Virginia National Bankshares Inc., the second largest bank holding company in Virginia, has stopped issuing Visa and Mastercard charge cards and has tightened credit requirements for auto loans, bank Chairman Clifford A. Cutchins III said today.

The company also is considering adding a penalty for late payments on credit-card accounts, but it is waiting for a decision by the state on whether such an action is legal, Cutchins said in an interview.

Virginia's economy will remain relatively stable compared with those of many other states without the benefit of large numbers of federal employes, but it is beginning to slow, Cutchins said.

Since 1978 the bank has restrained the growth of new commercial and industrial loans in expectation of a slowdown in the economy, Cutchins said.

Last year, for example, Cutchins said that commercial and industrial loans grew by 1.6 percent "and that was by design. Our forecast for growth this year is 5 percent."

The company also stopped taking applications for its Private Line consumer revolving credit program during the first week of March, Cutchins said. That action was taken primarily because customers were withdrawing $25,000 and $50,000 "and investing it elsewhere," he said. The interest on those credit accounts was only 1 percent a month.

The company still is taking credit card applications, but none will be issued for an indefinite time, Cutchins said. The company is "probably just breaking even or losing money with credit cards" because the maximum interest rate that can be charged is only 18 percent, he said.

Losses of payments on credit cards accounts have increased, too, which is usual "whenever you begin to get unemployment," Cutchins said.

In addition, the bank has toughened the criteria for issuing credit cards and auto loans, the chairman said. Maximum terms for auto loans also have been shortened to 36 months.In addition to higher interest rates for auto loans, required down payments also have increased, Cutchins said.

Consumer buying has dropped, he added.

On a more positive note, Cutchins said despite economic woe in other parts of the country, Virginia's economy will remain relatively strong, particularly because of the high concentrations of federal workers in Northern Virginia, the Tidewater area and the Peninsula.

"Virginia has always had a fairly stable economy," Cutchins said. "We think we'll be better off than the rest of the nation."

Cutchins added, however, that housing starts already have dropped.

During the company's annual shareholders meeting here today, Cutchins said first-quarter earnings before securities transactions rose 18.1 percent from $5.2 million (76 cents a share) to $6.1 million (88 cents).