Washington Mutual Inc. took a significant step toward its goal of becoming a force in consumer finance, announcing Wednesday that it would buy Long Beach Financial Corp. for about $350 million.

"We've been interested in this segment of the business for a long time," said Craig Tall, an executive vice president at Wamu. "There's a real opportunity for us to become a significant national player" in subprime lending, he said.

Long Beach, one of the few remaining public home finance companies, would get $15.50 a share, a 25% premium to its stock price Tuesday.

The deal is expected to add to Washington Mutual's earnings immediately after its third-quarter closing.

Long Beach has a $2 billion servicing portfolio, and reported $6.5 million in earnings during the first quarter. It originated $752 million in loans in the quarter, mainly through its network of 12,500 brokers.

Washington Mutual picked up finance unit Aristar Inc. when it bought Great Western Financial Corp. in June 1998. Aristar makes unsecured loans and finances appliances through more than 400 offices nationwide.

Long Beach's management, track record, and avoidance of securitization made it attractive to Washington Mutual, Mr. Tall said. Long Beach sells off whole loans, rather than securitizing them like many of its peers, and therefore bypassed some of the hardship many subprime lenders experienced last year when the market for asset-backed securities collapsed.

Companies that securitize loans are required use gain-on-sale accounting, which forces them to estimate incoming cash flow from these loans. The practice can lead to earnings volatility if the market for these securities tanks.

Long Beach will retain its Southern California headquarters, its name, and its entire staff, Wamu said.

"There's a tremendous opportunity for consolidation, and we can become the consolidator," said Jack Mayesh, chief executive of Long Beach, who said he plans to use Wamu's resources to make the unit the "dominant" subprime lender in the country.

Because Long Beach lends to customers with poor credit history, it charges higher rates than traditional mortgage lenders, and therefore earns higher profits.

"Long Beach loans earn about 400 basis points more than Wamu loans, while Wamu has better and cheaper funding sources," said Charlotte Chamberlain, a Jefferies & Co. analyst who called the deal an "excellent opportunity" for the thrift.

Though the deal is Washington Mutual's first step in what it says will be a major business, analysts noted that the two companies have a long way to go to capture a lead share in the nearly $200 billion subprime industry, or to go head-to-head with finance companies such as Associates First Captial Corp. of Dallas, or Household International Inc. of Prospect Heights, Ill.

"The transaction fits in with Washington Mutual's very broad and subtle indications" concerning their inclinations in consumer finance, said Michael Hodes, an analyst at Goldman, Sachs & Co., but "they are far from a big player."

Mr. Hodes said he will monitor the Long Beach transaction to "see where it leads."

Long Beach paid a $4 million settlement in 1996 after a Department of Justice investigation into predatory lending practices. Mr. Mayesh said the company has "very good relationships" with regulators after the settlement, and that he doubts there will be any opposition to the deal.

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