Few in the United States outside of banking circles or the North Georgia Mountains likely know of United Community Banks Inc. But the bank, based in tiny Blairsville, Georgia, might have found an innovative solution to soured real estate loans that other community banks will try to replicate.

On April 30, United closed a deal with a New York private equity firm that agreed to acquire $100 million in nonperforming assets in exchange for a piece of the bank. It’s a drastic measure in a state that has seen more banks crater than any other. Thirty-seven Georgia banks have failed since 2008 (as of May 14 at 3:30 p.m.); regulators could seize another 50 or more over the next two years.

It’s also as painless a transaction as a lender in the nation’s bank failure capital is likely to find. “The folks at (United) can be credited with a real breakthrough transaction," said Brian Olasov, a managing director at McKenna Long & Aldridge LLP in Atlanta.

Essentially a play on the “bad bank” model from the Savings & Loan Crisis, Fletcher International Ltd. will acquire a quarter of United’s most illiquid assets—ones the bank couldn’t have shed from its books without essentially giving it away and burning enormous capital—and in exchange the private equity group receives warrants for equity in the company. The deal likely takes the risk of a slow death off the table for Georgia’s third-largest bank, and immediately sets it up for a chance to go on offense.

“I’m surprised it’s taken this long to make a deal like this happen,” said Bobby Schwartz, banking attorney with Smith Gambrell & Russell LLP in Atlanta. “It works very well, especially with assets that are so illiquid and such a long-term hold. If a bank can get it off its books for something and the bank can have an interest in the project, it can be long-term solution.”

It’s not a silver bullet, insiders say, and won’t work for every bank. But it is a strategy that could be copied as banks scramble for capital to stay alive and bounce back.

Much of that depends on the receptiveness of regulators, and the patience of investors. Investors want scale, a stock that is publicly traded at volume, and a franchise free from the most onerous regulatory restrictions. They also want a bank with a plan to go roll up rivals when it’s back on its feet. United certainly appears to be readying itself.

United President and CEO Jimmy Tallent told analysts April 22, “one of our key goals is to participate in the failed-bank activity that will most likely occur in [2010] and [2011]. This removal of [nonperforming assets] gets us closer to that goal.”

By taking the dead weight of soured loans off the North Georgia lender’s balance sheet, Fletcher is banking on United’s return to fighting shape, the market for the assets rebounding, and its stock price taking off.

The complex transaction covers nonperforming commercial and residential mortgages and foreclosed property—mostly partially built houses and raw lots—in the North Georgia Mountains, the Western Carolinas, and along the Georgia coast.

The deal will essentially take illiquid assets off the balance sheet and free up capital that industry watchers expected the banking company to burn by backstopping its losses. Instead of capital lost in fire sales, United Community gets that capital back, while also structuring the deal to be accretive to capital over time through a stock investment by its new private equity partner.

As a result, United could go from limping through the crisis to potentially being a consolidator of failed institutions.

As part of the deal, Fletcher entered into a securities purchase agreement for rights to acquire $65 million in convertible preferred stock and will acquire warrants to purchase up to an additional $65 million in common stock. It will also put $10 million in deposits into the bank in exchange for financing.