[X]

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2002

OR

[  ]

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from__________ to__________

New York
(State or other jurisdiction of
incorporation or organization)

16-1234823
(IRS Employer Identification Number)

72 South Main Street
Canandaigua, New York
(Address of principal executive offices)

14424
(Zip 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, and (2) has been subject to such filing requirements for the past 90 days

Yes   X

No

    The number of shares outstanding of each of the issuer's classes of common stock was 476,673 shares of common stock, par value $20.00, outstanding as at October 28, 2002.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This report contains certain "forward-looking statements" intended to qualify for the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. When used or incorporated by reference in the Company's disclosure documents, the words "anticipate," "estimate," "expect," "project," "target," "goal," "budget" 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, projected or budgeted. These forward-looking s tatements 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.

PART I -- FINANCIAL INFORMATION

PAGE

Item 1. Financial Statements (Unaudited)

  Condensed consolidated balance sheets at September 30, 2002 and December 31, 2001

4

Condensed consolidated statements of income for the three- and nine-month periods ended
    September 30, 2002 and 2001.

5

Consolidated statements of stockholders' equity for the nine-month periods ended September 30, 2002 and

   2001

6

  Consolidated statements of cash flows for the nine-month periods ended September 30, 2002 and 2001.

7

  Notes to financial statements.

8

Item 2. Management's Discussion and Analysis of Financial

Condition and Results of Operations

11

Item 3. Quantitative and Qualitative Disclosures about Market Risk

  This information is incorporated by reference in Part I, Item 2, Interest Rate Sensitivity and
    Asset/Liability Management Review

13

PART II -- OTHER INFORMATION

Item 1.  Legal Proceedings

18

Item 2.  Changes in Securities

18

Item 3.  Defaults Upon Senior Securities

18

Item 4.  Submission of Matters to a Vote of Security Holders

18

Item 5.  Other Information

18

Item 6.  Exhibits and Reports on Form 8-K

18

SIGNATURES

19

EXHIBITS

20

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

September 30,

December 31,

2002

2001

Cash and due from banks

$

34,216

30,248

Interest-bearing deposits with other financial institutions

14,454

8,293

Federal funds sold

30,000

8,100

Securities:

  - Available for sale, at fair value

34,461

534

  - Held-to-maturity (fair value of $121,925 in 2002 and $119,971 in 2001)

117,306

118,449

Loans:

  Commercial, financial & agricultural

101,042

96,772

  Commercial mortgage

252,188

228,447

  Residential mortgage

87,520

85,402

  Consumer-auto indirect

86,347

85,243

  Consumer-other

22,227

23,093

  Other

747

1,603

  Loans held for sale

6,181

14,401

    Total loans

556,252

534,961

  Less:  Allowance for loan losses

(5,776

)

(5,480

)

    Loans - net

550,476

529,481

Premises and equipment - net

16,403

17,062

Accrued interest receivable

4,254

3,201

Federal Home Loan Bank stock and Federal Reserve Bank stock

2,200

2,013

Other assets

7,912

8,337

        Total Assets

$

811,682

725,718

Deposits:

  Demand:

    Non-interest bearing

$

95,426

93,931

    Interest bearing

75,451

69,156

  Savings and money market

324,075

276,689

  Time deposits

239,608

231,067

        Total deposits

734,560

670,843

Borrowings

1,060

1,097

Guaranteed Preferred Beneficial Interest in Company's Subordinated Debt

19,404

-

Accrued interest payable and other liabilities

5,863

5,646

        Total Liabilities

760,887

677,586

Stockholders' Equity:

  Common stock, $20 par value; 2,000,000 shares authorized;

    486,624 shares issued in 2002 and 2001

9,732

9,732

  Additional paid-in capital

6,931

6,931

  Retained earnings

34,867

32,428

  Treasury stock at cost (9,951 and 9,963 shares in 2002 and 2001, respectively)

(1,216

)

(1,218

)

  Accumulated other comprehensive income

481

259

        Total Stockholders' Equity

50,795

48,132

        Total Liabilities and Stockholders' Equity

$

811,682

725,718

CANANDAIGUA NATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the three- and nine-month periods ended September 30, 2002 and 2001 (Unaudited)
(dollars in thousands, except per share data)

Three months ended

Nine months ended

September 30,

September 30,

2002

2001

2002

2001

Interest income:

  Loans, including fees

$

9,619

9,965

28,580

29,507

  Securities

1,390

1,153

3,641

3,520

  Other

188

44

463

88

        Total interest income

11,197

11,162

32,684

33,115

Interest expense:

  Deposits

3,479

4,239

10,719

13,541

  Borrowings

297

173

315

367

      Total interest expense

3,776

4,412

11,034

13,908

      Net interest income

7,421

6,750

21,650

19,207

Provision for loan losses

1,115

379

1,776

1,177

      Net interest income after provision for loan losses

6,306

6,371

19,874

18,030

Other income:

  Service charges on deposit accounts

1,237

1,119

3,508

3,355

  Trust income

901

832

2,570

2,743

  Net gain on sale of mortgage loans

241

215

907

694

  Other operating income

315

456

1,080

1,270

      Total other income

2,694

2,622

8,065

8,062

Operating expenses:

  Salaries and employee benefits

4,011

3,609

12,018

11,023

  Occupancy

1,381

1,245

3,935

3,764

  Marketing and public relations

418

206

1,045

647

  Office supplies, printing and postage

297

278

782

798

  FDIC insurance

78

26

228

76

  Other operating expenses

1,430

977

3,883

3,414

      Total operating expenses

7,615

6,341

21,891

19,722

      Income before income taxes

1,385

2,652

6,048

6,370

Income taxes

270

775

1,654

1,879

      Net income

$

1,115

1,877

4,394

4,491

Basic earnings per share

$

2.34

3.94

9.22

9.43

Diluted earnings per share

$

2.31

3.91

9.13

9.37

CANANDAIGUA NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the nine-month periods ended September 30, 2002 and 2001 (Unaudited)
(dollars in thousands, except per share data)

Accumulated

Additional

Other

Common

Paid in

Retained

Treasury

Comprehensive

Stock

Capital

Earnings

Stock

Income

Total

Historical balance at

January 1, 2002

$

8,110

8,553

32,428

(1,218

)

259

48,132

  Comprehensive income:

    Change in unrealized gain on

      securities available for sale,

      net of taxes of $142

-

-

-

-

222

222

    Net income

-

-

4,394

-

-

4,394

  Total comprehensive income

4,616

  Cash dividend - $4.10 per share

-

-

(1,955

)

-

-

(1,955

)

  Sale of 12 shares

    of treasury stock

-

-

-

2

-

2

  Change in par value of stock

1,622

(1,622

)

-

-

-

-

Balance at September 30, 2002

$

9,732

6,931

34,867

(1,216

)

481

50,795

Balance at January 1, 2001

$

8,110

8,532

28,687

(1,268

)

208

44,269

  Comprehensive income:

    Change in unrealized gain on

      securities available for sale,

      net of taxes of $10

-

-

-

-

47

47

    Net income

-

-

4,491

-

-

4,491

  Total comprehensive income

4,538

  Cash dividend - $4.03 per share

-

-

(1,921

)

-

-

(1,921

)

  Sale of 15 shares

    of treasury stock

-

-

-

1

-

1

Balance at September 30, 2001

$

8,110

8,532

31,257

(1,267

)

255

46,887

CANANDAIGUA NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine-month periods ended September 30, 2002 and 2001 (Unaudited)
(dollars in thousands)

2002

2001

Cash flow from operating activities:

Net income

$

4,394

4,491

Adjustments to reconcile net income to

net cash provided (used in) by operating activities:

Depreciation, amortization and accretion

1,879

1,158

Provision for loan losses

1,776

1,177

Deferred income taxes

(180

)

(157

)

Undistributed income from minority owned entities

(23

)

(73

)

Originations of loans held for sale

(106,495

)

(77,970

)

Proceeds from sale of loans held for sale

114,715

77,508

Increase in accrued interest receivable and other assets

(1,299

)

(405

)

Increase in accrued interest payable and other liabilities

217

406

Net cash provided (used in) by operating activities

14,984

(6,135

)

Cash flow from investing activities:

Proceeds from call of FHLB stock

315

1,019

Purchase of FHLB and FRB stock

(502

)

-

Securities available-for-sale:

Purchases

(34,102

)

-

Securities held to maturity:

Proceeds from maturities and calls

145,456

139,498

Purchases

(144,112

)

(157,075

)

Loans originated , net of repayments

(30,991

)

(53,025

)

Fixed asset purchases - net

(1,142

)

(2,662

)

Investment in minority owned entity

-

(884

)

Cash received from sale of other real estate

992

10

Net cash used by investing activities

(64,086

)

(73,119

)

Cash flow from financing activities:

Net increase in demand, savings and money market deposits

54,436

69,080

Net increase (decrease) in time deposits

9,281

(5,209

)

Proceeds from overnight borrowings

-

10,400

Proceeds from issuance of trust preferred securities

19,399

-

Principal repayments on long-term borrowings

(32

)

(13,865

)

Proceeds from sale of treasury stock

2

1

Dividends paid

(1,955

)

(1,921

)

Net cash provided by financing activities

81,131

75,834

Net increase in cash & cash equivalents

32,029

8,850

Cash & cash equivalents - beginning of period

46,641

28,254

Cash & cash equivalents - end of period

$

78,670

37,104

Supplemental disclosures of cash flow information:

Cash paid during the period for:

Interest

$

11,416

14,121

Income taxes

$

2,198

1,990

(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, 2001 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. All references in the consolidated financial statements to common shares, share prices, per share amounts and stock plans have been restated retroactively for the three-for-one stock split (as described in Note 2), unless otherwise noted. 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- and nine-month periods ended September 30, 2002, are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. 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, 2001.

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

(2) Changes to Common Stock

On January 9, 2002, the Board of Directors declared a three-for-one common stock split, subject to the approval of stockholders of an increase in the number of common shares authorized from 240,000 to 2,000,000 and a change in the par value from $50.00 per share to $20.00 per share. The record date of the split was January 9, 2002. The stockholders approved the increase on March 13, 2002. All share amounts per share calculations have been restated to reflect the stock split.

(3)   Dividends Per Share

The Company declared a semi-annual $2.05 per share dividend on common stock on July 9, 2002, payable August 1, 2002 to shareholders of record July 9, 2002. The Company also declared a semi-annual $2.05 per share dividend on common stock on January 9, 2002, and paid February 1, 2002, to shareholders of record January 9, 2002.

(4)   Earnings Per Share

Basic earnings per common share is calculated by dividing net income available to common shareholders by the weighted average number of shares outstanding during the period. Diluted earnings per share includes the maximum dilutive effect of stock issueable upon conversion of stock options. Calculations for the three- and nine-month periods ended September 30, 2002, and 2001 follow (dollars in thousands, except share data):

For the three months ended September 30,

2002

2001

Basic Earnings Per Share:

Net income applicable to common shareholders

$

1,115

1,877

Weighted average common shares outstanding

476,672

476,211

Basic earnings per share

$

2.34

3.94

Diluted Earnings Per Share:

Net income applicable to common shareholders

$

1,115

1,877

Weighted average common shares outstanding

476,672

476,211

Effect of assumed exercise of stock options

5,227

3,381

Total

481,899

479,592

Diluted earnings per share

$

2.31

3.91

(4)   Earnings Per Share (continued)

For the nine months ended September 30,

2002

2001

Basic Earnings Per Share:

Net income applicable to common shareholders

$

4,394

4,491

Weighted average common shares outstanding

476,665

476,202

Basic earnings per share

$

9.22

9.43

Diluted Earnings Per Share:

Net income applicable to common shareholders

$

4,394

4,491

Weighted average common shares outstanding

476,665

476,202

Effect of assumed exercise of stock options

4,368

3,168

Total

481,033

479,370

Diluted earnings per share

$

9.13

9.37

(5)   Stock Option Plan

The Company applies APB Opinion No. 25 in accounting for its stock option plan, and accordingly, no compensation cost has been recognized for its fixed-award stock options in the condensed consolidated statement of income. Had compensation cost been determined based on the fair value at the grant date of the stock options using valuation models consistent with the approach of SFAS No. 123, the Company's net income and earnings per share for the year-to-date periods in 2002 and 2001 would have been reduced to the pro forma amounts indicated below (net income in thousands):

For the nine months ended September 30,

2002

2001

Net income:

As reported

$

4,394

4,491

Pro forma

4,184

4,326

Earnings per share:

As reported:

Basic

$

9.22

9.43

Diluted

9.13

9.37

Pro forma:

Basic

$

8.78

9.08

Diluted

8.70

9.02

The weighted average fair value of options granted during 2002 and 2001 was $37.46 and $32.51, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

Grant year

2002

2001

Dividend yield

2.60%

2.61%

Risk free interest rate

5.07%

4.92%

Life

13.2 years

10.4 years

Volatility

13.30%

13.81%

(6)   Contract Termination Costs and Sale of Credit Card Portfolios

The balance of the contract termination costs liability at September 30, 2002, was $98,000, as compared to $145,000 at December 31, 2001. The $47,000 reduction represents net cash payments for a portion of the termination costs. The balance is expected to be fully paid and funded through operations in 2002, when final termination costs are invoiced.

7. Guaranteed Preferred Beneficial Interest in Company's Subordinated Debt -Trust Preferred Issuance

(8)   Impact of Accounting Standard Adoption

The Company adopted Financial Accounting Standards Board (FASB) Statement No. 142, "Goodwill and Other Intangible Assets," on January 1, 2002. This statement changed the accounting for goodwill from an amortization method to an impairment-only approach. Thus, amortization of goodwill, including goodwill recorded in past business combinations, ceased upon its adoption. Since the Company had no unamortized goodwill at December 31, 2001, the statement had no impact.

The Company also adopted FASB Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which replaced FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Statement 144 requires long-lived assets held for sale or disposal to be measured at the lower of carrying amount or fair value less costs to sell, whether reported in continuing operations or in discontinued operations. Therefore, discontinued operations will no longer be measured at net realizable value or include amounts for operating losses that have not yet occurred. The Statement also broadens the reporting of discontinued operations. Although adopted, the statement had no impact on the Company as it is dependent upon any future long-lived asset disposal decisions.

In the second quarter of 2002, the Company adopted FASB Statement No. 145 "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections" issued in April 2002. This Statement rescinds FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment of Debt", and an amendment of that Statement, FASB Statement No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements." This Statement also rescinds FASB Statement No. 44, "Accounting for Intangible Assets of Motor Carriers". This Statement amends FASB Statement No. 13, "Accounting for Leases," to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe the ir applicability under changed conditions. Although adopted, the statement had no impact on the Company as the Company has no transactions to which the statement applies.