of the issuer's classes
of  common  stock,  as  of  the  latest  practical  date.

            Class                           Outstanding at August 10, 1998
            -----                           ------------------------------
            Common stock, $50.00 par                   160,481

<PAGE>
<TABLE>

<CAPTION>

                                               CANANDAIGUA NATIONAL CORPORATION AND SUBSIDIARIES

                                                               INDEX TO FORM 10-Q

                                                                 JUNE 30, 1998



PART I -- FINANCIAL INFORMATION                                                                                         Page
                                                                                                                        ----
<S>                                                                                                                     <C>
Item 1.  Financial Statements                                                                                              1

Condensed consolidated balance sheets at June 30, 1998 and December 31, 1997.                                              1

Condensed consolidated statements of income for the three month and six month periods ended June 30, 1998 and 1997.        3

Condensed consolidated statements of stockholders' equity for the six month period ended June 30, 1998 and 1997.           4

Condensed consolidated statements of cash flows for the six month period ended June 30, 1998 and 1997.                     5

Notes to condensed consolidated financial statements at June 30, 1998.                                                     6

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations                             7

Item 3.  Qualitative and Quantitative Disclosures about Market Risk
 This information is incorporated by reference in Part I, Item 2, 
  Interest Rate Sensitivity and Asset/Liability Management Review.                                                        10
  ----------------------------------------------------------------      


PART II -- OTHER INFORMATION

Item 1.  Legal Proceedings                                                                                                16
Item 2.  Changes in Securities                                                                                            16
Item 3.  Defaults Upon Senior Securities                                                                                  16
Item 4.  Submission of Matters to a Vote of Security Holders                                                              16
Item 5.  Other Information                                                                                                16
Item 6.  Exhibits and Reports on Form 8-K                                                                                 16

SIGNATURES                                                                                                                17
</TABLE>


<PAGE>

<PAGE>
                         PART I -- FINANCIAL INFORMATION
                          Item 1.  Financial Statements
<TABLE>

<CAPTION>

                             CANANDAIGUA NATIONAL CORPORATION AND SUBSIDIARIES

                             Condensed Consolidated Balance Sheets (unaudited)
                               (Dollars in thousands, except per share data)


                                                                                  June 30,   December 31,
                                                                                    1998         1997
                                                                                 ----------  -------------
<S>                                                                              <C>         <C>
ASSETS                                                                           $  20,723         19,397 
-------------------------------------------------------------------------------  ----------  ------------             
Cash and due from banks                                                                259            250 
Interest-bearing deposits with other banks
Securities:                                                                            432            394 
Securities available for sale, at fair value                                        71,124         70,987 
                                                                                 ----------  -------------
Securities held-to-maturity (fair value of $71,850 in 1998 and $71,284 in 1997)     71,556         71,381 
                                                                                 ----------  -------------
Total securities
Loans:                                                                              51,443         37,610 
Commercial, financial & agricultural                                                74,206         81,035 
Commercial mortgage                                                                 80,539         87,786 
Residential mortgage                                                                74,106         73,211 
Consumer-indirect                                                                   16,848         15,245 
Consumer-other                                                                       6,279         12,138 
Other                                                                                4,243          2,119 
                                                                                 ----------  -------------
Loans held for sale                                                                307,664        309,144 
Total loans                                                                         (3,253)        (3,153)
                                                                                 ----------  -------------
Less:  Allowance for loan losses                                                   304,411        305,991 
                                                                                 ----------  -------------
Loans - net                                                                         11,030         11,184 
Premises and equipment - net                                                         2,232          2,372 
Accrued interest receivable                                                          3,548          3,118 
FHLB and FRB stock                                                                   5,451          5,249 
                                                                                 ----------  -------------
Other assets                                                                     $ 419,210        418,942 
                                                                                 ==========  =============
Total Assets

</TABLE>







                                     Page 1

<PAGE>
<TABLE>

<CAPTION>

                    CANANDAIGUA NATIONAL CORPORATION AND SUBSIDIARIES

              Condensed Consolidated Balance Sheets (unaudited), continued
                      (Dollars in thousands, except per share data)


                                                                June 30,   December 31,
                                                                  1998         1997
                                                               ----------  -------------
<S>                                                            <C>         <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------------------------------                           
Deposits:
Non-interest bearing                                           $  65,830         73,297 
Interest bearing                                                 270,228        251,464 
                                                               ----------  -------------
Total deposits                                                   336,058        324,761 
FHLB advances                                                     38,555         50,667 
Accrued interest payable and other liabilities                     2,756          2,582 
                                                               ----------  -------------
Total Liabilities                                                377,369        378,010 
                                                               ----------  -------------

Stockholders' Equity:
Common stock, $50 par value; 240,000 shares authorized;
   162,208 issued and outstanding in 1998 and 1997                 8,110          8,110 
Additional paid-in-capital                                         8,489          8,489 
Retained earnings                                                 25,659         24,742 
Treasury stock at cost (1,727 and 1,642 shares, respectively)       (559)          (528)
Accumulated other comprehensive income                               142            119 
                                                               ----------  -------------
Total Stockholders' Equity                                        41,841         40,932 
                                                               ----------  -------------
Total Liabilities and Stockholders' Equity                     $ 419,210        418,942 
                                                               ==========  =============



<FN>

See  notes  to  condensed  consolidated  financial  statements
</TABLE>













                                     Page 2

<PAGE>
<TABLE>

<CAPTION>

                      CANANDAIGUA NATIONAL CORPORATION AND SUBSIDIARIES

                   Condensed Consolidated Statements of Income (unaudited)
                        (Dollars in thousands, except per share data)

                                                     Three months ended     Six months ended
                                                     ------------------   ------------------
                                                      June 30,   June 30, June 30,  June 30,
                                                       1998       1997      1998      1997
                                                     ---------  --------  --------  --------
<S>                                                  <C>        <C>       <C>       <C>
Interest income:
Loans, including fees                                $   6,285     6,063    13,116    12,101
Securities                                                 995     1,015     1,989     2,018
Federal funds sold and other                                 5         2        38         2
                                                     ---------  --------  --------  --------
Total interest income                                    7,285     7,080    15,143    14,121
                                                     ---------  --------  --------  --------
Interest expense:
Deposits                                                 2,587     2,423     5,024     4,737
Borrowings                                                 465       321     1,138       471
                                                     ---------  --------  --------  --------
Total interest expense                                   3,052     2,744     6,162     5,208
                                                     ---------  --------  --------  --------
Net interest income                                      4,233     4,336     8,981     8,913
Provision for loan losses                                  106       132       429       465
                                                     ---------  --------  --------  --------
Net interest income after provision for loan losses      4,127     4,204     8,552     8,448
                                                     ---------  --------  --------  --------

Other income:
Service charges on deposit accounts                        693       408     1,004       807
Trust                                                      628       450     1,139       832
Other                                                      242       259       651       468
                                                     ---------  --------  --------  --------
Total other income                                       1,563     1,117     2,794     2,107
                                                     ---------  --------  --------  --------

Operating expenses:
Salaries & employee benefits                             2,297     2,070     4,679     4,348
Occupancy                                                  783       632     1,523     1,245
Stationery, supplies & postage                             196       134       355       301
Other                                                    1,059       943     2,014     1,526
                                                     ---------  --------  --------  --------
Total operating expenses                                 4,335     3,779     8,571     7,420
                                                     ---------  --------  --------  --------

Income before income taxes                               1,355     1,542     2,775     3,135
Provision for income taxes                                 566       287       975       857
                                                     ---------  --------  --------  --------
Net income                                           $     789     1,255     1,800     2,278
                                                     =========  ========  ========  ========

Basic earnings per share                             $    4.92      7.79     11.21     14.12
                                                     =========  ========  ========  ========


<FN>

See  notes  to  condensed  consolidated  financial  statements.
</TABLE>


                                     Page 3
<PAGE>

<PAGE>
<TABLE>

<CAPTION>

                              CANANDAIGUA NATIONAL CORPORATION AND SUBSIDIARIES

                    Condensed Consolidated Statements of Stockholders' Equity (unaudited)
                            For the six month period ended June 30, 1998 and 1997
                                (Dollars in thousands, except per share data)


                                          Accumulated
                                           Additional    Other
                                             Common     Paid in  Retained   Treasury   Comprehensive
                                             Stock      Capital  Earnings     Stock       Income       Total
                                          ------------  -------  ---------  ---------  -------------  -------
<S>                                       <C>           <C>      <C>        <C>        <C>            <C>
Balance at January 1, 1998                $      8,110    8,489    24,742       (528)            119  40,932 
Comprehensive income:
Change in unrealized
  gain on securities
  available-for-sale, net of
  taxes of $15                                       -        -         -          -              23      23 
Net income                                           -        -     1,800          -               -   1,800 
                                          ------------  -------  ---------  ---------  -------------  -------
Total comprehensive income                           -        -     1,800          -              23   1,823 
                                          ------------  -------  ---------  ---------  -------------  -------
Cash dividend - $5.50 per share                      -        -      (883)         -               -    (883)
Sale of 10 shares of treasury stock                  -        -         -          3               -       3 
Purchase of 95 shares of treasury stock              -        -         -        (34)              -     (34)
                                          ------------  -------  ---------  ---------  -------------  -------
Balance at June 30, 1998                  $      8,110    8,489    25,659       (559)            142  41,841 
                                          ============  =======  =========  =========  =============  =======

Balance at January 1, 1997                $      8,110    8,489    22,616       (174)             78  39,119 
Comprehensive income:
Change in unrealized
  gain on securities
  available-for-sale, net of
  taxes of $18                                       -        -         -          -              35      35 
Net income                                           -        -     2,278          -               -   2,278 
                                          ------------  -------  ---------  ---------  -------------  -------
Total comprehensive income                           -        -     2,278          -              35   2,313 
                                          ------------  -------  ---------  ---------  -------------  -------
Cash dividend - $4.75 per share                      -        -      (768)         -               -    (768)
Sale of 9 shares of treasury stock                   -        -         -          3               -       3 
Purchase of 658 shares of treasury stock
                                                     -        -         -       (213)              -    (213)
                                          ------------  -------  ---------  ---------  -------------  -------
Balance at June 30, 1997                  $      8,110    8,489    24,126       (384)            113  40,454 
                                          ============  =======  =========  =========  =============  =======
<FN>

See  notes  to  condensed  consolidated  financial  statements.
</TABLE>



                                     Page 4

<PAGE>
<TABLE>

<CAPTION>

                         CANANDAIGUA NATIONAL CORPORATION AND SUBSIDIARIES

                    Condensed Consolidated Statements of Cash Flows (unaudited)
                       For the six month period ended June 30, 1998 and 1997
                           (Dollars in thousands, except per share data)


                                                                                     June 30,
                                                                               -------------------      
                                                                                  1998       1997
                                                                               ----------  --------
<S>                                                                            <C>         <C>
Cash flow from operating activities:                                           $   1,800     2,278 
Net income
Adjustments to reconcile net income to
net cash from operating activities:                                                1,039       704 
Depreciation and amortization                                                       (102)      (70)
Accretion and amortization                                                           429       469 
Provision for loan losses                                                           (121)        - 
Deferred income taxes                                                            (11,586)   (2,140)
Origination of loans held for sale                                                11,575     2,140 
Proceeds from sale of loans held for sale                                            140      (278)
(Increase) decrease in accrued interest receivable                                  (581)   (1,221)
(Increase) in other assets                                                           159       395 
                                                                               ----------  --------
Increase in accrued interest payable and other liabilities                         2,752     2,277 
                                                                               ----------  --------
Net cash from operating activities

Cash flows from investing activities:
Securities held to maturity:                                                      16,130    17,982 
Proceeds from calls and maturities                                               (16,165)  (18,887)
Purchases                                                                           (430)   (1,198)
Purchase of FRB & FHLB stock                                                       1,162   (28,804)
Loans made, net of principal payments                                               (801)   (1,421)
Fixed asset purchases, net                                                           911       242 
Proceeds from sale of other real estate                                             (495)     (555)
                                                                               ----------  --------
Investment in minority owned subsidiary                                              312   (32,641)
                                                                               ----------  --------
Net cash provided (used) by investing activities

Cash flows from financing activities:                                              4,046    13,679 
Net increase in demand, savings and short term deposits                            7,251    (5,534)
Proceeds from issuance of certificates of deposit net of matured certificates      7,900    22,788 
Proceeds from FHLB advances                                                      (20,012)        - 
Principal repayments on FHLB advances                                                  3         3 
Proceeds from sale of treasury stock                                                 (34)     (213)
Purchase of treasury stock                                                          (883)     (768)
                                                                               ----------  --------
Dividends paid                                                                    (1,729)   29,955 
                                                                               ----------  --------
Net cash provided (used) by financing activities
                                                                                   1,335      (409)
Net increase (decrease) in cash & cash equivalents                                19,647    19,173 
                                                                               ----------  --------
Cash & cash equivalents - beginning of period                                  $  20,982    18,764 
                                                                               ==========  ========
Cash & cash equivalents-end of period

Supplemental disclosures of cash flow information:
Cash paid during the period for:                                               $   6,147     5,229 
                                                                               ==========  ========
Interest

Supplemental disclosure of non-cash investing activity:
Additions to other real estate owned acquired through foreclosure,             $       -     2,462 
                                                                               ==========  ========
net of loans to facilitate sales
<FN>

See  notes  to  condensed  consolidated  financial  statements.
</TABLE>


                                     Page 5

<PAGE>
                CANANDAIGUA NATIONAL CORPORATION AND SUBSIDIARIES
        Notes to Condensed Consolidated Financial Statements (unaudited)


(1)     Basis  of  Presentation
        -----------------------

The accompanying unaudited condensed consolidated financial statements have been
prepared  in  accordance  with  the  instructions to Form 10-Q and Article 10 of
Regulation  S-X  and  with  generally accepted accounting principles for interim
financial  information.  Such  principles are applied on a basis consistent with
those  reflected  in the December 31, 1997 Form 10-K Report of the Company filed
with  the  Securities  and Exchange Commission. Accordingly, they do not include
all  of  the information and footnotes required by generally accepted accounting
principles  for  complete  financial  statements.  Management  has  prepared the
financial  information  included  herein  without audit by independent certified
public  accountants.  In  the opinion of management, all adjustments (consisting
of  normal recurring accruals) considered necessary for a fair presentation have
been  included.  Operating  results  for  the  three-month and six-month periods
ended  June  30,  1998 are not necessarily indicative of the results that may be
expected  for  the year ended December 31, 1998.  For further information, refer
to  the  consolidated financial statements and footnotes thereto included in the
Company's  annual  report  on  Form  10-K  for the year ended December 31, 1997.

Amounts  in  prior  periods'  consolidated financial statements are reclassified
whenever  necessary  to  conform  with  the  current  year's  presentation.

(2)     Comprehensive  Income
        ---------------------

On  January  1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income."  This  statement  establishes  standards  for  reporting and display of
comprehensive  income  and its components (revenues, expenses, gains and losses)
in  a  full  set  of  general-purpose financial statements. Comprehensive income
includes  a  company's reported net income adjusted for items that are currently
accounted  for  as  direct  entries to stockholders' equity, such as the mark to
market  adjustment  on securities available for sale. The Company's only sources
of comprehensive income are net income and changes in unrealized gains (losses),
net of taxes, on available-for-sale securities.  Accumulated other comprehensive
income represents the net unrealized gains or losses on securities available for
sale as of the balance sheet date. The adoption of this statement resulted in no
reclassification  of  prior period amounts, because the Company has not realized
any  gains  on  the  sale of its available-for-sale securities in the past three
years.

(3)     New  Accounting  Pronouncements
        -------------------------------

FASB  Statement  No.  133  entitled  "Accounting  for Derivative Instruments and
Hedging  Activities"  was  issued  in  June  1998.  This  statement  establishes
comprehensive  accounting  and reporting requirements for derivative instruments
and  hedging  activities.  The  statement  requires  companies  to recognize all
derivatives  as  either  assets or liabilities, with the instruments measured at
fair  value.  The accounting for gains and losses resulting from changes in fair
value of the derivative instrument depends on the intended use of the derivative
and  the  type of risk being hedged.  The statement is effective for the Company
for  fiscal  quarters beginning January 1, 2000.  Earlier adoption is permitted.
Management anticipates adopting the provision of this statement in 2000, however
its  impact  of  which  has  not  yet  been  evaluated.




                                     Page 6

<PAGE>

FASB Statement No. 132 entitled "Employers' Disclosures about Pensions and Other
Post  Retirement  Benefits" was issued in February 1998.  This statement revises
employers'  disclosures  about  pension and other post retirement benefit plans.
It does not change the measurement or recognition of these plans.  The statement
is  effective  for  the Company's December 31, 1998 year end financial reporting
and will not impact the Company's financial position or results of operations as
the  Company  does  not  sponsor  any  plans  covered  by  this  statement.

FASB Statement No. 131 entitled "Disclosures about Segments of an Enterprise and
Related  Information"  was issued in June 1997.  This Statement is effective for
the  Company beginning with its year end December 31, 1998 financial statements.
The  statement  establishes  standards  for  the  way  public  companies  report
information  about  operating  segments in their annual financial statements and
requires  that  those  companies  report  selected  information  about operating
segments  in  interim  financial  reports  issued  to  shareholders.  It  also
establishes  standards  for  related  disclosures  about  products,  services,
geographic areas and major customers.  This statement may increase the Company's
financial  disclosures  but  will  have  no  impact  on  operating  results.


    Item 2. -- Management's Discussion and Analysis of Financial Condition and
                              Results of Operations
                                  June 30, 1998

The  following  is  management's  discussion and analysis of certain significant
factors  which  have  affected  the  Company's  financial position and operating
results  during  the periods included in the accompanying condensed consolidated
financial  statements.  Management's  discussion  and  analysis  supplements
management's  discussion  and  analysis  for  the  year  ended December 31, 1997
contained  in  the Company's Form 10-K and includes certain known trends, events
and  uncertainties that are reasonably expected to have a material effect on the
Company's  financial  position  or  operating  results.

Forward-looking  Statements
---------------------------

When  used  or  incorporated by reference in the Company's disclosure documents,
the  words  "anticipate,"  "estimate," "expect," "project," "target," "goal" and
similar  expressions  are intended to identify forward-looking statements within
the  meaning  of  Section  27A  of  the  Securities  Act.  Such  forward-looking
statements  are  subject  to  certain  risks,  uncertainties  and  assumptions,
including,  but  not limited to (1) economic conditions, (2) real estate market,
and  (3)  interest  rates.  Should  one  or more of these risks or uncertainties
materialize,  or  should  underlying assumptions prove incorrect, actual results
may  vary  materially  from those anticipated, estimated, expected or projected.
These  forward looking statements speak only as of the date of the document. The
Company  expressly  disclaims  any obligation or undertaking to publicly release
any  updates  or  revisions to any forward-looking statement contained herein to
reflect  any  change  in  the  Company's  expectation with regard thereto or any
change  in  events,  conditions  or circumstances on which any such statement is
based.

Overview
--------

Total  assets  increased  $.3  million  or  .1% in the first six months of 1998.
Loans  decreased  $1.5  million or .5% while securities increased $.2 million or
0.1%.  During  the  same  period,  deposits  increased $11.3 million or 3.5% and
borrowings  (from  the  FHLB)  decreased $12.1 million or 23.9%. Funds generated
through  loan  paydowns  and deposit inflows were used to reduce FHLB borrowings
during  the  period.

Net  income  for the three-month period ended June 30, 1998 declined $.5 million
or  37.1%  as  compared  to  the  same period in 1997.  Basic earnings per share
decreased  by  $2.87 or 36.9% over the same period. For the six month period net
income  declined  $.5 million or 21.0% and basic earnings per share decreased by

                                     Page 7

<PAGE>

$2.91  or  20.3%.  The  decrease  in net income for both the three and six month
periods was a result of a significant expense reimbursement in 1997 relating one
large  credit  and  one-time  charges  in  1998 related to the completion of the
Company's  core  banking  system  conversion.  Also  a  portion of the increased
operating  expenses  was  derived  from  one  of  the Company's mortgage banking
subsidiaries,  which  was  not  acquired  until  late  1997;  and, the Company's
effective  tax  rate increased to 35% from 27% for the six month period. For the
three  and  six  months  ended  June 30, 1998, net interest income increased $.1
million  or  1.8% and $.1 million or 1.2%, respectively over the same periods in
1997  and  is  reflective  of  the  growth in interest income from the Company's
indirect automobile loan portfolio offset by the growth in interest expense from
FHLB  borrowings  during  the  same  period.


Results  of  Operations
-----------------------

As  of  June  30, 1998, total assets of the Company were $419.2 million, up from
$418.9  million  at  year  end  1997.  Securities showed a minor increase of $.2
million  to  $71.6 million.  Net loans decreased $1.6 million to $304.4 million,
other  assets  rose  $.2  million  to  $5.6 million, and cash and due from banks
increased  $1.1  million  to  $20.7  million.  The decline in loans is primarily
related to payoffs and refinancings of mortgage loans held in portfolio and is a
reaction to the continued low interest rate environment for residential mortgage
loans.


Total  deposits  at  June 30, 1998 were $336.1 million and were up $11.3 million
from December 31, 1997. For the same period borrowings from FHLB were down $12.1
million  to  $38.6  million.  Other liabilities increased by $.2 million to $2.8
million. The decline in borrowings is a direct result of flat loan demand and an
increase  in  time  deposits.

For  the  three  months  ending  June 30, 1998, average interest earning assets,
increased  $21.1  million  to $376.9 million from $355.8 million at December 31,
1997.  The  yields  on  these  assets  were  7.73%  and 8.35%, respectively; the
decline resulting from mortgage loan refinancings.  For the same period, average
interest  bearing  liabilities  increased  $19.5  million to $304.5 million from
$285.0  at  December  31,  1997.  Rates paid on these liabilities were 4.01% and
3.94%,  respectively.  This  69  basis  point  drop in interest spread had a $.6
million  negative  impact  on net interest income for the quarter ended June 30,
1998.  In 1998 the Company's net interest margin declined to 4.49% and 4.76% for
the  three  and  six month periods ended June 30, 1998 versus 5.19% for the year
ended  December  31,  1997.  If  market rates continue to remain low, management
expects  further erosion of both the interest rate margin and spread as a result
of  loan  refinancings.  Management  anticipates  no  significant  change in the
Company's  cost  of  funds.

Other  income  for the quarter ended June 30, 1998 was $1.6 million, an increase
of  $.4  million  or  39.9%  over  the  same  quarter in 1997.  The increase was
reflected  both  in  trust income, due to growth in assets under management, and
service  charges  attributed  increased  transaction  volume.

Operating  expenses increased $.6 million for the quarter ended June 30, 1998 to
$4.3  million  versus $3.8 million for the 1997 second quarter, reflected mostly
in  other  operating expenses.  The increase in this category for the period was
due  to  the  Company's  acquisition  of  Home  Town  Funding  in  late 1997 and
additional costs associated with the successful completion of the Company's core
banking  system  conversion.





                                     Page 8

<PAGE>

Allowance  for  Loan  Losses  and  Non-Performing  Assets
---------------------------------------------------------

Allowance  for  Loan  Losses
----------------------------
<TABLE>

<CAPTION>

Changes  in  the  allowance for loan losses for the six month periods ended June
30,  1998  and  1997  are  as  follows  (dollars  in  thousands):


                                                      June 30,   June 30,
                                                        1998       1997
                                                     ----------  ---------
<S>                                                  <C>         <C>
Balance at beginning of period                       $   3,153      2,675 
Provision for loan losses                                  429        465 
Loans charged off                                         (637)      (374)
Recoveries on loan previously charged off                  308        184 
                                                     ----------  ---------
Balance at end of period                             $   3,253      2,950 
                                                     ==========  =========

Allowance as a percentage of total period end loans       1.06%      1.04%
                                                     ==========  =========

Allowance as a percentage of non performing loans        100.9%      58.9%
                                                     ==========  =========
</TABLE>



At  June 30, 1998, the recorded investment in loans that are considered impaired
totaled  $2.6  million as compared to $3.1 million at December 31, 1997 and $5.0
million  at  June  30,  1997.  The average recorded investment in impaired loans
during  the  periods then ended was approximately $3.0 million and $8.7 million,
respectively.  For  the  six months ended June 30, 1998 and 1997 interest income
recognized  on  impaired  loans  was  not  material.

Total non-performing loans decreased by $1.8 million to $3.2 million at June 30,
1998  as  compared  to  $5.0  million  at June 30, 1997.  A major portion of the
decrease  was  contributed by a $3.4 million reduction in non accrual commercial
real  estate  through  the Company's successful workout in mid 1997 of one large
credit.  Loans  90  days  or  more  past  due and accruing have increased to $.6
million  at  June  30,  1998  from  June  30,  1997.  However, since these loans
continue to accrue interest, because management considers principal and interest
on  these  loans  fully collectible, management considers this trend positive in
light  of  the  reduction  in  total  non-performing  loans.

Other  real  estate owned consists of seven parcels of property, all commercial,
for $1.6 million. The decline in other real estate owned from the same period in
1997  is  a  result of the Company's foreclosure on $ 2.1 million in real estate
assets  in  May  1997  offset  by  the liquidation of portions of this and other
properties.












                                     Page 9

<PAGE>

Non-Performing  Assets
----------------------
<TABLE>

<CAPTION>

                                    Non-Performing Assets
                                    (Dollars in thousands)


                                                                        June 30,   June 30,
                                                                          1998       1997
                                                                       ----------  ---------
<S>                                                                    <C>         <C>
Loans past due 90 days or more and accruing
Commercial, financial & agricultural                                   $     429          - 
Real estate-commercial                                                       135          - 
Real estate-residential                                                       73          - 
Consumer                                                                      29         48 
                                                                       ----------  ---------
Total past due 90 days or more and accruing                                  666         48 
                                                                       ----------  ---------

Loans in non-accrual status
Commercial, financial & agricultural                                         611      1,672 
Real estate-commercial                                                     1,519      2,708 
Real estate-residential                                                      427        511 
Consumer                                                                       -         73 
                                                                       ----------  ---------
Total non-accrual loans                                                    2,557      4,964 
                                                                       ----------  ---------
Total non-performing loans                                                 3,223      5,012 
                                                                       ----------  ---------

Other real estate owned
Commercial                                                                 1,601      3,158 
Residential                                                                    -        202 
                                                                       ----------  ---------
Total other real estate owned                                              1,601      3,360 
                                                                       ----------  ---------
Total non-performing assets                                            $   4,824      8,372 
                                                                       ==========  =========

Non performing loans to total period end loan                               1.05%      1.77%
                                                                       ==========  =========

Non performing assets to total period end loans and other real estate       1.56%      2.92%
                                                                       ==========  =========
</TABLE>


The  Company  has  no  restructured  loans.

Liquidity
---------

Liquidity is defined as the ability to generate adequate amounts of cash to meet
the  demand  for  cash from depositors who wish to withdraw funds, borrowers who
require  funds, and capital expansion.  Liquidity is produced by cash flows from
operating,  investing,  and  financing  activities  of  the  Company.

For  the  six months ended June 30, 1998, net cash from operating activities was
$2.8  million  as  compared  to  $2.3  million for the same period in 1997.  The
increase of $.5 million was primarily caused by a decrease in net income, offset
by  a  lower  increase  in  other  assets  than  in  1997

Cash  provided by investing activities was $.3 million versus cash used of $32.6
million for the six months ended June 30, 1998 and 1997, respectively.  The loan
portfolio decreased by $1.2 million for the first six months of 1998 as compared
to  an  increase  of $28.8 million for the same period in 1997.  The substantial
increase in 1997 came from the growth in the indirect automobile loan portfolio.
Net  purchases  of

                                     Page 10

<PAGE>

securities  amounted  to .5 million in 1998 as compared to net purchases of $2.1
million  in 1997.  These changes, as well as reductions in fixed asset purchases
and  higher  liquidations  of  other  real  estate,  provided the cash flow from
investing  activities  for  1998  as  opposed  to  the  use  of  cash  in  1997.

Cash  used by financing activities was $1.7 million in 1998 versus cash provided
of  $29.9  million in 1997.  Major components contributing to this change were a
net  increase  of  $11.3 million in deposits in 1998 versus $8.1 million in 1997
and  net repayment of FHLB advances of $12.1 million in 1998 versus borrowing of
$22.8  million  in  1997.

At  June 30, 1998 the Company had additional borrowing capacity from the FHLB of
at  least  $8  million.

Interest  Rate  Sensitivity  and  Asset  /  Liability  Management  Review
-------------------------------------------------------------------------
(Quantitative  and  Qualitative  Disclosures  about  Market  Risk)
------------------------------------------------------------------

The  Company realizes income principally from the differential or spread between
the interest earned on loans, investments and other interest-earnings assets and
the  interest  paid on deposits and borrowings. Loan volumes and yields, as well
as the volume of and rates on investments, deposits and borrowings, are affected
by  market  interest rates. Additionally, because of the terms and conditions of
many  of the Company's loan documents and deposit accounts, a change in interest
rates  could  also  affect the projected maturities of the loan portfolio and/or
the  deposit base, which could alter the Company's sensitivity to future changes
in  interest  rates.  Accordingly, management considers interest rate risk to be
the  Company's  most  significant  market  risk.

Interest  rate  risk  management focuses on maintaining consistent growth in net
interest  income  within  Board  approved  policy  limits  while  taking  into
consideration,  among  other  factors,  the  Company's overall credit, operating
income,  operating  cost,  and  capital  profile.  The Company's Asset/Liability
Committee  (ALCO),  which includes senior management and reports to the Board of
Directors,  monitors  and  manages  interest rate risk to maintain an acceptable
level of change to net interest income as a result of changes in interest rates.

Management  of  the  Company's  interest  rate  risk,  requires the selection of
appropriate  techniques  and  instruments  to  be utilized after considering the
benefits,  costs  and  risk  associated  with available alternatives.  Since the
Company does not utilize derivative instruments, management's techniques usually
consider  one  or more of the following: (1) interest rates offered on products,
(2)  maturity  terms offered on products, (3) types of products offered, and (4)
products  available to the Company in the wholesale market such as advances from
the  FHLB.

The  Company  uses  an interest margin simulation model as its primary method to
identify  and  manage  its  interest  rate  risk  profile. The model is based on
expected  cash flows and repricing characteristics for all financial instruments
and  incorporates  market-based  assumptions  regarding  the  impact of changing
interest  rates  on

these  financial  instruments.  Assumptions  based on the historical behavior of
deposit  rates  and  balances  in relation to changes in interest rates are also
incorporated  into the model. These assumptions are inherently uncertain and, as
a  result,  the  model cannot precisely measure net interest income or precisely
predict  the  impact  of  fluctuations in interest rates on net interest income.
Actual  results will differ from simulated results due to timing, magnitude, and
frequency  of  interest rate changes as well as changes in market conditions and
management  strategies.



                                     Page 11

<PAGE>

Using  the  aforementioned  simulation  model,  net earnings projections reflect
continued  growth  in  net  income  when  applying  the  declining interest rate
environment as of June 30, 1998 ("Base Case").  The table below, which shows the
Company's  estimated  net  earnings  sensitivity  profile  as  of June 30, 1998,
assumes  no  changes  in  the  operating environment, but assumes interest rates
increase/decrease  immediately (rate shock) and remain unchanged thereafter. The
table  indicates  the  estimated impact on net income under the various interest
rate  scenarios  as  a  percentage  of  Base  Case  earnings  projections.

<TABLE>

<CAPTION>

                Estimated Percentage  Estimated Percentage
Changes in        Change in Future      Change in Future
Interest Rates       Net Income            Net Income
Basis points         12 Months             24 Months
--------------  --------------------  --------------------                    
<S>                   <C>                   <C>
Base Case               -                     -
+200                  (8.08)%               (6.46)%
+100                  (5.41)                (4.59)
-100                   4.75                  3.94 
-200                   7.74                  6.11 
</TABLE>

A  secondary method used to identify and manage the Company's interest rate risk
profile  is  the  static gap analysis. Interest sensitivity gap ("gap") analysis
measures the difference between the assets and liabilities repricing or maturing
within  specific  time periods. An asset-sensitive position indicates that there
are  more  rate-sensitive  assets  than  rate-sensitive liabilities repricing or
maturing  within specific time horizons, which would generally imply a favorable
impact on net interest income in periods of rising interest rates and a negative
impact  in  periods  of  falling  rates.  A  liability-sensitive  position would
generally  imply  a  negative impact on net interest income in periods of rising
rates  and  a  positive  impact  in  periods  of  falling  rates.

The  following  table  presents  an  analysis  of  the  Company's  interest
rate-sensitivity gap position at June 30, 1998.  All interest-earning assets and
interest-bearing liabilities are shown based on the earlier of their contractual
maturity  or  repricing  date adjusted by forecasted prepayment and decay rates.
Asset  prepayment  and  liability decay rates are selected after considering the
current  rate environment, industry prepayment and decay rates and the Company's
historical  experience.  It  should  also  be  noted  that  the  interest  rate
sensitivity  levels shown in the table could be changed by external factors such
as  loan  prepayments  or  by  factors controllable by the Company such as asset
sales.












                                     Page 12

<PAGE>
<TABLE>

<CAPTION>

                               Interest Rate Sensitivity Gap
                                       June 30, 1998
                                   (Dollars in thousands)
                    Maturity/Repricing  Period
                    --------------------------


                                           Within 3   4 to 12    1 to 5     Over 5
                                           Months     Months     Years      Years     Total
                                           --------   ---------  ---------  --------  -------     
<S>                                        <C>        <C>        <C>       <C>      <C>
Interest-earning assets:
Interest-bearing deposits and
  federal funds sold                             --        259        --       --       259
Securities                                    7,643     18,768    37,387   11,306    75,104
Loans                                        90,432      5,015   149,147   63,070   307,664
                                           ---------  ---------  --------  -------  -------
Total interest-earnings assets               98,075     24,042   186,534   74,376   383,027
                                           ---------  ---------  --------  -------  -------

Interest-bearing liabilities:
NOW accounts                                 38,870         --        --       --    38,870
Money market                                 45,546         --        --       --    45,546
Savings                                      64,973         --        --       --    64,973
Certificates of deposits                     51,354     35,534    33,951       --   120,839
FHLB advances                                34,200      1,024     2,520      811    38,555
                                           ---------  ---------  --------  -------  -------
Total interest-bearing liabilities          234,943     36,558    36,471      811   308,783
                                           ---------  ---------  --------  -------  -------

Interest rate sensitivity gap              (136,868)   (12,516)  150,063   73,565    74,244
                                           =========  =========  ========  =======  =======

Cumulative gap                             (136,868)  (149,384)      679   74,244 
                                           =========  =========  ========  =======         

Cumulative gap as percent of total assets    (32.6%)    (35.6%)       .2%    17.7%
                                           =========  =========  ========  =======         
</TABLE>


As of June 30, 1998, the Company's three-month gap is a negative $136.9 million,
which is $40 million higher than one year ago.  While interest-earning assets in
this  period have declined $2.4 million, interest-bearing liabilities have risen
$14.1 million.  FHLB advances are up $1 million and deposits rose $13.1 million.

The  12  month  cumulative gap is a negative $149.3 million up from a year ago's
negative  $137.6  million, again due primarily to the FHLB borrowings.  However,
the  gap  as  a  percent  of  total  assets  has  remained  steady  at  35%.

The  period and cumulative gaps continue to be positive in the 1 to 5 year range
and  forward.

As  part  of  the  Company's  active  asset liability management, management has
identified  a  program  of brokered certificate of deposit sales and is pursuing
its establishment.  The Company is also considering pursuing a means to market a
subordinated  debenture  issuance.

Capital  Adequacy
-----------------

Total  stockholders' equity was $41.8 million at June 30, 1998, which represents
an  increase  of  $.1  million  or 2.2% from $40.9 million at December 31, 1997.
Stockholders'  equity  increased  by  $1.8  million  due  to

                                     Page 13

<PAGE>

net  income  and  $.02  million from increased unrealized gains on available for
sale securities, but was offset by dividends of $.9 million and net purchases of
treasury  stock  of  $.03  million for the six month period ended June 30, 1998.

At  June  30,  1998  the Company and its banking subsidiary exceeded the minimum
regulatory  guidelines  for all capital ratios (Tier 1 - 4% and Total Risk-Based
Capital  -  8%).  The  Company  and  Bank  also  exceeded the minimum regulatory
guideline  for  leverage  ratio  of 5% for "well-capitalized" institutions.  The
table  below illustrates the Corporation's regulatory capital ratios at June 30,
1998,  under  current  requirements.  The Bank's ratios do not differ materially
from  the  Company's.  (dollars  in  thousands):
<TABLE>

<CAPTION>

                                                               Amount   Ratio
                                                               -------  ------
<S>                                                            <C>      <C>
Total capital (to risk weighted assets)                        $41,841   12.9%
Tier 1 capital (to risk weighted assets)                       $41,503   12.8%
Tier I capital (to average assets)                             $41,503   10.1%
Leverage ratio (Tier 1 capital to total assets less goodwill)  $41,503    9.9%
</TABLE>


The  ratios  above  are indicative of the Corporation's strong capital position.

Dividends  Per  Share  and  Earnings  Per  Share
------------------------------------------------

No  dividends  were  paid  in  the  quarters  ended  June  30, 1998 and 1997.  A
semi-annual  dividend  of  $5.50 was paid February 1, 1998 versus $4.75 in 1997.

Basic  earnings  per  common  share is based upon the weighted average number of
common  shares  and  equivalents  (stock options) outstanding during the period.
Since there are no potentially dilutive securities outstanding at June 30, 1998,
diluted  earnings  per  share  is not presented.  The weighted average number of
common  shares  outstanding  for the three month periods ended June 30, 1998 and
1997  were  160,493  and  161,146,  respectively. The weighted average number of
common shares outstanding for the six month periods ended June 30, 1998 and 1997
were  160,528  and 161,297, respectively.  Net income used in the calculation of
basic  earnings  per  share  is  net  income shown on the condensed consolidated
statements  of  income  for  the  respective  periods.

Year  2000
----------

Like  other  companies,  many  of  the  Company's  computer  programs  and other
applications  were originally designed to recognize calendar years by their last
two  digits.  Calculations  performed using these truncated fields will not work
properly  with  dates from the year 2000 and beyond. The Company began reviewing
its year 2000 conversion needs in 1996 and has a project committee that meets to
review  the  status  of  the  conversion. A comprehensive review to identify the
systems  affected by this issue was completed in 1997 and an implementation plan
was  compiled  and  is  currently  being executed. As a result of the procedures
already  completed,  the  Company expects to upgrade existing systems or replace
some  systems  altogether.  Considerable  progress  has been made, including the
replacement/conversion  of  the  Company's  core  operating  systems.  It  is
anticipated that all remaining projects will be completed by internal staff. The
Company  does  not  expect  to  spend  any  significant  amounts  with  outside
contractors.  Therefore,  costs do not represent any material incremental costs,
but rather will represent the redeployment of existing technology resources. The
remaining systems to be converted/replaced are vendor-supplied, and most vendors
have  provided  the  Company with certification or a delivery commitment letter.
The  Company  presently  believes  that  with the conversion to new systems, and
vendor  delivery  of  millennium-compliant  systems,  all  material  year  2000
compliance  issues  will  be  resolved  no later than the first quarter of 1999.

                                     Page 14

<PAGE>

A  committee  continues  to  direct the Company's Year 2000 activities under the
framework  of  the  Federal Financial Institutions Examination Council's (FFIEC)
Five  Step Program.  As of June 30, 1998 the Testing  and Contingency Plan Phase
of  our  Y2K Compliance Plan has begun with a goal of completing these phases by
December  31,  1998.

The  Company  is  also  subject, either directly or indirectly, to the year 2000
issue  with  respect to external parties, particularly commercial loan customers
and  transaction  processing parties.  The Company is addressing its exposure to
its  commercial  loan  customers  by  reviewing  customer's plans and procedures

for remediating their year 2000 risk.  This review is carried out in the context
of  the  Company's  annual  loan  review  process.  With  respect to transaction
processing  parties, the Company is monitoring their remediation efforts through
periodic  communication.   As  these  parties  begin  their  testing  phase, the
Company  will  be  involved  in  testing  its own systems against the remediated
systems.





































                                     Page 15

<PAGE>
PART  II  --  OTHER  INFORMATION

                CANANDAIGUA NATIONAL CORPORATION AND SUBSIDIARIES


Item  1.  Legal  proceedings

None

Item  2.  Changes  in  securities

None

Item  3.  Defaults  upon  senior  securities

None

Item  4.  Submission  of  matters  to  a  vote  of  security  holders

None

Item  5.  Other  information

None

Item  6.  Exhibits  and  reports  on  Form  8-K
(a)     Exhibits
None

(b)     Reports  on  Form  8-K
None





















                                     Page 16

<PAGE>

                                   SIGNATURES

                CANANDAIGUA NATIONAL CORPORATION AND SUBSIDIARIES


      Pursuant  to  the requirements of the Securities Exchange Act of 1934, the
registrant  has  duly  caused  this  report  to  be  signed on its behalf by the
undersigned  thereunto  duly  authorized.



          CANANDAIGUA  NATIONAL  CORPORATION
          ----------------------------------
                                       (Registrant)



                August 15, 1998          /s/ George W. Hamlin, IV
                ---------------          ------------------------
                  Date          George W. Hamlin, IV, President


                 August 15, 1998          /s/ Gregory S. MacKay
                 ---------------          ---------------------
                   Date          Gregory S. MacKay, Treasurer






























                                     Page 17

<PAGE>