United posted a $36 million loss in the first quarter, with a slowing pace of nonperforming loans.

It lost $238 million in 2009, as the bank’s portfolio of residential construction loans in the North Georgia Mountains, suburban Atlanta, the Western Carolinas, and the Georgia coast were battered by the fallout of the housing market and recession.

The deal appears to signal a growing willingness on the part of bank regulators to allow private equity to play a part in bringing the banking sector back to health. Thus far in the cycle, private equity has been limited—players would argue extremely limited—to backing management teams in the acquisition of failed institutions.

Two groups in Georgia, State Bank and Trust Co. and Community & Southern Bank, have made multiple failed-bank buys, and other groups are said to be scouring prospects in the Peach State. Private equity has also been active with bank buys in Florida, California, and Illinois.

The Federal Deposit Insurance Corp. has been generally wary of private equity investment in banks. The groups typically have higher hurdles to clear because of the perception of the industry that it’s only around for a quick buck. “Whether this is used going forward depends,” said Joseph Rizzi, senior strategist with New York private equity investor CapGen Financial Group.

Such deals take a particular buyer and situation, as well as approval of regulators. The United deal took 12 months to close. The more likely cleanup scenario for the industry long term, Rizzi said, is traditional merger and acquisition activity.

“The alternative is a straight sale (of real estate) and a capital raise,” Rizzi said. And that has been difficult for many community institutions. But Adam Greene, investment banker and principal with BenAlon Capital LLC in New York, said his firm is “quite enthused that the United deal got done.” BenAlon has approached about 10 Georgia lenders about a similar partnership.

“You will see more of them,” Greene said.

Banks face four primary challenges: capital adequacy, classified asset concentrations, recurring earnings, and liquidity. “This structure responds to all four challenges,” said Olasov, the McKenna Long & Aldridge managing director. “This particular structure, this is very patient money. These are long-dated warrants.”

The capital needs to be around for length of the workout of the assets, Olasov said. “Many of these markets are going to be multiyear workouts,” he said.

Greene said he expects some markets won’t turn around for three to five years.

BenAlon is “asset agnostic,” meaning it is less concerned about the type of soured asset it would hold. What it is most concerned with is finding a partner with a solid franchise and management and getting back to performing profitability.

Holding toxic loans requires reserving capital, which then doesn’t enter the marketplace, curtailing growth. “It’s key for the U.S. economy to clean the banking industry,” said Asher Fogel, BenAlon’s managing partner.

“We have a phenomena here—the zombie banks,” Fogel said. “[So far] any [investment] activity is at the top end of the market, not the middle end. But that’s where we need to see the activity.”