and require a high degree of judgment. At June 30, 2009, the allowance for loan losses was $64.2 million and is subject to periodic adjustment based on management's assessment of current probable losses in the loan portfolio. Such adjustment from period to period can have a significant impact on United's consolidated financial statements. To illustrate the potential effect on the financial statements of our estimates of the allowance for loan losses, a 10% increase in the allowance for loan losses would have required $6.4 million in additional allowance (funded by additional provision for credit losses), which would have negatively impacted first six months of 2009 net income by approximately $4.2 million, or $0.10 per common share. Management's evaluation of the adequacy of the allowance for credit losses and the appropriate provision for credit losses is based upon a quarterly evaluation of the loan portfolio and lending related commitments. This evaluation is inherently subjective and requires significant estimates, including estimates related to the amounts and timing of future cash flows, value of collateral, losses on pools of homogeneous loans based on historical loss experience, and consideration of current economic trends, all of which are susceptible to constant and significant change. The allowance allocated to specific credits and loan pools grouped by similar risk characteristics is reviewed on a quarterly basis and adjusted as necessary based upon subsequent changes in circumstances. In determining the components of the allowance for credit losses, management considers the risk arising in part from, but not limited to, charge-off and delinquency trends, current economic and business conditions, lending policies and procedures, the size and risk characteristics of the loan portfolio, concentrations of credit, and other various factors. Additional information relating to United's allowance for credit losses, including the methodology used to determine the allowance for credit losses, is described in Note 4. A discussion of the factors leading to changes in the amount of the allowance for credit losses is included in the Provision for Credit Losses section of this Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A). As discussed in the MD&A, the increase in the allowance for credit losses in the first six months of 2009 as compared to the first six months of 2008 can be directly attributed to the current economic environment. Additional information relating to United's loans is included in Note 3, Loans to the unaudited consolidated financial statements.
Accounting estimates are used in the presentation of the investment portfolio and these estimates impact the presentation of United's financial condition and results of operations. United classifies its investments in debt and equity securities as either held to maturity or available for sale in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Securities held to maturity are accounted for using historical costs, adjusted for amortization of premiums and accretion of discounts. Securities available for sale are accounted for at fair value, with the net unrealized gains and losses, net of income tax effects, presented as a separate component of stockholders' equity. When available, fair values of securities are based on quoted prices or prices obtained from third party vendors. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data. Prices obtained from third party vendors that do not reflect forced liquidation or distressed sales are not adjusted by management. Where prices reflect forced liquidation or distressed sales, as is the case with United's portfolio of pooled trust preferred securities, management estimates fair value based on a discounted cash flow methodology using appropriately adjusted discount rates reflecting nonperformance and liquidity risks. Due to the subjective nature of this valuation process, it is possible that the actual fair values of these securities could differ from the estimated amounts, thereby affecting United's financial position, results of operations and cash flows. The potential impact to United's financial position, results of operations or cash flows for changes in the valuation process cannot be reasonably estimated.
If the estimated value of investments is less than the cost or amortized cost, management evaluates whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of the investment. If such an event or change has occurred, management must exercise judgment to determine the nature of the potential impairment (i.e., temporary or other-than-temporary) in order to apply the appropriate accounting treatment. For example, available for sale securities for which there is an unrealized loss that is deemed to be "other-than-temporary" are written down to fair value with the write-down recorded as a realized loss and included in securities gains (losses) on the income statement rather than as a separate component of stockholders' equity on the balance sheet. Given the recent disruptions in the financial markets, the decision to recognize other-than-temporary impairment on investment

securities has become more difficult as complete information is not always available and market conditions and other relevant factors are subject to rapid changes. Therefore, the other-than-temporary impairment assessment has become a critical accounting policy for United. For additional information on management's consideration of investment valuation and other-than-temporary impairment, see Note 2, Investment Securities, and Note 11, Fair Value Measurements, to the unaudited consolidated financial statements.
United uses derivative instruments as part of its risk management activities to protect the value of certain assets and liabilities against adverse price or interest rate movements. All derivative instruments are carried at fair value on the balance sheet. United considers derivative instruments to be a critical accounting policy due to the complexity and judgment associated with the implementation of the accounting guidance and because carrying assets and liabilities at fair value inherently result in more financial statement volatility. The accounting policies utilized by the Company to record derivatives reflect the guidance in SFAS No.133 "Accounting for Derivative Instruments and Hedging Activities" and other related accounting guidance. In accordance with the guidance, all derivatives are recognized as either assets or liabilities on the balance sheet at fair value. Fair values and the information used to record valuation adjustments for certain assets and liabilities are provided by third parties. Accounting for changes in the fair value of a particular derivative differs depending on whether the derivative has been designated and qualifies as part of a hedging relationship, and further, on the type of hedging relationship. At June 30, 2009, United has one derivative designated as a cash flow hedge and three derivatives designated as fair value hedges. The application of hedge accounting requires significant judgment to interpret the relevant accounting guidance, as well as to assess hedge effectiveness, identify similar hedged item groupings and measure changes in the fair value of the hedged items. At June 30, 2009, United also has three derivatives not included in hedge relationships. Such derivatives consist of interest rate swaps used for interest rate management purposes and derivatives executed with commercial banking customers to facilitate their interest rate management strategies. Gains and losses on other derivative financial instruments are included in noninterest income and noninterest expense, respectively. Management believes that its methods of addressing these judgmental areas and applying the guidance are in accordance with GAAP and consistent with industry practices. Interpretations of SFAS No.133 and related guidance continue to change and evolve. Future interpretations could result in material changes to United's accounting for derivative financial instruments and related hedging activities. Although such changes may not have a material effect on financial condition, they could have a material adverse effect on United's results of operations in the period they occur. However, the potential impact to United's operating results for such changes cannot be reasonably estimated. Additional information relating to United's use of derivatives is included in Note 10, Derivative Financial Instruments, to the unaudited consolidated financial statements.
United's calculation of income tax provision is inherently complex due to the various different tax laws and jurisdictions in which we operate and requires management's use of estimates and judgments in its determination. The current income tax liability also includes income tax expense related to our uncertain tax positions as required in SFAS 109 "Accounting for Income Taxes" as interpreted by FASB Interpretation FIN 48 "Accounting for Uncertainty in Income Taxes". Changes to the estimated accrued taxes can occur due to changes in tax rates, implementation of new business strategies, resolution of issues with taxing authorities and recently enacted statutory, judicial and regulatory guidance. These changes can be material to the Company's operating results for any particular reporting period. The analysis of the income tax provision requires the assessments of the relative risks and merits of the appropriate tax treatment of transactions, filing positions, filing methods and taxable income calculations after considering statutes, regulations, judicial precedent and other information. United strives to keep abreast of changes in the tax laws and the issuance of regulations which may impact tax reporting and provisions for income tax expense. United is also subject to audit by federal and state authorities. Because the application of tax laws is subject to varying interpretations, results of these audits may produce indicated liabilities which differ from United's estimates and provisions. United continually evaluates its exposure to possible tax assessments arising from audits and records its estimate of probable exposure based on current facts and circumstances. The potential impact to United's operating results for any of the changes cannot be reasonably estimated. See Note 14, Income Taxes, to the unaudited consolidated financial statements for information regarding United's FIN 48 disclosures.

Any material effect on the financial statements related to these critical accounting areas are further discussed in Management's Discussion and Analysis of Financial Condition and Results of Operations.
USE OF FAIR VALUE MEASUREMENTS
On January 1, 2008, United adopted SFAS No. 157, "Fair Value Measurements" (SFAS 157) to determine the fair value of its financial instruments based on the fair value hierarchy established in SFAS 157, which also clarifies that fair value of certain assets and liabilities is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. FAS 157 establishes a three-level hierarchy for disclosure of assets and liabilities recorded at fair value. The classification of assets and liabilities within the hierarchy is based on whether the inputs in the methodology for determining fair value are observable or unobservable. Observable inputs reflect market-based information obtained from independent sources (Level 1 or Level 2), while unobservable inputs reflect management's estimate of market data (Level 3). For assets and liabilities that are actively traded and have quoted prices or observable market data, a minimal amount of subjectivity concerning fair value is needed. Prices and values obtained from third party vendors that do not reflect forced liquidation or distressed sales are not adjusted by management. When quoted prices or observable market data are not available, management's judgment is necessary to estimate fair value.
At June 30, 2009, approximately 13.06% of total assets, or $1.02 billion, consisted of financial instruments recorded at fair value. Of this total, approximately 90.32% or $925.69 million of these financial instruments used valuation methodologies involving observable market data, collectively Level 1 and Level 2 measurements, to determine fair value. Approximately 9.68% or $99.26 million of these financial instruments were valued using unobservable market information or Level 3 measurements. At June 30, 2009, only $14.91 million or less than 1% of total liabilities was recorded at fair value. This entire amount was valued using methodologies involving observable market data. United does not believe that any changes in the unobservable inputs used to value the financial instruments mentioned above would have a material impact on United's results of operations, liquidity, or capital resources. See Note 11, Fair Value Measurements, to the unaudited consolidated financial statements for additional information regarding SFAS 157 and its impact on United's financial statements.
FINANCIAL CONDITION
United's total assets as of June 30, 2009 were $7.85 billion which was a decline of $254.58 million or 3.14% from December 31, 2008. The decrease was primarily the result of decreases in portfolio loans, investment securities, and cash and cash equivalents of $124.00 million or 2.06%, $153.60 million or 11.89% and $11.64 million or 5.45%, respectively. The decrease in total assets is reflected in a corresponding decrease in total liabilities of $274.25 million or 3.72% from year-end 2008. The decrease in total liabilities was due mainly to a reduction of $351.75 million or 21.57% in borrowings while accrued expenses and other liabilities decreased $10.65 million or 12.64%. Deposits increased $87.96 million or 1.56% from year-end 2008. Shareholders' equity increased $19.67 million or 2.67% from year-end 2008.
The following discussion explains in more detail the changes in financial condition by major category.
Cash and Cash Equivalents
Cash and cash equivalents at June 30, 2009 declined $11.64 million or 5.45% from year-end 2008. Of this total decrease, cash and due from banks decreased $23.98 million or 12.56% while interest-bearing deposits with other banks and federal funds sold increased $591 thousand and $11.76 million, respectively. During the first six months of 2009, net cash of $23.73 million and $253.25 million was provided by operating activities and investing activities, respectively. Net cash of $288.62 million was used in financing activities. See the unaudited Consolidated Statements of Cash Flows for data on cash and cash equivalents provided and used in operating, investing and financing activities for the first six months of 2009 and 2008.

Securities
Total investment securities at June 30, 2009 decreased $153.60 million or 11.89% from year-end 2008. Securities available for sale declined $138.68 million or 12.64%. This change in securities available for sale reflects $180.11 million in sales, maturities and calls of securities, $34.09 million in purchases, and an increase of $7.73 million in market value. Securities held to maturity decreased $14.24 million or 12.23% from year-end 2008 due to calls and maturities of securities. Cash received from the sale, maturities and calls of investment securities was used to repay borrowings. Other investment securities were relatively flat, only declining $677 thousand or less than 1% from year-end 2008 due to an other-than-temporary impairment charge of $782 thousand on an investment security. The amortized cost and estimated fair value of investment securities, including types and remaining maturities, is presented in Note 2 to the unaudited Notes to Consolidated Financial Statements. Loans
Loans held for sale increased $11.32 million as loan originations exceeded loan sales in the secondary market during the first six months of 2009. Portfolio loans, net of unearned income decreased $124.00 million or 2.06% from year-end 2008 due mainly to a decrease in commercial loans (not secured by real estate) of $155.10 million or 12.17%. Single-family residential real estate loans, commercial real estate loans and installment loans were relatively flat from year-end 2008, declining $3.68 million and increasing $3.72 million and $1.71 million, respectively. All of these changes were less than 1%. Construction loans and other real estate loans increased $19.67 million or 3.27% and $8.35 million or 3.40%, respectively.
The following table summarizes the changes in the loan categories since year-end 2008:

                                                June 30          December 31
(Dollars in thousands)                           2009                2008             $ Change         % Change
Loans held for sale                           $    12,191        $        868        $   11,323          1304.49 %

Commercial, financial, and agricultural       $ 1,119,840        $  1,274,937        $ (155,097 )         (12.17 %)
Real Estate:
Single family residential                       1,911,673           1,915,355            (3,682 )          (0.19 %)
Commercial                                      1,651,022           1,647,307             3,715             0.23 %
Construction                                      621,668             601,995            19,673             3.27 %
Other                                             253,563             245,214             8,349             3.40 %
Consumer                                          337,456             335,750             1,706             0.51 %
Less: Unearned income                              (5,066 )            (6,403 )           1,337           (20.88 %)

Total Loans, net of unearned income           $ 5,890,156        $  6,014,155        $ (123,999 )          (2.06 %)

For a further discussion of loans see Note 3 to the unaudited Notes to Consolidated Financial Statements.
Other Assets
Other assets increased $30.01 million or 12.47% from year-end 2008 due mainly to increases of $22.41 million in OREO due to increased foreclosures as a result of the current economic conditions, $4.21 million in deferred tax assets and $4.97 million in income taxes receivable. The increases in deferred tax assets and income taxes receivable for the first six months of 2009 were due to a tax benefit associated with net operating loss carryforwards and a positive adjustment to income taxes as a result of a concluded state tax examination, respectively. Partially offsetting these increases from year-end 2008 were decreases in derivatives assets of $2.32 million due to a change in value and core deposit intangibles of $1.37 million due to amortization.

Deposits
Total deposits at June 30, 2009 increased $87.96 million or 1.56% from year-end 2008. In terms of composition, noninterest-bearing deposits increased $160.11 million or 17.67% while interest-bearing deposits decreased $72.15 million or 1.52% from December 31, 2008. The increase in noninterest-bearing deposits was due mainly to increases in commercial noninterest bearing deposits of $131.36 million or 20.93% and personal noninterest bearing deposits of $7.64 million or 3.15%.
The decrease in interest-bearing deposits was due mainly to a decline in time deposits under $100,000 of $349.85 million or 18.55%. Most of this decline was due mainly to a shift in Certificate of Deposit Account Registry Service (CDARS) balances to certificate of deposits over $100,000 as a result of the temporary increase in the Federal Deposit Insurance Corporation (FDIC) insurance coverage from $100,000 to $250,000. Interest bearing money market accounts (MMDAs) decreased $66.77 million or 4.96%. Time deposits over $100,000 increased $247.86 million or 24.50%. Regular savings balances increased $22.80 million or 7.07% and interest-bearing checking deposits increased $73.81 million or 42.16%. The following table summarizes the changes in the deposit categories since year-end 2008:

                                   June 30       December 31
  (Dollars In thousands)            2009             2008          $ Change      % Change
  Demand deposits                $   495,398     $    419,091     $   76,307         18.21 %
  Interest-bearing checking          248,876          175,065         73,811         42.16 %
  Regular savings                    345,276          322,478         22,798          7.07 %
  Money market accounts            1,850,502        1,833,472         17,030          0.93 %
  Time deposits under $100,000     1,536,407        1,886,256       (349,849 )      (18.55 %)
  Time deposits over $100,000      1,259,451        1,011,592        247,859         24.50 %

  Total deposits                 $ 5,735,910     $  5,647,954     $   87,956          1.56 %

Borrowings
Total borrowings at June 30, 2009 decreased $351.75 million or 21.57% during the first six months of 2009. Since year-end 2008, short-term borrowings decreased $351.38 million or 45.15% due to a $212 million reduction in overnight FHLB borrowings and a $123.38 million or 28.40% decrease in securities under agreements to repurchase. In addition, federal funds purchased decreased $16.07 million or 12.54% since year-end 2008. Long-term borrowings remained fairly flat, decreasing $373 thousand or less than 1% since year-end 2008.
The table below summarizes the change in the borrowing categories since year-end 2008:

                                                June 30          December 31
(Dollars In thousands)                           2009                2008             $ Change         % Change
Federal funds purchased                       $   112,115        $    128,185        $  (16,070 )         (12.54 %)
Securities sold under agreements to
repurchase                                        311,042             434,425          (123,383 )         (28.40 %)
Overnight FHLB advances                                 -             212,000          (212,000 )        (100.00 %)
TT&L note option                                    3,785               3,710                75             2.02 %
Long-term FHLB advances                           667,378             667,538              (160 )          (0.02 %)
Issuances of trust preferred capital
securities                                        184,934             185,147              (213 )          (0.12 %)

Total borrowings                              $ 1,279,254        $  1,631,005        $ (351,751 )         (21.57 %)

For a further discussion of borrowings see Notes 7 and 8 to the unaudited Notes to Consolidated Financial Statements.

Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities at June 30, 2009 decreased $10.65 million or 12.64% from year-end 2008 mainly as a result of a decrease in income taxes payable of $5.37 million due to a timing difference in payments. In addition, derivative liabilities decreased $4.09 million due to a change in value and interest payable decreased $2.83 million due to a decline in borrowings. Other accrued expenses increased $2.39 million. Shareholders' Equity . . .