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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 17, 2009

REGISTRATION NO.             

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES

PURSUANT TO SECTION 12(b) OR 12(g) OF THE

SECURITIES EXCHANGE ACT OF 1934

2911 Turtle Creek Blvd., Suite 700, Dallas, Texas 75219

(Address of principal executive offices, including zip code)

(214) 252-4000

(Registrant’s telephone number, including area code)

Securities to be registered pursuant to Section 12(b) of the Act:

Securities to be registered pursuant to Section 12(g) of the Act:

TITLE OF CLASS

Common Stock, $10.00 par value

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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PLAINS CAPITAL CORPORATION

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FORWARD-LOOKING STATEMENTS

Certain statements contained in this registration statement on Form 10 that are not statements of historical fact constitute “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements but are not the exclusive means of identifying such statements.

Forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from those anticipated in such statements. Most of these factors are outside our control and difficult to predict. These forward-looking statements include, without limitation, our expectations with respect to our future financial or business performance, strategies or expectations and anticipated financial impacts and synergies resulting from our recent acquisition of First Southwest Holdings, Inc. and related transactions. Factors that may cause such differences include, but are not limited to:

(1) changes in general economic, market and business conditions in areas or markets where we compete;

(2) conditions beyond our control such as future state and federal legislation and regulation affecting one or more of our business segments, natural disasters or acts of war or terrorism;

(3) changes in the interest rate environment;

(4) changes in the default rate of our loans;

(5) changes in the auction rate securities markets, including ongoing liquidity problems related thereto;

(6) cost and availability of capital;

(7) competition for our banking, mortgage origination and financial advisory segments from other banks and financial institutions as well as insurance companies, mortgage originators, investment banking and financial advisory firms, asset-based non-bank lenders and government agencies;

(8) approval of new, or changes in, accounting policies and practices;

(9) our participation in governmental programs implemented under the Emergency Economic Stabilization Act of 2008 (the “EESA”) and the American Recovery and Reinvestment Act (the “ARRA”), including without limitation the Troubled Asset Relief Program (“TARP”), the Capital Purchase Program, and the Temporary Liquidity Guarantee Program, and the impact of such programs and related regulations on the Company and on international, national, and local economic and financial markets and conditions; and

(10) other factors discussed from time to time in our news releases and/or public statements, and those factors listed in this registration statement on Form 10 under Item 1A. “Risk Factors.”

We caution that the foregoing list of factors is not exclusive, and new factors may emerge or changes to the foregoing factors may occur that could impact our business. You should review carefully the items captioned “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this registration statement on Form 10 for a more complete discussion of these and other factors that may affect our business. All subsequent written and oral forward-looking statements concerning our business attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements above. We do not undertake any obligation to update any forward-looking statement, whether written or oral, relating to the matters discussed in this registration statement on Form 10 except to the extent required by federal securities laws.

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BASIS OF PRESENTATION

All references to “we,” “us,” “our,” “our company,” “the Company,” or “Plains Capital” in this registration statement on Form 10 mean Plains Capital Corporation, a Texas corporation, and its consolidated subsidiaries as a whole. In addition, we refer to PlainsCapital Bank as the “Bank,” and to First Southwest Holdings, LLC and its subsidiaries as a whole as “First Southwest.”

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Overview

Plains Capital Corporation is a Texas-based and Dallas-headquartered financial holding company registered under the Gramm-Leach-Bliley Act of 1999 (the “Gramm-Leach-Bliley Act”) and a bank holding company registered under the Bank Holding Company Act of 1956 (the “BHC Act”). The majority of our net income is derived from our wholly-owned bank subsidiary, PlainsCapital Bank. The Bank provides business and consumer banking services from offices located throughout central, north and west Texas. In addition to the Bank, we have various other subsidiaries with specialized areas of expertise that allow us to provide a wide array of financial products and services. Through these other subsidiaries, we offer financial products and services such as mortgage origination, financial advisory, public finance, investment banking, asset management and capital equipment leasing. As of December 31, 2008, on a consolidated basis, we had total assets of approximately $4.0 billion, total loans, including loans held for sale, of approximately $3.1 billion and stockholders’ equity of approximately $399.8 million.

History and Expansion

Shortly after originally incorporating as a Texas corporation in 1987, we purchased Plains National Bank (“Plains National”) in Lubbock, Texas in 1988. At the time, Plains National had approximately $174.0 million in assets and was the fifth largest bank in Lubbock. Over the next decade, Plains National’s market share and service offering grew, and it became the largest bank in Lubbock with approximately $609.0 million in deposits and 23% of Lubbock’s market share. In 1998, we acquired McAfee Mortgage Company, a Lubbock-based mortgage company.

In 1999, we were able to begin expanding our business beyond traditional banking services as a result of the passage of the Gramm-Leach-Bliley Act. We were also able to expand into different markets. Specifically, we acquired PrimeLending, a PlainsCapital Company (“PrimeLending”), a Dallas-based mortgage company with five locations in the Dallas-Fort Worth metroplex, and Plains National converted from a national chartered bank to a Texas chartered bank, opened its first Dallas location in the Turtle Creek neighborhood and changed its name to PNB Financial Bank. In 2000, we moved our corporate headquarters to Dallas and PNB Financial Bank opened its first location in Austin. In 2003, as part of a larger branding campaign, PNB Financial Bank changed its name to PlainsCapital Bank. Additionally, we acquired a majority interest in Hester Capital Management, L.L.C. (“Hester Capital”), a registered investment advisor under the Investment Advisers Act of 1940 specializing in investment portfolio management services for private clients including families, trusts and estates. In 2004, the Bank entered the Fort Worth and San Antonio markets. In 2007, the Bank entered the Arlington market. On December 31, 2008, we acquired First Southwest Holdings, Inc., a diversified private investment banking corporation. Upon completion of its acquisition, First Southwest Holdings, Inc. was renamed First Southwest Holdings, LLC, and it became a wholly-owned subsidiary of the Bank.

As of December 31, 2008, we had more than $2.9 billion in deposits. The following table summarizes our deposit portfolio by geographic region as of December 31, 2008 (dollar amounts in thousands).

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The following table shows our loan portfolio by geographic region as of December 31, 2008 (dollar amounts in thousands).

As of December 31, 2008, we had the following U.S. bank branches:

Additionally, we maintain a branch of our bank in the Cayman Islands. We believe that a Cayman Islands branch of our bank enables us to offer more competitive cash management and deposit products to our customers. Our Cayman Islands branch consists of an agented office to facilitate our offering of these products. We opened our Cayman Islands branch in June 2004. All deposits in the Cayman Branch come from U.S. based customers of the Bank. Deposits do not originate from foreign sources, and funds transfers neither come from nor go to facilities outside of the United States. All deposits are in U.S. dollars. As of December 31, 2008, our Cayman Islands deposits totaled approximately $136.5 million.

Business Segments

Operating as a financial services company allows us to seek to diversify risk so that revenue can be generated in a variety of market conditions and it also facilitates cross-selling between our subsidiaries. We operate in three business segments: banking, mortgage origination and financial advisory. For more financial information about each of these business segments, see the section entitled “Financial Information—Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Also see Note 24 in the notes to our consolidated financial statements.

Banking

Our banking segment primarily operates through the Bank and PlainsCapital Leasing, LLC. The Bank has more than 30 locations across Texas in the Austin, Dallas, Fort Worth, Lubbock, San Antonio and Weatherford areas. As of December 31, 2008, our banking segment had approximately $3.9 billion in assets and total deposits of approximately $2.9 billion. As of December 31, 2008, brokered deposits represented approximately 20% of the total deposits of the Bank. The sources for the remainder of our deposits are residents located in the Texas markets we serve.

Business Banking . Our business banking customers primarily consist of agribusiness, energy, health care, institutions of higher education, real estate (including construction and land development), and wholesale/retail trade

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companies. We provide these customers with extensive banking services such as Internet banking, business check cards and other add-on services as determined on a customer-by-customer basis. Our treasury management services, which are designed to reduce the time, burden and expense of collecting, transferring, disbursing and reporting cash, are also available to our business customers. We offer these business customers lines of credits, equipment loans and leases, letters of credits, agricultural loans, commercial real estate loans and other loan products.

The table below sets forth a distribution of our business loans by type as of December 31, 2008 (dollar amounts in thousands).

Commercial and agricultural loans are primarily made within our market areas in Texas and are underwritten on the basis of the borrower’s ability to service the debt from income. In general, commercial and agricultural loans involve more credit risk than residential mortgage loans and commercial mortgage loans and, therefore, usually yield a higher return. The increased risk in commercial and agricultural loans results primarily from the type of collateral securing these loans, typically commercial real estate, accounts receivable, equipment and inventory. Additionally, increased risk arises from the expectation that commercial and agricultural loans generally will be serviced principally from the operations of the business, and those operations may not be successful. Historical trends have shown theses types of loans to have higher delinquencies than mortgage loans. As a result of the additional risk and complexity associated with commercial and agricultural loans, such loans require more thorough underwriting and servicing than loans to individuals. To manage these risks, our policy is to attempt to secure commercial and agricultural loans with both the assets of the borrowing business and other additional collateral and guarantees that may be available. In addition, depending on the size of the credit, we actively monitor certain fiscal measures of the borrower, including cash flow, collateral value and other appropriate credit factors. We also have processes in place to analyze and evaluate on a regular basis our exposure to industries, products, market changes and economic trends. Our commercial and agricultural loans generally range in size from $100,000 to $25.0 million.

The Bank also offers term financing on commercial real estate properties that include retail, office, multi-family, industrial, warehouse and non-owner occupied single family residences. Commercial mortgage lending can involve high principal loan amounts, and the repayment of these loans is dependent, in large part, on a borrower’s on-going business operations or on income generated from the properties that are leased to third parties. As a general practice, the Bank requires its commercial mortgage loans to be secured with first lien positions on the underlying property, to generate adequate equity margins, to be serviced by businesses operated by an established management team, and to be guaranteed by the principals of the borrower. The Bank seeks lending opportunities where cash flow from the collateral provides adequate debt service coverage and/or the guarantor’s net worth is comprised of assets other than the project being financed.

The Bank offers construction financing for (i) commercial, retail, office, industrial, warehouse and multi-family developments, (ii) residential developments, and (iii) single family residential properties. Loans to finance these transactions are generally secured by first liens on the underlying real property. The Bank conducts periodic completion inspections, either directly or through an agent, prior to approval of periodic draws on these loans. Construction loans involve additional risks because loan funds are advanced upon the security of a project under construction, and the project is of uncertain value prior to its completion. Because of uncertainties inherent in estimating construction costs, the market value of the completed project and the effects of governmental regulation on real property, it can be difficult to accurately evaluate the total funds

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required to complete a project and the related loan-to-value ratio. As a result of these uncertainties, construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan. If the Bank is forced to foreclose on a project prior to completion, it may not be able to recover the entire unpaid portion of the loan. Additionally, it may be required to fund additional amounts to complete a project and may have to hold the property for an indeterminate period of time.

PlainsCapital Leasing, LLC, a wholly-owned subsidiary of the Bank, provides commercial customers with an alternative to purchasing expensive capital equipment by allowing them to lease capital equipment from us. We have historically leased equipment to customers in the transportation, medical, machine tools, electronics, entertainment and audio/visual industries.

Personal Banking . We offer a broad range of personal banking products and services for individuals. Similar to our business banking operations, we also provide our personal banking customers with a variety of add-on features such as check and credit cards, safe deposit boxes, Internet banking, bill pay, overdraft privilege services, gift cards and access to ATM facilities throughout the United States. We offer a variety of deposit accounts to our personal banking customers including savings, checking, interest-bearing checking, money market and certificates of deposit.

We loan to individuals for personal, family and household purposes, including lines of credit, home improvement loans, home equity loans and credit cards. Additionally, a portion of the Bank’s lending activities consists of the origination of single family residential mortgage loans typically collateralized by owner occupied properties located in its market areas. These residential mortgage loans are generally secured by a first lien on the underlying property, have maturities of five years or less, and serve as bridge financing until the property is refinanced into a traditional mortgage product. Longer term mortgage financing is provided for certain customers within the Bank’s private banking group. As of December 31, 2008, the Bank had approximately $207.3 million in one-to-four family residential loans, which represented approximately 7% of its total loans.

Our private banking team personally assists high net worth individuals and their families with their banking needs, including depository, credit, asset management, and trust and estate services. We offer trust and asset management services in order to assist these customers in managing, and ultimately transferring, their wealth. Our wealth management services provide personal trust, investment management and employee benefit plan administration services, including estate planning, management and administration, investment portfolio management, employee benefit accounts, and individual retirement accounts.

Mortgage Origination

Our mortgage origination segment operates through a wholly-owned subsidiary of the Bank, PrimeLending. Founded in 1986, PrimeLending is a residential mortgage originator headquartered in Dallas, Texas but licensed to originate and close loans in 47 states. It operates from 93 locations in 17 states, originating a majority of its mortgages from its Texas locations. In addition to the Dallas market, PrimeLending also serves other Texas markets, including Austin, Forth Worth, Houston and San Antonio. The mortgage lending business is subject to seasonality, and the overall demand for mortgage loans is driven largely by the applicable interest rates at any given time.

PrimeLending handles loan processing, underwriting and closings in-house. Mortgage loans originated by PrimeLending are funded through a warehouse line of credit maintained with the Bank. PrimeLending sells substantially all mortgage loans it originates to various investors in the secondary market with servicing released. As these mortgage loans are sold in the secondary market, PrimeLending pays down its warehouse line of credit with the Bank. Loans sold are subject to certain indemnification provisions with investors, including the repurchase of loans sold and the repayment of sales proceeds to investors under certain conditions.

Our mortgage lending underwriting strategy seeks to follow conservative loan policies and underwriting practices, including:

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The table below sets forth, as of December 31, 2008, the principal amount of mortgage loans originated by PrimeLending offices located in certain of its primary market areas.

In addition to its branch office network, PrimeLending recently completed the formation of PrimeLending Ventures, LLC, which was formed with the objective of establishing various “affiliated business arrangements” to originate residential mortgages for customers of referring business partners and for other customers not associated with business partners. PrimeLending Ventures, LLC became operational during the first quarter of 2009.

Since its inception, PrimeLending has grown from originating approximately $80 million in mortgage loans annually with a staff of 20 individuals to originating approximately $2.3 billion in loans in 2008 with over 1,000 employees. PrimeLending offers a wide array of loan products catering to the specific needs of borrowers, including 30-year and 15-year fixed rate conventional mortgages, adjustable rate mortgages, jumbo loans, FHA and VA loans, relocation programs and refinancing options. Mortgage loans originated by PrimeLending are secured by a first lien on the underlying property. PrimeLending does not originate subprime loans (which we define to be loans to borrowers having a Fair Isaac Corporation (FICO) score lower than 620 or that do not comply with applicable agency or investor-specific underwriting guidelines).

Financial Advisory

Our financial advisory segment operates through First Southwest and Hester Capital. Through these subsidiaries, we serve families, trusts, endowments, foundations and other non-profit entities, retirement plans, public funds, local governments, public agencies, financial institutions and high net worth investors. We provide these customers with a diverse group of services such as investment advisory, investment banking, underwriting, asset management, arbitrage rebate, continuing disclosure and benefit plan services. Prior to December 31, 2008, our financial advisory services were offered primarily through Hester Capital and accounted for approximately 2% of our revenues on a consolidated basis as of December 31, 2008.

First Southwest . With our acquisition of First Southwest, we expect our financial advisory segment to become more significant to our overall operations. First Southwest is a diversified investment banking corporation and a registered broker-dealer with the Securities and Exchange Commission (the “SEC”) and the Financial Industry Regulatory Authority (“FINRA”). It is a leading public financial advisor in the United States and provides underwriting, asset management, arbitrage rebate, continuing disclosure and benefit plan services to local governments and public agencies. First Southwest also provides advisory services to corporations, financial institutions, non-profit entities and high net worth investors. Although it is a diversified investment banking firm, First Southwest’s primary focus is on providing public finance services.

First Southwest was founded in 1946 in Dallas, Texas and employs approximately 370 people and maintains 21 branch offices in Alaska, Arkansas, California, Connecticut, Florida, Massachusetts, New York, North Carolina, Rhode

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Island and Texas. As of December 31, 2008, First Southwest maintained more than $60.8 million in equity capital and had more than 1,500 public sector clients. Additionally, as of December 31, 2008, it had consolidated assets of approximately $394.2 million.

First Southwest has five primary lines of business: (i) public finance, (ii) capital markets, (iii) correspondent clearing services, (iv) asset management, and (v) corporate finance.

Public Finance . First Southwest’s public finance group represents its largest department. This group advises cities, counties, school districts, utility districts, tax increment zones, special districts, state agencies and other governmental entities nationwide. In addition, the group provides specialized advisory and investment banking services for airports, convention centers, healthcare institutions, institutions of higher education, housing, industrial development agencies, toll road authorities, and public power and utility providers.

Capital Markets . Through its capital markets group, First Southwest trades and underwrites tax-exempt and taxable fixed income securities and trades equities on an agency basis on behalf of its retail and institutional clients. In addition, First Southwest provides asset and liability management advisory services to community banks through its MC Planning group.

Correspondent Clearing Services . The correspondent clearing services group offers omnibus and fully disclosed clearing services to FINRA member firms for trade executing, clearing and back office services. Services are provided to approximately 60 correspondent firms.

Asset Management . First Southwest Asset Management is a registered investment advisor providing state and local governments with advice and assistance with respect to arbitrage rebate compliance, portfolio management and local government investment pool administration. Specifically, First Southwest Asset Management advises municipalities with respect to the emerging regulations relating to arbitrage rebates. Further, First Southwest Asset Management assists governmental entities with the complexities of investing public funds in the fixed income markets. As an investment adviser registered with the SEC, First Southwest Asset Management promotes cash management-based investment strategies that seek to adhere to the standards imposed by the fiduciary responsibilities of investment officers of public funds. As of December 31, 2008, First Southwest Asset Management served as administrator for local government investment pools totaling approximately $7 billion, investment manager of approximately $7.3 billion in short-term fixed income portfolios of municipal governments, and investment advisor for approximately $5 billion invested by municipal governments.

Corporate Finance . First Southwest’s corporate finance group provides focused and tailored investment banking services to institutions and corporations. These services include capital raising, advisory services and corporate restructuring.

Hester Capital . We acquired a majority interest in Hester Capital in 2003. Hester Capital primarily serves clients in Austin, Dallas and Fort Worth and is a registered investment advisor under the Investment Advisors Act of 1940. It specializes in investment portfolio management services for private clients, including families, trusts and estates; endowments, foundations and other non-profit entities; retirement plans; businesses; and public funds. Hester Capital manages equity, fixed income and balanced portfolios using defined investment objectives and guidelines established with each client. The investment management services offered by Hester Capital involve managing and overseeing investment portfolios containing liquid assets of at least $1.0 million.

Growth and Operating Strategies

Growth Strategy

Our growth strategy in all of our segments is to expand primarily through internal growth with a secondary focus on acquisitions. Internal growth in our banking segment has historically been achieved by taking advantage of opportunities to employ experienced bank leaders and teams who have significant experience in the Texas banking industry. Once we have identified and employed key individuals with experience in a particular market, we then seek to build new branches. Our commitment to find such individuals is not limited to certain geographic market areas. We believe we have been successful in recruiting and plan to continue our efforts to recruit experienced bankers, particularly experienced bankers and lenders who can have an immediate impact on our overall goals such as generating greater internal growth and more specific goals such as increasing assets under management and loan volume through existing relationships. Similarly, we will seek to continue to grow our mortgage origination and financial advisory segments through the recruitment of experienced mortgage loan officers and financial advisory professionals, respectively.

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In addition to internal growth, we may pursue strategic acquisitions by which we believe we will be able to obtain a leadership team and structure with significant banking or financial services experience in a market area that will smoothly integrate into and complement our present operational culture. On December 31, 2008, we acquired First Southwest whose markets overlap those of our banking and mortgage origination businesses. We believe this acquisition provides us with financial advisory and investment banking expertise, thus making us a more diversified financial services company with a national platform for future growth.

Operational Strategy

We seek opportunities to centralize our primary operational functions in order to enhance operating efficiencies as well as service quality. Support services are provided from our offices in Lubbock, Texas and our headquarters in Dallas, Texas. These services include, but are not limited to: back office operations, data processing, human resources management, internal compliance and training, legal, marketing and risk management. Additionally, we continue to seek new ways to increase efficiency and reduce costs.

We operate under a strategy that is customer driven, seeking to build and maintain long-term relationships with customers while providing efficient and dependable solutions to our customers’ financial needs. We believe that many of the larger financial institutions in our market area do not emphasize the high level of personalized service that we provide through the Bank to commercial businesses and professional or individual retail customers. Our mortgage banking and financial advisory businesses also seek to distinguish themselves by emphasizing highly personalized service. We entrust our experienced leadership teams with the authority and flexibility to enable us to implement and maintain the most effective solutions for our customers.

Our goal is to operate at a capital level that provides an attractive return on equity without unnecessarily stressing our level of capital. For example, our banking segment is primarily dependent on net interest income, which is the difference between the income earned on loan and investment portfolios and the cost of funds, consisting of the interest paid on deposits and borrowings.

Competition

We face significant competition with respect to all of the lending and mortgage origination products and services we offer and geographic markets we serve. Our lending and mortgage origination competitors include commercial banks, savings banks, savings and loan associations, credit unions, finance companies, pension trusts, mutual funds, insurance companies, mortgage bankers and brokers, brokerage and investment banking firms, asset-based non-bank lenders, government agencies and certain other non-financial institutions. Competition for deposits and in providing lending and mortgage origination products and services to businesses in our market area is intense and pricing is important. Additionally, other factors encountered in competing for savings deposits are convenient office locations and rates offered. Direct competition for savings deposits also comes from other commercial bank and thrift institutions, money market mutual funds and corporate and government securities which may offer more attractive rates than insured depository institutions are willing to pay. Competition for loans includes such additional factors as interest rate, loan origination fees and the range of services offered by the provider.

We also face significant competition for financial advisory services on a number of factors such as price, perceived expertise, range of services, and local presence. Our financial advisory business competes directly with numerous other financial advisory and investment banking firms, broker-dealers and banks, including large national and major regional firms and smaller niche companies, some of whom are not broker dealers and, therefore, not subject to the broker dealer regulatory framework. Many of our competitors have substantially greater financial resources, lending limits and larger branch networks than we do, and offer a broader range of products and services.

Employees

As of December 31, 2008, we had approximately 1,920 full-time equivalent employees. None of our employees is represented by any collective bargaining unit or a party to any collective bargaining agreement.

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Government Supervision and Regulation

General

Plains Capital, the Bank, PrimeLending, First Southwest and many of our other non-banking subsidiaries are subject to extensive regulation under federal and state laws. The regulatory framework is intended primarily for the protection of customers and clients of our financial advisory services, depositors, the insurance funds of the Federal Deposit Insurance Corporation (the “FDIC”) and the Securities Investor Protection Corporation (“SIPC”) and the banking system as a whole, and not for the protection of the bank holding company stockholders or creditors. In many cases, the applicable regulatory authorities have broad enforcement power over bank holding companies and banks including the power to impose substantial fines and other penalties for violations of laws and regulations. The following discussion describes the material elements of the regulatory framework that applies to us and our subsidiaries. References in this registration statement on Form 10 to applicable statutes and regulations are brief summaries thereof, do not purport to be complete, and are qualified in their entirety by reference to such statutes and regulations.

Privacy . Under the Gramm-Leach-Bliley Act, financial institutions are required to disclose their policies for collecting and protecting confidential information. Customers generally may prevent financial institutions from sharing nonpublic personal financial information with nonaffiliated third parties except under narrow circumstances, such as the processing of transactions requested by the consumer or when the financial institution is jointly sponsoring a product or service with a nonaffiliated third party. Additionally, financial institutions generally may not disclose consumer account numbers to any nonaffiliated third party for use in telemarketing, direct mail marketing or other marketing to consumers. Plains Capital and all of its subsidiaries have established policies and procedures to assure compliance with all privacy provisions of the Gramm-Leach-Bliley Act.

Governmental Monetary Policies . Our earnings are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The monetary policies of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) have had, and are likely to continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve Board affect the levels of bank loans, investments and deposits through its control over the issuance of United States government securities, its regulation of the discount rate applicable to member banks and its influence over reserve requirements to which member banks are subject. We cannot predict the nature or impact of future changes in monetary and fiscal policies.

Proposed Legislation and Regulatory Action . New regulations and statutes are regularly proposed that contain wide-ranging proposals for altering the structures, regulations and competitive relationships of financial institutions operating and doing business in the United States. We cannot predict whether or in what form any proposed regulation or statute will be adopted or the extent to which its business may be affected by any new regulation or statute.

Plains Capital Corporation

Plains Capital is a legal entity separate and distinct from the Bank and its other subsidiaries. Plains Capital is a financial holding company pursuant to the Gramm-Leach-Bliley Act and a bank holding company registered under the BHC Act. Accordingly, it is subject to supervision, regulation and examination by the Federal Reserve Board. The Gramm-Leach-Bliley Act, the BHC Act and other federal laws subject financial and bank holding companies to particular restrictions on the types of activities in which they may engage, and to a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations.

Regulatory Restrictions on Dividends; Source of Strength . It is the policy of the Federal Reserve Board that bank holding companies should pay cash dividends on common stock only out of income available over the past year and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. The policy provides that bank holding companies should not maintain a level of cash dividends that undermines the bank holding company’s ability to serve as a source of strength to its banking subsidiaries.

Under Federal Reserve Board policy, a bank holding company is expected to act as a source of financial strength to each of its banking subsidiaries and commit resources to their support. Such support may be required at times when, absent this Federal Reserve Board policy, a holding company may not be inclined to provide it. As discussed below, a bank holding company, in certain circumstances, could be required to guarantee the capital plan of an undercapitalized banking subsidiary.

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Scope of Permissible Activities . Under the BHC Act, Plains Capital generally may not acquire a direct or indirect interest in or control of more than 5% of the voting shares of any company that is not a bank or bank holding company. Additionally, the BHC Act may prohibit Plains Capital from engaging in activities other than those of banking, managing or controlling banks or furnishing services to or performing services for its subsidiaries, except that it may engage in, directly or indirectly, certain activities that the Federal Reserve Board has determined to be closely related to banking or managing and controlling banks as to be a proper incident thereto. In approving acquisitions or the addition of activities, the Federal Reserve Board considers, among other things, whether the acquisition or the additional activities can reasonably be expected to produce benefits to the public, such as greater convenience, increased competition, or gains in efficiency, that outweigh such possible adverse effects as undue concentration of resources, decreased or unfair competition, conflicts of interest or unsound banking practices.

Notwithstanding the foregoing, the Gramm-Leach-Bliley Act, effective March 11, 2000, eliminated the barriers to affiliations among banks, securities firms, insurance companies and other financial service providers and permits bank holding companies to become financial holding companies and thereby affiliate with securities firms and insurance companies and engage in other activities that are financial in nature. The Gramm-Leach- Bliley Act defines “financial in nature” to include securities underwriting, dealing and market making; sponsoring mutual funds and investment companies; insurance underwriting and agency; merchant banking activities; and activities that the Federal Reserve Board has determined to be closely related to banking. No regulatory approval will be required for a financial holding company to acquire a company, other than a bank or savings association, engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the Federal Reserve Board.

Under the Gramm-Leach-Bliley Act, a bank holding company may become a financial holding company by filing a declaration with the Federal Reserve Board if each of its subsidiary banks is “well capitalized” under the Federal Deposit Insurance Corporation Improvement Act prompt corrective action provisions, is well managed, and has at least a satisfactory rating under the Community Reinvestment Act of 1977. Plains Capital became a financial holding company on March 23, 2000.

While the Federal Reserve Board is the “umbrella” regulator for financial holding companies and has the power to examine banking organizations engaged in new activities, regulation and supervision of activities which are financial in nature or determined to be incidental to such financial activities will be handled along functional lines. Accordingly, activities of subsidiaries of a financial holding company will be regulated by the agency or authorities with the most experience regulating that activity as it is conducted in a financial holding company. First Southwest, for example, is primarily regulated by FINRA.

Safe and Sound Banking Practices . Bank holding companies are not permitted to engage in unsafe and unsound banking practices. The Federal Reserve Board’s Regulation Y, for example, generally requires a holding company to give the Federal Reserve Board prior notice of any redemption or repurchase of its equity securities, if the consideration to be paid, together with the consideration paid for any repurchases or redemptions in the preceding year, is equal to 10% or more of the company’s consolidated net worth. The Federal Reserve Board may oppose the transaction if it believes that the transaction would constitute an unsafe or unsound practice or would violate any law or regulation. Depending upon the circumstances, the Federal Reserve Board could take the position that paying a dividend would constitute an unsafe or unsound banking practice.

The Federal Reserve Board has broad authority to prohibit activities of bank holding companies and their nonbanking subsidiaries that represent unsafe and unsound banking practices or that constitute violations of laws or regulations, and can assess civil money penalties for certain activities conducted on a knowing and reckless basis, if those activities caused a substantial loss to a depository institution. The penalties can be as high as $1.0 million for each day the activity continues.

Anti-Tying Restrictions . Bank holding companies and their affiliates are prohibited from tying the provision of certain services, such as extensions of credit, to other services offered by a holding company or its affiliates.

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Capital Adequacy Requirements . The Federal Reserve Board has adopted a system using risk-based capital guidelines to evaluate the capital adequacy of bank holding companies. Under the guidelines, a risk weight factor of 0% to 100% is assigned to each category of assets based generally on the perceived credit risk of the asset class. The risk weights are then multiplied by the corresponding asset balances to determine a “risk weighted” asset base. At least half of the risk based capital must consist of core (Tier 1) capital, which is comprised of:

The remainder, supplementary (Tier 2) capital, may consist of:

“Total risk based capital” is determined by combining core capital and supplementary capital. The guidelines require a minimum ratio of total capital to total risk-weighted assets of 8.0% (of which at least 4.0% is required to consist of Tier 1 capital elements). Total capital is the sum of Tier 1 and Tier 2 capital. As of December 31, 2008, Plains Capital’s ratio of Tier 1 capital to total risk-weighted assets was 12.8% and its ratio of total capital to total risk-weighted assets was 14.5%.

In addition to the risk-based capital guidelines, the Federal Reserve Board uses a leverage ratio as an additional tool to evaluate the capital adequacy of bank holding companies. The leverage ratio is a company’s Tier 1 capital divided by its average total consolidated assets. Certain highly rated bank holding companies may maintain a minimum leverage ratio of 3.0%, but other bank holding companies are required to maintain a leverage ratio of 4.0%. As of December 31, 2008, Plains Capital’s leverage ratio was 12.7%.

The federal banking agencies’ risk-based and leverage ratios are minimum supervisory ratios generally applicable to banking organizations that meet certain specified criteria, assuming that they have the highest regulatory rating. Banking organizations not meeting these criteria are expected to operate with capital positions well above the minimum ratios. The federal bank regulatory agencies may set capital requirements for a particular banking organization that are higher than the minimum ratios when circumstances warrant. Federal Reserve Board guidelines also provide that banking organizations experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets.

Imposition of Liability for Undercapitalized Subsidiaries . Bank regulators are required to take “prompt corrective action” to resolve problems associated with insured depository institutions whose capital declines below certain levels. In the event an institution becomes “undercapitalized,” it must submit a capital restoration plan. The capital restoration plan will

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not be accepted by the regulators unless each company having control of the undercapitalized institution guarantees the subsidiary’s compliance with the capital restoration plan up to a certain specified amount. Any such guarantee from a depository institution’s holding company is entitled to a priority of payment in bankruptcy.

The aggregate liability of the holding company of an undercapitalized bank is limited to the lesser of 5% of the institution’s assets at the time it became undercapitalized or the amount necessary to cause the institution to be “adequately capitalized.” The bank regulators have greater power in situations where an institution becomes “significantly” or “critically” undercapitalized or fails to submit a capital restoration plan. For example, a bank holding company controlling such an institution can be required to obtain prior Federal Reserve Board approval of proposed dividends, or might be required to consent to a consolidation or to divest the troubled institution or other affiliates.

Acquisitions by Bank Holding Companies . The BHC Act requires every bank holding company to obtain the prior approval of the Federal Reserve Board before it may acquire all or substantially all of the assets of any bank, or ownership or control of any voting shares of any bank, if after such acquisition it would own or control, directly or indirectly, more than 5% of the voting shares of such bank. In approving bank acquisitions by bank holding companies, the Federal Reserve Board is required to consider, among other things, the financial and managerial resources and future prospects of the bank holding company and the banks concerned, the convenience and needs of the communities to be served, and various competitive factors.

Control Acquisitions . The Change in Bank Control Act prohibits a person or group of persons from acquiring “control” of a bank holding company unless the Federal Reserve Board has been notified and has not objected to the transaction. Under a rebuttable presumption established by the Federal Reserve Board, the acquisition of 10% or more of a class of voting stock of a bank holding company with a class of securities registered under Section 12 of the Exchange Act would, under the circumstances set forth in the presumption, constitute acquisition of control of such company.

In addition, any entity is required to obtain the approval of the Federal Reserve Board under the BHC Act before acquiring 25% (5% in the case of an acquiror that is a bank holding company) or more of the outstanding common stock of Plains Capital, or otherwise obtaining control or a “controlling influence” over Plains Capital.

Emergency Economic Stabilization Act of 2008 . The U.S. Congress, the U.S. Treasury Department and the federal banking regulators have taken broad action since early September 2008 to address volatility in the U.S. banking system. The EESA authorizes the U.S. Treasury Department to purchase from financial institutions and their holding companies up to $700 billion in mortgage loans, MBS and certain other financial instruments, including debt and equity securities issued by financial institutions and their holding companies in a troubled asset relief program (“TARP”). The stated purpose of TARP is to restore confidence and stability to the U.S. banking system and to encourage financial institutions to increase their lending to customers and to each other. The U.S. Treasury Department has allocated $250 billion towards the TARP Capital Purchase Program. Under the TARP Capital Purchase Program, the U.S. Treasury Department will purchase debt or equity securities from eligible participating institutions. The TARP also will include direct purchases or guarantees of troubled assets of financial institutions. On December 19, 2008, we sold 87,631 shares of our Series A Preferred Stock and a warrant to purchase 4,382 shares of our Series B Preferred Stock to the U.S. Treasury Department for approximately $87.6 million pursuant to the TARP Capital Purchase Program. The U.S. Treasury Department immediately exercised its warrant on December 19, 2008, and we issued the underlying shares of Series B Preferred Stock to the U.S. Treasury Department. As a participant in the TARP Capital Purchase Program, we are subject to executive compensation limits and other restrictions and are encouraged to expand our lending and mortgage loan modifications. For a description of these limits and restrictions, see the section entitled “Executive Compensation – Compensation Discussion and Analysis – TARP Capital Purchase Program” beginning on page 59 of this registration statement on Form 10.

The EESA also increased FDIC deposit insurance on most accounts from $100 thousand to $250 thousand. This increase is in place until December 31, 2009 and is not covered by deposit insurance premiums paid by the banking industry. Following a systemic risk determination, the FDIC established its Temporary Liquidity Guarantee Program (“TLGP”) in October 2008. Under the final rule for the TLGP, there are two parts to the program: the Debt Guarantee Program (“DGP”) and the Transaction Account Guarantee Program (“TAGP”). Eligible entities continue to participate unless they opted out on or before December 5, 2008. For the DGP, eligible entities are generally U.S. bank holding companies, savings and loan holding companies, and FDIC-insured institutions. Under the DGP, the FDIC guarantees senior unsecured debt of an eligible entity issued on or after October 14, 2008 and not later than June 30, 2009. The guarantee is effective through the earlier of the maturity date or June 30, 2012. The DGP coverage limit is generally 125% of the eligible entity’s eligible debt

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outstanding on September 30, 2008 and scheduled to mature on or before June 30, 2009. Assessments for participating in the DGP are 50 basis points (annualized) for covered debt outstanding that matures between 31-180 days, 75 basis points (annualized) for covered debt outstanding that matures between 181 days and 364 days and 100 basis points (annualized) for covered debt outstanding that matures after 365 days. The FDIC’s debt guarantee will generally expire at the earlier to occur of the maturity of the covered debt or June 30, 2012. An insured depository institution can, with prior written notice to and no objection from the FDIC, increase its own senior unsecured indebtedness that is guaranteed by using part of its parent’s limit. In the event an insured depository institution were to do so, however, the debt guarantee limit of the holding company would be reduced by the amount of guaranteed debt that the subsidiary issued over its limit. Plains Capital and the Bank have opted to participate in the DGP. For the TAGP, eligible entities are FDIC-insured institutions. Under the TAGP, the FDIC provided unlimited deposit insurance coverage through December 31, 2009 for noninterest-bearing transaction accounts (typically business checking accounts) and certain funds swept into noninterest-bearing savings accounts, as well as negotiable order of withdrawal accounts with interest rates no higher than 0.5% and Interest on Lawyers Trust Accounts. Participating institutions pay an assessment of 10 basis points (annualized) on the balance of each covered account in excess of $250,000 during the period from November 13, 2008 through December 31, 2009. The Bank participates in the TAGP.

American Recovery and Reinvestment Act of 2009 . The ARRA was enacted on February 17, 2009. The ARRA includes a wide variety of programs intended to stimulate the U.S. economy and provide for extensive infrastructure, energy, health, and education needs. In addition, the ARRA imposes certain new executive compensation and corporate governance obligations on all current and future TARP recipients, including Plains Capital, until the institution has redeemed the preferred stock issued to the U.S. Treasury Department, which TARP recipients are now permitted to do under the ARRA without regard to the three year holding period and without the need to raise new capital, subject to approval of its primary federal regulator. The executive compensation restrictions under the ARRA are more stringent than those currently in effect under the TARP Capital Purchase Program, but it is unclear how these executive compensation standards will relate to the similar standards recently announced by the U.S. Treasury Department, or whether the standards will be considered effective immediately or only after implementing regulations issued by the U.S. Treasury Department. For a detailed description of these restrictions, see the section entitled “Executive Compensation – Compensation Discussion and Analysis – TARP Capital Purchase Program” beginning on page 59 of this registration statement on Form 10.

The ARRA also sets forth additional corporate governance obligations for TARP recipients, including requirements for the Secretary to establish standards that provide for semi-annual meetings of compensation committees of the board of directors to discuss and evaluate employee compensation plans in light of an assessment of any risk posed from such compensation plans. TARP recipients are further required by the ARRA to have in place company-wide policies regarding excessive or luxury expenditures, permit non-binding stockholder “say-on-pay” proposals to be included in proxy materials, as well as require written certifications by the chief executive officer and chief financial officer with respect to compliance. The Secretary is required to promulgate regulations to implement the executive compensation and certain corporate governance provisions detailed in the ARRA.

PlainsCapital Bank

The Bank is subject to various requirements and restrictions under the laws of the United States, and to regulation, supervision and regular examination by the Texas Department of Banking. The Bank, as a state member bank is also subject to regulation and examination by the Federal Reserve Board. The Bank is also an insured depository institution and, therefore, subject to regulation by the FDIC, although the Federal Reserve Board is the Bank’s primary federal regulator. The Federal Reserve Board, the Texas Department of Banking and the FDIC have the power to enforce compliance with applicable banking statutes and regulations. Such requirements and restrictions include requirements to maintain reserves against deposits, restrictions on the nature and amount of loans that may be made and the interest that may be charged thereon and restrictions relating to investments and other activities of the Bank.

Restrictions on Transactions with Affiliates . Transactions between the Bank and its nonbanking affiliates, including Plains Capital, are subject to Section 23A of the Federal Reserve Act. In general, Section 23A imposes limits on the amount of such transactions, and also requires certain levels of collateral for loans to affiliated parties. It also limits the amount of advances to third parties that are collateralized by the securities or obligations of Plains Capital or its subsidiaries.

Affiliate transactions are also subject to Section 23B of the Federal Reserve Act which generally requires that certain transactions between the Bank and its affiliates be on terms substantially the same, or at least as favorable to the Bank, as those prevailing at the time for comparable transactions with or involving other nonaffiliated persons. The Federal Reserve has also issued Regulation W which codifies prior regulations under Sections 23A and 23B of the Federal Reserve Act and interpretive guidance with respect to affiliate transactions.

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Loans to Insiders . The restrictions on loans to directors, executive officers, principal stockholders and their related interests (collectively referred to herein as “insiders”) contained in the Federal Reserve Act and Regulation O apply to all insured institutions and their subsidiaries and holding companies. These restrictions include limits on loans to one borrower and conditions that must be met before such a loan can be made. There is also an aggregate limitation on all loans to insiders and their related interests. These loans cannot exceed the institution’s total unimpaired capital and surplus, and the Federal Reserve Board may determine that a lesser amount is appropriate. Insiders are subject to enforcement actions for knowingly accepting loans in violation of applicable restrictions.

Restrictions on Distribution of Subsidiary Bank Dividends and Assets . Dividends paid by the Bank have provided a substantial part of Plains Capital’s operating funds and for the foreseeable future it is anticipated that dividends paid by the Bank to Plains Capital will continue to be Plains Capital’s principal source of operating funds. Capital adequacy requirements serve to limit the amount of dividends that may be paid by the Bank. Pursuant to the Texas Finance Code, a Texas banking association may not pay a dividend that would reduce its outstanding capital and surplus unless it obtains the prior approval of the Texas Banking Commissioner. Additionally, the FDIC and the Federal Reserve Board have the authority to prohibit Texas state banks from paying a dividend when they determine the dividend would be an unsafe or unsound banking practice. As a member of the Federal Reserve System, the Bank must also comply with the dividend restrictions with which a national bank would be required to comply. Those provisions are generally similar to those imposed by the State of Texas. Among other things, the federal restrictions require that if losses have at any time been sustained by a bank equal to or exceeding its undivided profits then on hand, no dividend may be paid.

In the event of a liquidation or other resolution of an insured depository institution, the claims of depositors and other general or subordinated creditors are entitled to a priority of payment over the claims of holders of any obligation of the institution to its stockholders, including any depository institution holding company (such as Plains Capital) or any stockholder or creditor thereof.

Branching . The establishment of a branch must be approved by the Texas Department of Banking and the Federal Reserve Board, which consider a number of factors, including financial history, capital adequacy, earnings prospects, character of management, needs of the community and consistency with corporate powers.

Interstate Branching . Effective June 1, 1997, the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 amended the Federal Deposit Insurance Act and certain other statutes to permit state and national banks with different home states to merge across state lines, with approval of the appropriate federal banking agency, unless the home state of a participating bank had passed legislation prior to May 31, 1997 expressly prohibiting interstate mergers. Under the Riegle-Neal Act amendments, once a state or national bank has established branches in a state, that bank may establish and acquire additional branches at any location in the state at which any bank involved in the interstate merger transaction could have established or acquired branches under applicable federal or state law. If a state opts out of interstate branching within the specified time period, no bank in any other state may establish a branch in the state which has opted out, whether through an acquisition or de novo.

Prompt Corrective Action . The Federal Deposit Insurance Corporation Improvement Act of 1991 establishes a system of prompt corrective action to resolve the problems of undercapitalized financial institutions. Under this system, the federal banking regulators have established five capital categories (“well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized”) in which all institutions are placed. Federal banking regulators are required to take various mandatory supervisory actions and are authorized to take other discretionary actions with respect to institutions in the three undercapitalized categories. The severity of the action depends upon the capital category in which the institution is placed. Generally, subject to a narrow exception, the banking regulator must appoint a receiver or conservator for an institution that is critically undercapitalized. The federal banking agencies have specified by regulation the relevant capital level for each category.

An institution that is categorized as undercapitalized, significantly undercapitalized or critically undercapitalized is required to submit an acceptable capital restoration plan to its appropriate federal banking agency. A bank holding company must guarantee that a subsidiary depository institution meets its capital restoration plan, subject to various limitations. The controlling holding company’s obligation to fund a capital restoration plan is limited to the lesser of 5% of an

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undercapitalized subsidiary’s assets at the time it became undercapitalized or the amount required to meet regulatory capital requirements. An undercapitalized institution is also generally prohibited from increasing its average total assets, making acquisitions, establishing any branches or engaging in any new line of business, except under an accepted capital restoration plan or with FDIC approval. The regulations also establish procedures for downgrading an institution to a lower capital category based on supervisory factors other than capital.

FDIC Insurance Assessments . The FDIC has adopted a risk-based assessment system for insured depository institutions that takes into account the risks attributable to different categories and concentrations of assets and liabilities. The system assigns an institution to one of three capital categories: (1) “well capitalized;” (2) “adequately capitalized;” and (3) “undercapitalized.” These three categories are substantially similar to the prompt corrective action categories described above, with the “undercapitalized” category including institutions that are undercapitalized, significantly undercapitalized and critically undercapitalized for prompt corrective action purposes. The FDIC also assigns an institution to one of three supervisory subgroups based on a supervisory evaluation that the institution’s primary federal regulator provides to the FDIC and information that the FDIC determines to be relevant to the institution’s financial condition and the risk posed to the deposit insurance funds. The FDIC may terminate its insurance of deposits if it finds that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.

Community Reinvestment Act . The Community Reinvestment Act requires, in connection with examinations of financial institutions, that federal banking regulators (in the Bank’s case, the Federal Reserve Board) evaluate the record of each financial institution in meeting the credit needs of its local community, including low and moderate-income neighborhoods. These facts are also considered in evaluating mergers, acquisitions and applications to open a branch or facility. Failure to adequately meet these criteria could impose additional requirements and limitations on the Bank. Additionally, the Bank must publicly disclose the terms of various Community Reinvestment Act-related agreements. The Bank received “satisfactory” CRA ratings from the Federal Reserve Board at its last completed examination in October 2006.

Other Regulations . Interest and other charges collected or contracted for by the Bank are subject to state usury laws and federal laws concerning interest rates.

Federal Laws Applicable to Credit Transactions . The loan operations of the Bank are also subject to federal laws applicable to credit transactions, such as the:

Federal Laws Applicable to Deposit Operations . The deposit operations of the Bank are subject to:

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Capital Requirements . The Federal Reserve Board and the Texas Department of Banking monitor the capital adequacy of the Bank by using a combination of risk based guidelines and leverage ratios. The agencies consider the Bank’s capital levels when taking action on various types of applications and when conducting supervisory activities related to the safety and soundness of individual banks and the banking system.

Under the regulatory capital guidelines, the Bank must maintain a total risk based capital to risk weighted assets ratio of at least 8.0%, a Tier 1 capital to risk weighted assets ratio of at least 4.0%, and a Tier 1 capital to adjusted total assets ratio of at least 4.0% (3.0% for banks receiving the highest examination rating) to be considered “adequately capitalized.” See the discussion below under “The FDIC Improvement Act” beginning on page 17 of this registration statement on Form 10.

FIRREA . The Financial Institutions Reform, Recovery and Enforcement Act of 1989, or FIRREA, includes various provisions that affect or may affect the Bank. Among other matters, FIRREA generally permits bank holding companies to acquire healthy thrifts as well as failed or failing thrifts. FIRREA removed certain cross marketing prohibitions previously applicable to thrift and bank subsidiaries of a common holding company. Furthermore, a multi-bank holding company may now be required to indemnify the federal deposit insurance fund against losses it incurs with respect to such company’s affiliated banks, which in effect makes a bank holding company’s equity investments in healthy bank subsidiaries available to the FDIC to assist such company’s failing or failed bank subsidiaries.

In addition, pursuant to FIRREA, any depository institution that has been chartered less than two years, is not in compliance with the minimum capital requirements of its primary federal banking regulator, or is otherwise in a troubled condition must notify its primary federal banking regulator of the proposed addition of any person to its board of directors or the employment of any person as a senior executive officer of the institution at least 30 days before such addition or employment becomes effective. During such 30 day period, the applicable federal banking regulatory agency may disapprove of the addition of or employment of such director or officer. The Bank is not subject to any such requirements.

FIRREA also expanded and increased civil and criminal penalties available for use by the appropriate regulatory agency against certain “institution affiliated parties” primarily including: (i) management, employees and agents of a financial institution; (ii) independent contractors such as attorneys and accountants and others who participate in the conduct of the financial institution’s affairs and who caused or are likely to cause more than minimum financial loss to or a significant adverse affect on the institution, who knowingly or recklessly violate a law or regulation, breach a fiduciary duty or engage in unsafe or unsound practices. Such practices can include the failure of an institution to timely file required reports or the submission of inaccurate reports. Furthermore, FIRREA authorizes the appropriate banking agency to issue cease and desist orders that may, among other things, require affirmative action to correct any harm resulting from a violation or practice, including restitution, reimbursement, indemnifications or guarantees against loss. A financial institution may also be ordered to restrict its growth, dispose of certain assets or take other action as determined by the ordering agency to be appropriate.

The FDIC Improvement Act . The Federal Deposit Insurance Corporation Improvement Act of 1991, or FDICIA, made a number of reforms addressing the safety and soundness of the deposit insurance system, supervision of domestic and foreign depository institutions, and improvement of accounting standards. This statute also limited deposit insurance coverage, implemented changes in consumer protection laws and provided for least cost resolution and prompt regulatory action with regard to troubled institutions.

FDICIA requires every bank with total assets in excess of $500 million to have an annual independent audit made of the bank’s financial statements by a certified public accountant to verify that the financial statements of the bank are presented in accordance with generally accepted accounting principles and comply with such other disclosure requirements as prescribed by the FDIC.

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FDICIA also places certain restrictions on activities of banks depending on their level of capital. FDICIA divides banks into five different categories, depending on their level of capital. Under regulations adopted by the FDIC, a bank is deemed to be “well capitalized” if it has a total Risk-Based Capital Ratio of 10.0% or more, a Tier 1 Capital Ratio of 6.0% or more and a Leverage Ratio of 5.0% or more, and the bank is not subject to an order or capital directive to meet and maintain a certain capital level. Under such regulations, a bank is deemed to be “adequately capitalized” if it has a total Risk-Based Capital Ratio of 8.0% or more, a Tier 1 Capital Ratio of 4.0% or more and a Leverage Ratio of 4.0% or more (unless it receives the highest composite rating at its most recent examination and is not experiencing or anticipating significant growth, in which instance it must maintain a Leverage Ratio of 3.0% or more). Under such regulations, a bank is deemed to be “undercapitalized” if it has a total Risk-Based Capital Ratio of less than 8.0%, a Tier 1 Capital Ratio of less than 4.0% or a Leverage Ratio of less than 4.0%. Under such regulations, a bank is deemed to be “significantly undercapitalized” if it has a Risk-Based Capital Ratio of less than 6.0%, a Tier 1 Capital Ratio of less than 3.0% and a Leverage Ratio of less than 3.0%. Under such regulations, a bank is deemed to be “critically undercapitalized” if it has a Leverage Ratio of less than or equal to 2.0%. In addition, the FDIC has the ability to downgrade a bank’s classification (but not to “critically undercapitalized”) based on other considerations even if the bank meets the capital guidelines. According to these guidelines, the Bank was classified as “well capitalized” as of December 31, 2008.

In addition, if a bank is classified as “undercapitalized,” the bank is required to submit a capital restoration plan to the federal banking regulators. Pursuant to FDICIA, an “undercapitalized” bank is prohibited from increasing its assets, engaging in a new line of business, acquiring any interest in any company or insured depository institution, or opening or acquiring a new branch office, except under certain circumstances, including the acceptance by the federal banking regulators of a capital restoration plan for the bank.

Furthermore, if a bank is classified as “undercapitalized,” the federal banking regulators may take certain actions to correct the capital position of the bank; if a bank is classified as “significantly undercapitalized” or “critically undercapitalized,” the federal banking regulators would be required to take one or more prompt corrective actions. These actions would include, among other things, requiring: sales of new securities to bolster capital, improvements in management, limits on interest rates paid, prohibitions on transactions with affiliates, termination of certain risky activities and restrictions on compensation paid to executive officers. If a bank is classified as “critically undercapitalized,” FDICIA requires the bank to be placed into conservatorship or receivership within 90 days, unless the federal banking regulators determines that other action would better achieve the purposes of FDICIA regarding prompt corrective action with respect to undercapitalized banks.

The capital classification of a bank affects the frequency of examinations of the bank and impacts the ability of the bank to engage in certain activities and affects the deposit insurance premiums paid by such bank. Under FDICIA, the federal banking regulators are required to conduct a full-scope, on-site examination of every bank at least once every 12 months. An exception to this rule is made, however, that provides that banks (i) with assets of less than $100 million, (ii) are categorized as “well capitalized,” (iii) were found to be well managed and its composite rating was outstanding and (iv) has not been subject to a change in control during the last 12 months, need only be examined once every 18 months.

Brokered Deposits . Under FDICIA, banks may be restricted in their ability to accept brokered deposits, depending on their capital classification. “Well capitalized” banks are permitted to accept brokered deposits, but all banks that are not “well capitalized” are not permitted to accept such deposits. The FDIC may, on a case-by-case basis, permit banks that are “adequately capitalized” to accept brokered deposits if the FDIC determines that acceptance of such deposits would not constitute an unsafe or unsound banking practice with respect to the bank. As previously mentioned, the Bank is currently “well capitalized” and therefore is not subject to any limitations with respect to its brokered deposits.

Federal Limitations on Activities and Investments . The equity investments and activities as a principal of FDIC-insured state-chartered banks are generally limited to those that are permissible for national banks. Under regulations dealing with equity investments, an insured state bank generally may not directly or indirectly acquire or retain any equity investment of a type, or in an amount, that is not permissible for a national bank.

Check Clearing for the 21st Century Act . The Check Clearing for the 21st Century Act, also known as Check 21, gives “substitute checks,” such as a digital image of a check and copies made from that image, the same legal standing as the original paper check.

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Federal Home Loan Bank System . The Federal Home Loan Bank, or FHLB, system, of which the Bank is a member, consists of 12 regional FHLBs governed and regulated by the Federal Housing Finance Board, or FHFB. The FHLBs serve as reserve or credit facilities for member institutions within their assigned regions. They are funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB system. They make loans (i.e., advances) to members in accordance with policies and procedures established by the FHLB and the Boards of directors of each regional FHLB.

As a system member, the Bank is entitled to borrow from the FHLB of their respective region and is required to own a certain amount of capital stock in the FHLB. The Bank is in compliance with the stock ownership rules described above with respect to such advances, commitments and letters of credit and home mortgage loans and similar obligations. All loans, advances and other extensions of credit made by the FHLB to the Bank are secured by a portion of the respective mortgage loan portfolio, certain other investments and the capital stock of the FHLB held by the Bank.

Anti-Terrorism and Money Laundering Legislation

The Bank is subject to the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism of 2001 (the “USA PATRIOT Act”), the Bank Secrecy Act and rules and regulations of the Office of Foreign Assets Control. These statutes and related rules and regulations impose requirements and limitations on specific financial transactions and account relationships intended to guard against money laundering and terrorism financing. The Bank has established a customer identification program pursuant to Section 326 of the USA PATRIOT Act and the Bank Secrecy Act, and otherwise has implemented policies and procedures intended to comply with the foregoing rules.

PrimeLending

PrimeLending and the Bank are subject to the rules and regulations of FHA, VA, FNMA, FHLMC and GNMA with respect to originating, processing, selling and servicing mortgage loans and the issuance and sale of mortgage-backed securities. Those rules and regulations, among other things, prohibit discrimination and establish underwriting guidelines which include provisions for inspections and appraisals, require credit reports on prospective borrowers and fix maximum loan amounts, and, with respect to VA loans, fix maximum interest rates. Mortgage origination activities are subject to, among others, the Equal Credit Opportunity Act, Federal Truth-in-Lending Act and the Real Estate Settlement Procedures Act and the regulations promulgated thereunder which, among other things, prohibit discrimination and require the disclosure of certain basic information to borrowers concerning credit terms and settlement costs. PrimeLending and the Bank are also subject to regulation by the Texas Department of Banking with respect to, among other things, the establishment of maximum origination fees on certain types of mortgage loan products.

First Southwest

First Southwest is a broker-dealer registered with the SEC, all 50 U.S. states, the District of Columbia and Puerto Rico. Much of the regulation of broker-dealers, however, has been delegated to self-regulatory organizations, principally FINRA, NASDAQ and national securities exchanges. These self-regulatory organizations adopt rules (which are subject to approval by the SEC) for governing the industry and securities commissions in the states in which they conduct business. First Southwest is a member of, and is primarily subject to regulation, supervision and regular examination by, FINRA.

The regulations to which broker-dealers are subject cover all aspects of the securities business, including sales methods, trade practices among broker-dealers, capital structure, record keeping and the conduct of directors, officers and employees. Broker-dealers are also subject to the privacy and anti-money laundering laws and regulations discussed above. Additional legislation, changes in rules promulgated by the SEC and by self-regulatory organizations or changes in the interpretation or enforcement of existing laws and rules often directly affect the method of operation and profitability of broker-dealers. The SEC and the self-regulatory organizations may conduct administrative proceedings that can result in censure, fine, suspension or expulsion of a broker-dealer, its officers or employees. The principal purpose of regulation and discipline of broker-dealers is the protection of clients and the securities markets rather than protection of creditors and stockholders of broker-dealers.

Limitation on Businesses . The businesses that First Southwest may conduct are limited by its agreements with and its oversight by, FINRA. Participation in new business lines, including trading of new products or participation on new exchanges or in new countries often requires governmental and/or exchange approvals, which may take significant time and resources. As a result, First Southwest may be prevented from entering new businesses that may be profitable in a timely manner, if at all.

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Net Capital Requirements . The SEC, FINRA and various other regulatory agencies have stringent rules and regulations with respect to the maintenance of specific levels of net capital by regulated entities. Generally, a broker-dealer’s net capital is net worth plus qualified subordinated debt less deductions for certain types of assets. Rule 15c3-1 of the Exchange Act (the “Net Capital Rule”) requires that at least a minimum part of a broker-dealer’s assets be maintained in a relatively liquid form.

The SEC and FINRA impose rules that require notification when net capital falls below certain predefined criteria. These rules also dictate the ratio of debt-to-equity in the regulatory capital composition of a broker-dealer, and constrain the ability of a broker-dealer to expand its business under certain circumstances. If a firm fails to maintain the required net capital, it may be subject to suspension or revocation of registration by the applicable regulatory agency, and suspension or expulsion by these regulators could ultimately lead to the firm’s liquidation. Additionally, the Net Capital Rule and certain FINRA rules impose requirements that may have the effect of prohibiting a broker-dealer from distributing or withdrawing capital and requiring prior notice to and approval from the SEC and FINRA for certain capital withdrawals.

Securities Investor Protection Corporation . First Southwest is required by federal law to belong to the SIPC, whose primary function is to provide financial protection for the customers of failing brokerage firms. SIPC provides protection for clients up to $500,000, of which a maximum of $100,000 may be in cash.

Changing Regulatory Environment . The regulatory environment in which First Southwest operates is subject to frequent change. Its business, financial condition and operating results may be adversely affected as a result of new or revised legislation or regulations imposed by the U.S. Congress, the SEC or other U.S. and state governmental regulatory authorities, or FINRA. First Southwest’s business, financial condition and operating results also may be adversely affected by changes in the interpretation and enforcement of existing laws and rules by these governmental authorities. In the current era of heightened regulation of financial institutions, First Southwest can expect to incur increasing compliance costs, along with the industry as a whole.

There are a number of risks inherent to our business. The material risks and uncertainties that management believes affect us are described below. You should carefully consider the risks and uncertainties described below together with all of the other information included in this registration statement on Form 10. The risks and uncertainties described below are not the only ones facing our business. Additional risks and uncertainties that management is not aware of or focused on or that management currently deems immaterial may also impair our business operations. If any of the following risks actually occur, our financial condition and results of operations could be materially and adversely affected. If this were to happen, you could lose all or part of your investment in our common stock.

Risks Related to Our Business

Recent negative developments in the financial industry and the domestic and international credit markets may adversely affect our operations and results.

Negative developments in the latter half of 2007 and during 2008 and 2009 in the global credit and securitization markets have resulted in uncertainty in the financial markets in general with the expectation of the general economic downturn continuing through 2009. As a result of this “credit crunch,” commercial as well as consumer loan portfolio performances have deteriorated at many institutions and the competition for deposits and quality loans has increased significantly. In addition, the values of real estate collateral supporting many commercial loans and home mortgages have declined and may continue to decline. Global securities markets, and financial institution stock prices in particular, have been negatively affected, as has the ability of banks and bank holding companies to raise capital or borrow in the debt markets. As a result, significant new federal laws and regulations relating to financial institutions, including, without limitation, the EESA and the ARRA, have been adopted. Furthermore, the potential exists for additional federal or state laws and regulations regarding, among other matters, lending and funding practices and liquidity standards, and bank regulatory agencies are expected to be active in responding to concerns and trends identified in examinations. Negative developments in the financial industry and the domestic and international credit markets, and the impact of new or future legislation in response to those developments, may negatively impact our operations by restricting our business operations, including our ability to originate or sell loans and attract and retain experienced personnel, and adversely impact our financial performance.

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A further adverse change in real estate market values may result in losses and otherwise adversely affect our profitability.

As of December 31, 2008, approximately 48% of our loan portfolio was comprised of loans with real estate as a primary or secondary component of collateral. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. The recent negative developments in the financial industry and economy as a whole have adversely affected the real estate market values generally and in our market areas in Texas specifically and may continue to decline. A further decline in real estate values could further impair the value of our collateral and our ability to sell the collateral upon any foreclosure. In the event of a default with respect to any of these loans, the amounts we receive upon sale of the collateral may be insufficient to recover the outstanding principal and interest on the loan. As a result, our profitability and financial condition may be adversely affected by a further decrease in real estate market values.

If our allowance for loan losses is insufficient to cover actual loan losses, our earnings will be adversely affected.

As a lender, we are exposed to the risk that our loan customers may not repay their loans according to the terms of these loans and the collateral securing the payment of these loans may be insufficient to fully compensate us for the outstanding balance of the loan plus the costs to dispose of the collateral. We may experience significant loan losses that may have a material adverse effect on our operating results and financial condition.

We maintain an allowance for loan losses in an attempt to cover loan losses inherent in our loan portfolio. In determining the size of the allowance, we rely on an analysis of our loan portfolio, our experience and our evaluation of general economic conditions. We also make various assumptions and judgments about the collectibility of our loan portfolio, including the diversification by industry of its commercial loan portfolio, the effect of changes in the economy on real estate and other collateral values, the results of recent regulatory examinations, the effects on the loan portfolio of current economic indicators and their probable impact on borrowers, the amount of charge-offs for the period and the amount of non-performing loans and related collateral security. If Plains Capital’s assumptions prove to be incorrect, its current allowance may not be sufficient and adjustments may be necessary to allow for different economic conditions or adverse developments in its loan portfolio. Material additions to the allowance for loan losses would materially decrease Plains Capital’s net income and adversely affect its financial condition generally.

In addition, federal and state regulators periodically review Plains Capital’s allowance for loan losses and may require it to increase its provision for loan losses or recognize further loan charge-offs, based on judgments different than those of Plains Capital. Any increase in its allowance for loan losses or loan charge-offs required by these regulatory agencies could have a material adverse effect on Plains Capital’s operating results and financial condition.

Our geographic concentration may magnify the adverse effects and consequences of any regional or local economic downturn.

We conduct our operations primarily in the State of Texas. Substantially all of the real estate loans in our loan portfolio are secured by properties located in the State of Texas, with approximately 30% and 39% secured by properties located in Austin and the Dallas/Ft. Worth metroplex, respectively. Likewise, substantially all of the real estate loans in our loan portfolio are made to borrowers who live and conduct business in the State of Texas. The banking business is affected by general economic conditions such as inflation, recession, unemployment and many other factors beyond our control. Adverse economic conditions in the State of Texas may result in a reduction in the value of the collateral securing our loans. Any regional or local economic downturn that affects the State of Texas or property or borrowers in the State of Texas may affect us and our profitability more significantly and more adversely than our competitors that are less geographically concentrated.

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Our operating results could be materially adversely affected by the negative performance of a small number of bank locations because of our relatively small bank base.

As of December 31, 2008, we operated only 30 bank locations, six of which opened since January 1, 2008. Because of our relatively small number of bank locations, poor operating results at any one or more of our new or existing bank locations could materially adversely affect our profitability. Factors that could adversely affect the operating results of any new or existing bank location include local competition, consumer preference, development of the area in which the bank is located and access to the bank, including construction of highways that provide, or in some cases restrict, access to the bank. The operating results of certain existing bank locations have been, and may continue to be, affected by any one or more of these factors. The business, financial condition, operating results and cash flows or the lack of success of one or more new or existing bank locations may have a more significant effect on our overall results of operations than would be the case in a larger company with a significantly larger bank location base.

Our business is subject to interest rate risk and fluctuations in interest rates may adversely affect our earnings and capital levels and overall results.

The majority of our assets are monetary in nature and, as a result, we are subject to significant risk from changes in interest rates. Changes in interest rates may impact our net interest income as well as the valuation of our assets and liabilities. Our earnings are significantly dependent on our net interest income, which is the difference between interest income on interest-earning assets, such as loans and securities, and interest expense on interest-bearing liabilities, such as deposits and borrowings. We expect to periodically experience “gaps” in the interest rate sensitivities of our assets and liabilities, meaning that either our interest-bearing liabilities will be more sensitive to changes in market interest rates than our interest-earning assets, or vice versa. In either event, if market interest rates should move contrary to our position, this “gap” may work against us, and our earnings may be adversely affected.

An increase in the general level of interest rates may also, among other things, adversely affect the demand for loans and our ability to originate loans. Conversely, a decrease in the general level of interest rates, among other things, may lead to prepayments on our loan and mortgage-backed securities portfolios and increased competition for deposits. Accordingly, changes in the general level of market interest rates may adversely affect our net yield on interest-earning assets, loan origination volume and our overall results.

Although our asset-liability management strategy is designed to control and mitigate exposure to the risks related to changes in the general level of market interest rates, market interest rates are affected by many factors outside of our control, including inflation, recession, unemployment, money supply, and international disorder and instability in domestic and foreign financial markets. We may not be able to accurately predict the likelihood, nature and magnitude of such changes or how and to what extent such changes may affect our business. We also may not be able to adequately prepare for or compensate for the consequences of such changes. Any failure to predict and prepare for changes in interest rates or adjust for the consequences of these changes may adversely affect our earnings and capital levels and overall results.

We are heavily dependent on the profitability of our bank subsidiary.

We are a bank holding company and a financial holding company engaged in the business of managing, controlling and operating our subsidiaries, including the Bank. We conduct no material business or other activity other than activities incidental to holding stock in the Bank and our other subsidiaries. As a result, we rely substantially on the profitability of the Bank and dividends from the Bank to pay our operating expenses, to satisfy our obligations and the expenses and obligations of all of our subsidiaries and to pay dividends on our common stock. As with most financial institutions, the profitability of the Bank is subject to the fluctuating cost and availability of money, changes in interest rates and in economic conditions in general. The Bank has several subsidiaries that may also contribute to its profitability and ability to pay dividends to us. However, if the Bank is unable to make cash distributions to us, we may be unable to satisfy our obligations or make distributions on our common stock.

First Southwest is subject to various risks associated with the securities industry.

First Southwest is subject to uncertainties that are common in the securities industry. These uncertainties include:

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As a result, First Southwest’s revenues and earnings may vary significantly from quarter to quarter and from year to year. In periods of low transaction volume such as in the current economic downturn, profitability is impaired because certain expenses remain relatively fixed. First Southwest is much smaller and has much less capital than many competitors in the securities industry. During the current market downturn, First Southwest’s business has been and could continue to be adversely affected in many ways.

If we are not able to sustain our historical levels of growth or continue to grow, we may not be able to sustain our historical earnings or current level of dividends.

We have grown historically through various methods, including the implementation of internal growth strategies, acquisitions and additional bank location openings. Although we intend to continue to grow through these methods, various factors, including increased competition, the availability of financing and other general economic conditions, may affect our ability to do so. Further, adverse regional or local economic conditions may impede or prohibit our ability to fund and open new bank locations and we may not be able to successfully implement our growth strategy if we are not able to identify attractive markets, locations, or opportunities to expand in the future. If we are not able to sustain our historical levels of growth or continue to grow through these methods or other methods, we may not be able to sustain our historical earnings and continue to pay dividends at historical rates.

If we are not able to manage our growth effectively, our results of operations may be adversely affected.

Although our historical performance may not be indicative of our future performance, during the last six years, we have experienced significant and rapid growth and may continue to grow. Companies like us that experience rapid growth face various risks and difficulties, including:

As we continue to open new branches or if management determines to acquire branches or other banks, we expect to incur increased personnel, occupancy and other operating expenses. In the case of new branches, we must absorb those higher expenses while we begin to generate new deposits and then redeploy those new deposits into attractively priced loans

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and other higher yielding earning assets. Based on our experience, it generally takes 12 months for new branches to first achieve operational profitability, if ever. Thus, our plans to establish additional branches could depress our earnings in the short run, even if we efficiently execute our branching strategy. Further, if we are not able to manage our growth effectively, our business, financial condition, results of operations and future prospects could be adversely affected and we may not be able to continue to implement our business strategy and successfully conduct our operations.

We may decide to make future acquisitions, which could dilute current stockholders’ ownership and expose us to additional risks.

We periodically evaluate opportunities to acquire financial services businesses, including other banks and/or branch locations. As a result, we may engage in negotiations or discussions that, if they were to result in a transaction, could have a material effect on our operating results and financial condition, including short and long-term liquidity.

Our acquisition activities could be material. For example, we could issue additional shares of common stock in a purchase transaction, which could dilute current stockholders’ ownership interests. These activities could require us to use a substantial amount of cash, other liquid assets, and/or incur debt. In addition, if goodwill recorded in connection with our prior or potential future acquisitions were determined to be impaired, then we would be required to recognize a charge against our earnings, which could materially and adversely affect our results of operations during the period in which the impairment was recognized.

Our acquisition activities could involve a number of additional risks, including the risks of: incurring time and expense associated with identifying and evaluating potential acquisitions and merger partners and negotiating potential transactions, resulting in management’s attention being diverted from the operation of our existing business; using inaccurate estimates and judgments to evaluate credit, operations, management and market risks with respect to the target institution or assets; incurring time and expense required to integrate the operations and personnel of the combined businesses, creating an adverse short-term effect on results of operations; and losing key employees and customers as a result of an acquisition that is poorly received.

We may be exposed to difficulties in combining the operations of acquired entities, including First Southwest, into our own operations, which may prevent us from achieving the expected benefits from our acquisition activities.

We may not be able to fully achieve the strategic objectives and operating efficiencies that we anticipate in our acquisition activities, including our recent acquisition of First Southwest. Inherent uncertainties exist in integrating the operations of an acquired entity. In addition, the markets and industries in which we and our potential acquisition targets operate are highly competitive. We may lose customers or the customers of an acquired entity as a result of an acquisition. We also may lose key personnel from the acquired entity as a result of an acquisition. We may not discover all known and unknown factors when examining a company for acquisition during the due diligence period. These factors could produce unintended and unexpected consequences. Undiscovered factors as a result of an acquisition, pursued by non-related third parties, could bring civil, criminal, and financial liabilities against us, our management, and the management of those entities acquired. These factors could contribute to our not achieving the expected benefits from our acquisitions within desired time frames, if at all.

Financial markets are susceptible to disruptive events that may lead to little or no liquidity for auction rate bonds.

As of December 31, 2008, we held approximately $168.4 million par value of auction rate bonds backed by pools of student loans under the Federal Family Education Loan Program. These auction rate bonds were acquired in conjunction with our acquisition of First Southwest. Since December 31, 2008 and in conjunction with a settlement with FINRA pursuant to a Letter of Acceptance, Waiver and Consent accepted on December 16, 2008 by FINRA (the “FINRA Settlement”), we have repurchased approximately $41.6 million in face value of certain auction rate bonds from current and former clients. The auction rate bonds are currently held in the Bank’s securities portfolio. In late 2007, the market for auction rate securities began experiencing disruptions through the failure of auctions for auction rate securities issued by leveraged closed-end funds, municipal governments, state instrumentalities and student loan companies backed by pools of student loans guaranteed by the U.S. Department of Education. Our clients were adversely affected by the failures in this market, which resulted in limited options to liquidate holdings in these positions or to post these securities as collateral for loans. These conditions will likely continue until either these securities are restructured or refunded or a liquid secondary market re-emerges for these securities. Because of the lack of observable market activity for similar auction rate bonds, the

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estimated fair value of our auction rate bonds as of December 31, 2008 was $151.6 million. The estimated fair value of these auction rate bonds may further decline and require write-downs and losses as additional market information is obtained or in the event the current market conditions continue and these securities are not restructured or refunded or a liquid secondary market does not re-emerge, in which case, our results of operations would be adversely affected.

Liquidity needs could adversely affect our results of operations and financial condition and could increase if we decide to redeem the preferred stock issued to the U.S. Treasury Department pursuant to the TARP Capital Purchase Program.

The primary sources of our funds are loan repayments and client deposits. While scheduled loan repayments are a relatively stable source of funds, they are subject to the ability of borrowers to repay the loans. The ability of borrowers to repay loans can be adversely affected by a number of factors, including changes in economic conditions, adverse trends or events affecting business industry groups, reductions in real estate values or markets, business closings or lay-offs, inclement weather, natural disasters and international instability. Additionally, deposit levels may be affected by a number of factors, including rates paid by competitors, general interest rate levels, regulatory capital requirements, returns available to clients on alternative investments and general economic conditions. Accordingly, we may be required from time to time to rely on secondary sources of liquidity to meet withdrawal demands or otherwise fund operations. Such sources include Federal Home Loan Bank advances, sales of securities and loans and federal funds lines of credit from correspondent banks, as well as out-of-market time deposits. While we believe that these sources are currently adequate, they may be insufficient to meet future liquidity demands, particularly if we continue to grow and experience increasing loan demand, are required to extend loans pursuant to the FINRA Settlement or if we decide to redeem the preferred stock issued to the U.S. Treasury Department pursuant to the TARP Capital Purchase Program. We may be required to slow or discontinue loan growth, capital expenditures or other investments or liquidate assets should such sources not be adequate.

The accuracy of our financial statements and related disclosures could be affected if we are exposed to actual conditions different from the judgments, assumptions or estimates used in our critical accounting policies.

The preparation of financial statements and related disclosure in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. Our critical accounting policies, which are included in this registration statement on Form 10, describe those significant accounting policies and methods used in the preparation of our consolidated financial statements that are considered “critical” by us because they require judgments, assumptions and estimates that materially impact our consolidated financial statements and related disclosures. As a result, if future events differ significantly from the judgments, assumptions and estimates in our critical accounting policies, such events or assumptions could have a material impact on our audited consolidated financial statements and related disclosures.

We are dependent on our management team, and the loss of our senior executive officers or other key employees could impair our relationship with customers and adversely affect our business and financial results.

Our success is dependent, to a large degree, upon the continued service and skills of our existing management team, including Messrs. Alan White, Jerry Schaffner, Hill Feinberg and Ms. Roseanna McGill and other key employees with long-term customer relationships. Our growth strategy is built primarily upon our ability to retain employees with experience and business relationships within their respective segments. The loss of one or more of these key personnel could have an adverse impact on our business because of their skills, knowledge of the market, years of industry experience and the difficulty of finding qualified replacement personnel. In addition, we currently do not have non-competition agreements with all of our senior executive officers and other key employees. If any of these personnel were to leave and compete with us, our business, financial condition, results of operations, cash flows and growth could suffer.

Economic stimulus legislation imposes compensation restrictions that could adversely affect our ability to recruit and retain key employees.

The EESA, as amended by the ARRA, includes extensive restrictions on our ability to pay retention awards, bonuses and other incentive compensation during the period in which we have any outstanding obligation arising from financial assistance provided to us under the TARP Capital Purchase Program. Many of the restrictions are not limited to our senior executives and cover other employees whose contributions to revenue and performance can be significant. In addition, the U.S. Congress is currently considering legislation that would restrict the compensation practices of recipients of financial

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assistance under the TARP Capital Purchase Program. The limitations imposed by existing or future legislation and regulation may adversely affect our ability to recruit and retain these key employees, especially if we are competing for management talent against U.S. and non-U.S. institutions that are not subject to the same restrictions. In such event, our business, financial condition, results of operations, cash flows and growth could suffer. For more information, see the section entitled “Executive Compensation – Compensation Discussion and Analysis – TARP Capital Purchase Program” beginning on page 59 of this registration statement on Form 10.

A decline in the market for advisory services could adversely affect our business and results of operations.

First Southwest has historically earned a significant portion of its revenues from advisory fees paid to it by its clients, in large part upon the successful completion of the client’s transaction. Financial advisory revenues represented a majority of First Southwest’s net revenues in fiscal year 2008 and fiscal year 2007. Unlike other investment banks, First Southwest earns most of its revenues from its advisory fees and less money from other business activities such as underwriting. We expect that First Southwest’s reliance on advisory fees will continue for the foreseeable future, and a decline in advisory engagements or the market for advisory services generally would have an adverse effect on our business and results of operations.

An interruption in, or breach in security of, our information systems may result in a loss of customer business.

We rely heavily on communications and information systems to conduct our business. Any failure or interruption or breach in security of these systems could result in failures or disruptions in our customer relationship management, securities trading, general ledger, deposits, servicing or loan origination systems. If such failures or interruptions occur, we may not be able to adequately address them or in a timely fashion. The occurrence of any failures or interruptions could result in a loss of customer business and have a material adverse effect on our public relations, reputation, results of operations and financial condition.

We are subject to extensive regulation that could restrict our activities and impose financial requirements or limitations on the conduct of our business and limit our ability to receive dividends from our bank subsidiary.

We are subject to extensive federal and state regulation and supervision, including that of the Federal Reserve Board, the Texas Department of Banking, the FDIC, the SEC and FINRA. Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole, not security holders. These regulations affect our lending practices, capital structure, investment practices, dividend policy and growth, among other things. The U.S. Congress and federal regulatory agencies continually review banking and securities laws, regulations and policies for possible changes. It is likely that there will be significant changes to the banking and financial institutions regulatory regimes in the near future in light of the recent performance of and government intervention in the financial services sector. Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect us in substantial and unpredictable ways. Such changes could subject our business to additional costs, limit the types of financial services and products we may offer and increase the ability of non-banks to offer competing financial services and products, among other things. Failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies, civil money penalties or reputation damage, which could have a material adverse effect on our business, financial condition and results of operations. While we have policies and procedures designed to prevent any such violations, there can be no assurance that such violations will not occur. See the section entitled “Government Supervision and Regulation” beginning on page 10 of this registration statement on Form 10.

The FDIC and SIPC deposit insurance assessments that we are required to pay have recently increased and may materially increase in the future, which would have an adverse effect on our earnings.

As a member institution of the FDIC, we are required to pay semi-annual deposit insurance premium assessments to the FDIC. During the year ended December 31, 2008, we paid approximately $1.6 million in deposit insurance assessments. First Southwest is a registered broker-dealer and a member of the SIPC and is required to pay assessments, which in recent years have been nominal amounts.

Due to the recent failure of several unaffiliated FDIC insurance depository institutions, we anticipate that the deposit insurance premium assessments paid by all banks will increase. On October 7, 2008, the board of directors of the FDIC adopted a restoration plan and issued a notice of proposed rulemaking and request for comment that would (i) revise deposit

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insurance assessment rates, including base assessment rates, to raise assessment revenue required under the restoration plan; (ii) change the way the assessment system differentiates risk among insured institutions to take into account new risk measures; and (iii) make technical and other changes to the rules governing the risk-based assessment system. Further, on March 2, 2009, the SIPC informed its members of an increase in assessments. The increase will become effective in April 2009. As a result of the increase, First Southwest expects to pay approximately $250,000 in SIPC assessments annually. When the deposit insurance premium assessment and the SIPC assessment rates applicable to us increase, our earnings will be adversely impacted.

On October 14, 2008, the FDIC announced the creation of the Temporary Liquidity Guarantee Program, or TLGP, which seeks to strengthen confidence and encourage liquidity in the banking system. The TLGP has two primary components that are available on a voluntary basis to financial institutions: (i) guarantee of newly-issued senior unsecured debt; the guarantee would apply to new debt issued on or before June 30, 2009 and would provide protection until June 30, 2012; issuers electing to participate would pay a 75 basis point fee for the guarantee; and (ii) unlimited deposit insurance for non-interest bearing deposit transaction accounts; financial institutions electing to participate will pay a 10 basis point premium in addition to the insurance premiums paid for standard deposit insurance. We elected to participate in the TLGP’s enhanced deposit insurance program. As a result of the enhancements to deposit insurance protection and the expectation that there will be demands on the FDIC’s deposit insurance fund, we expect our deposit insurance costs to increase further during 2009.

We face strong competition from other financial institutions and financial service companies, which may adversely affect our operations and financial condition.

Our banking and mortgage origination businesses face vigorous competition from banks and other financial institutions, including savings and loan associations, savings banks, finance companies and credit unions. A number of these banks and other financial institutions have substantially greater resources and lending limits, larger branch systems and a wider array of banking services than we do. We also compete with other providers of financial services, such as money market mutual funds, brokerage firms, consumer finance companies, insurance companies and governmental organizations, each of which may offer more favorable financing than we are able to provide. In addition, some of our non-bank competitors are not subject to the same extensive regulations that govern us. The banking business in the State of Texas, particularly in the Austin, Dallas/Fort Worth, Lubbock and San Antonio metropolitan and surrounding areas, has become increasingly competitive over the past several years, and we expect the level of competition we face to further increase. Our profitability depends on our ability to compete effectively in these markets. This competition may reduce or limit our margins on banking services, reduce our market share and adversely affect our results of operations and financial condition.

Additionally, the financial advisory and investment banking industries are intensely competitive industries and will likely remain competitive. Our financial advisory business competes directly with numerous other financial advisory and investment banking firms, broker-dealers and banks, including large national and major regional firms and smaller niche companies, some of whom are not broker dealers and, therefore, not subject to the broker dealer regulatory framework. In addition to competition from firms currently in the industry, there has been increasing competition from others offering financial services, including automated trading and other services based on technological innovations. First Southwest competes on the basis of a number of factors, including the quality of advice and service, innovation, reputation and price. Many of First Southwest’s competitors in the investment banking industry have a greater range of products and services, greater financial and marketing resources, larger customer bases, greater name recognition, more managing directors to serve their clients’ needs, greater global reach and more established relationships with their customers than First Southwest. Additionally, some of First Southwest’s competitors have reorganized or plan to reorganize from investment banks into bank holding companies which may provide them with a competitive advantage. These larger and better capitalized competitors may be more capable of responding to changes in the investment banking market, to compete for skilled professionals, to finance acquisitions, to fund internal growth and to compete for market share generally. Increased pressure created by any current or future competitors, or by First Southwest’s competitors collectively, could materially and adversely affect our business and results of operations. Increased competition may result in reduced revenue and loss of market share. Further, as a strategic response to changes in the competitive environment, First Southwest may from time to time make certain pricing, service or marketing decisions that also could materially and adversely affect our business and results of operations.

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We are subject to claims and litigation that could have a material adverse effect on our business.

We face significant legal risks in the business segments in which we operate, and the volume of claims and amount of damages and penalties claimed in litigation and regulatory proceedings against financial institutions remains high. These risks often are difficult to assess or quantify, and their existence and magnitude often remain unknown for substantial periods of time. Substantial legal liability or significant regulatory action against us or any of our subsidiaries could have a material adverse effect on our results of operations or cause significant reputational harm to us, which could seriously harm our business and prospects. Further, regulatory inquiries and subpoenas, other requests for information, or testimony in connection with litigation may require incurrence of significant expenses, including fees for legal representation and fees associated with document production. These costs may be incurred even if we are not a target of the inquiry or a party to the litigation. Any financial liability or reputational damage could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.

We may be subject to environmental risks and the associated costs in connection with any foreclosure on the real estate assets securing our loan portfolio.

There is a risk that hazardous or toxic waste or other environmental hazards may be found on the properties that secure many of our loans. If we acquire such properties as a result of foreclosure, we could be held responsible for the cost of cleaning up or removing this waste or these hazards and this cost could exceed the value of the underlying properties and adversely affect our profitability. Although we have policies and procedures that require us to perform an environmental review before initiating any foreclosure action on certain real property, these reviews may not be sufficient to detect all potential environmental hazards.

Our small to medium-sized business target market may have fewer financial resources to weather the current downturn in the economy.

We target our business development and marketing strategy primarily to serve the banking and financial services needs of small to medium-sized businesses. These small to medium-sized businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities. If general economic conditions adversely impact these businesses within the State of Texas, our results of operations and financial condition may be adversely affected.

We may not be able to address and adapt to technological change.

The banking industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend in part upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience as well as create additional operating efficiencies. Many of our competitors have substantially greater resources to invest in technological improvements. If we are not able to effectively implement new technology-driven products and services or be successful in marketing such products and services to our customers and otherwise address and adapt to technological change, our business, financial condition and results of operations could be materially adversely affected.

Risks Related to Our Common Stock

The lack of any established trading market may significantly restrict your ability to sell shares of our common stock.

There is no established trading market for our common stock. The absence of an active trading market may significantly restrict your ability to transfer your shares of our common stock, even if such transfer is exempt from registration under the securities laws. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market or how liquid that market might become. We do not currently intend to seek listing on any securities exchange. Consequently, you may be unable to liquidate your investment and should be able to bear the economic risk of the investment in our common stock indefinitely.

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Shares of our common stock are subject to dilution.

As of March 31, 2009, we had approximately 10,418,389 shares of common stock issued and outstanding and outstanding options to purchase 327,973 shares of our common stock. Additionally, 565,810 shares of our common stock are currently held in escrow, and 23,774 shares underlying outstanding and unexercised stock options could be held in escrow if exercised prior to the applicable release date, by an escrow agent on behalf of the former stockholders of First Southwest and may be released to such stockholders upon the satisfaction of the earnout provisions contained in the merger agreement between us and First Southwest, dated as of December 31, 2008 (the “Merger Agreement”). If we issue additional shares of common stock in the future and such issuance is not made to all then-existing common stockholders proportionate to their interests (as in a stock dividend or stock split), then the issuance will result in dilution to each stockholder by reducing his, her or its percentage ownership of the total outstanding shares of our common stock.

The amounts recorded in the financial statements as a result of the acquisition of First Southwest have not been finalized, and we may be required to adjust the amounts we have recorded by a material amount.

The process of allocating the purchase price of the First Southwest merger has not been completed. The amounts we have recorded for the assets acquired and liabilities assumed from First Southwest are preliminary estimates that are subject to refinement based upon the completion of a third-party valuation. As described elsewhere in this registration statement on Form 10, we may issue up to 565,810 additional shares of our common stock to the former stockholders of First Southwest based on the fair value of auction rate bonds at the end of a four-year contingency period. If we issue additional shares as a result of this contingency, the purchase price of the acquisition will increase, and we may record goodwill with respect to the transaction. Our book value per share may be diluted as well, which could impact the market value of our common stock. In addition, we may identify other intangible assets at First Southwest in the final purchase accounting. Our regulatory capital will be reduced if we record goodwill or other intangible assets. Goodwill and other intangible assets are subject to an annual impairment analysis that may result in our writing off some or all of the goodwill and other intangible assets.

Our organizational documents, the provisions of Texas law to which we are subject, the Merger Agreement and the U.S. Treasury Department’s Capital Purchase Program may delay or prevent a change in control that you may favor.

Our articles of incorporation and bylaws contain various provisions that may delay, discourage or prevent an attempted acquisition or change in control of Plains Capital. These provisions include a requirement that at least a majority of the votes cast by the holders of shares entitled to vote in the election of directors at a meeting of stockholders at which a quorum is present is necessary to elect directors. Our articles of incorporation also provide for noncumulative voting for directors. In addition, we have additional authorized common stock and authorized preferred stock, and our board of directors may issue additional shares of our common stock and shares of preferred stock without stockholder approval and upon such terms as our board of directors may determine. The issuance of additional shares of common stock or shares of preferred stock, while providing desirable flexibility in connection with possible acquisitions, financings and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring, a controlling interest in our company. In addition, certain provisions of Texas and federal law, including a provision that restricts certain business combinations between a Texas corporation and certain affiliated stockholders, may delay, discourage or prevent an attempted acquisition or change in control of our company. Furthermore, any change in control of our company is subject to prior regulatory approval under the BHC Act or the Change in Bank Control Act. Additionally, pursuant to our acquisition of First Southwest, we agreed that in the event we determine to sell the properties or business of First Southwest or its subsidiaries prior to December 31, 2010 to someone other than one of our affiliates, and such sale does not constitute a change of control (as defined in the Merger Agreement), we will provide notice and allow the former First Southwest stockholders the opportunity to purchase such properties or business in accordance with the terms set forth in the Merger Agreement. Finally, the preferred stock that we issued to the U.S. Treasury Department pursuant to the TARP Capital Purchase Program is generally non-voting. Therefore, any potential acquirer may not be able to accomplish a tax free reorganization if the U.S. Treasury Department insists on securing non-voting preferred stock in any such reorganization.

Our board of directors may issue shares of preferred stock that would adversely affect the rights of our stockholders.

Our authorized capital stock includes 5,000,000 shares of preferred stock, and we have 87,631 shares of Series A Preferred Stock and 4,382 shares of Series B Preferred Stock issued and outstanding. Our board of directors, in its sole

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discretion, may designate and issue one or more additional series of preferred stock from the authorized and unissued shares of preferred stock. Subject to limitations imposed by law or our articles of incorporation, our board of directors is empowered to determine: (i) the designation of, and the number of, shares constituting each series of preferred stock; (ii) the dividend rate for each series; (iii) the terms and conditions of any voting, conversion and exchange rights for each series; (iv) the amounts payable on each series upon redemption or our liquidation, dissolution or winding-up; (v) the provisions of any sinking fund for the redemption or purchase of shares of any series; and (vi) the preferences and the relative rights among the series of preferred stock. Preferred stock could be issued with voting and conversion rights that could adversely affect the voting power of the shares of our common stock. The issuance of preferred stock could also result in a series of securities outstanding that would have preferences over the common stock with respect to dividends and in liquidation.

The U.S. Treasury Department’s investment in us imposes restrictions and obligations upon us that could adversely affect the rights of our common stockholders.

On December 19, 2008, we sold approximately $87.6 million of Series A and Series B Preferred Stock to the U.S. Treasury Department pursuant to the TARP Capital Purchase Program. The shares of Series B Preferred Stock were issued to the U.S. Treasury Department upon the exercise of a warrant issued in conjunction with the Series A Preferred Stock. The shares of Series A and Series B Preferred Stock issued to the U.S. Treasury Department are senior to shares of our common stock with respect to dividends and liquidation preference. Under the terms of the Series A Preferred Stock, we are obligated to pay a 5% per annum cumulative dividend on the stated value of the preferred stock until February 15, 2014 and thereafter at a rate of 9% per annum. As long as shares of the Series A and Series B Preferred Stock remain outstanding, we may not pay dividends to our common stockholders (nor may we repurchase or redeem any shares of our common stock) unless all accrued and unpaid dividends on the preferred stock have been paid in full. Furthermore, prior to December 19, 2011, unless we have redeemed all of the preferred stock, the consent of the U.S. Treasury Department will be required to, among other things, increase the amount of dividends paid on our common stock. After December 19, 2011 and thereafter until December 19, 2018, the consent of the U.S. Treasury Department (if it still holds our preferred stock) will be required for any increase in the aggregate common stock dividends per share greater than 3% per annum. After December 19, 2018, we will be prohibited from paying dividends on or repurchasing any common stock until the preferred stock issued to the U.S. Treasury Department is redeemed in whole or the U.S. Treasury Department has transferred all of its preferred stock to third parties. If dividends on the preferred stock are not paid in full for six dividend periods, whether or not consecutive, the U.S. Treasury Department will have the right to elect two directors to our board of directors until all unpaid cumulative dividends are paid in full. The terms of the Series B Preferred Stock are identical to those described above for the Series A Preferred Stock except that (i) the dividend rate is 9% per annum and (ii) the Series B Preferred Stock may not be redeemed unless all of the Series A Preferred Stock is redeemed.

An investment in our common stock is not an insured deposit.

An investment in our common stock is not a bank deposit and is not insured or guaranteed by the FDIC or any other government agency. Accordingly, you should be capable of affording the loss of any investment in our common stock.

Selected Financial Data

The following table sets forth our selected historical consolidated financial information for each of the periods indicated (dollar amounts in thousands). The annual historical information has been derived from our audited consolidated financial statements for the years ended December 31, 2004 through 2008. The historical results set forth below and elsewhere in this registration statement on Form 10 are not necessarily indicative of our future performance.

The information is only a summary and should be read with our historical consolidated financial statements and related notes contained in this registration statement on Form 10, as well as other information.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes to those statements included elsewhere in this registration statement on Form 10. The following discussion and analysis contains forward-looking statements that are

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based on our current expectations and involve risks and uncertainties. Generally, verbs in the future tense and the words “believe,” “expect,” “anticipate,” “intends,” “opinion,” “potential” and similar terms and expressions identify forward-looking statements. Examples of these forward-looking statements can be found in, but are not limited to, the discussion of government regulation applicable to our operations, allowance for loan losses, expected effects of accounting pronouncements, any quantitative and qualitative disclosure about market and interest rate risk, and litigation. Actual results and the timing of events may differ materially from those described in these forward-looking statements due to a number of factors, including those discussed in the section entitled “Risk Factors” and elsewhere in this registration statement on Form 10. See also the section entitled “Forward-Looking Statements.” These risks and uncertainties should be considered in evaluating these forward-looking statements and undue reliance should not be placed on these statements. The forward-looking statements contained herein speak only as of the date of this registration statement on Form 10, and, except as may be required by applicable law and regulation, we do not undertake, and specifically disclaim any obligation, to publicly update or revise such statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Overview

We are a bank holding company and a financial holding company with approximately $4.0 billion in assets. The Bank, one of our wholly-owned subsidiaries, provides a broad array of products and services, including commercial banking, personal banking, wealth management and treasury management, from offices located throughout central, north and west Texas. In addition to the Bank, we have various subsidiaries with specialized areas of expertise that also offer an array of products and services such as mortgage origination and financial advisory services. On December 31, 2008, we expanded our financial advisory segment when we acquired First Southwest. This acquisition was accounted for as a purchase transaction, and as such, First Southwest’s results of operations are not included in our consolidated financial statements or discussed in detail below. See Note 2 in the accompanying notes to consolidated financial statements included elsewhere in this registration statement on Form 10.

Recent Government Actions

In response to the challenges facing the financial services sector, several regulatory and governmental actions have recently been announced including:

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On December 19, 2008, we sold approximately $87.6 million in Series A and Series B Preferred Stock to the U.S. Treasury Department pursuant to the TARP Capital Purchase Program. As a participant in the TARP Capital Purchase Program, we are subject to executive compensation limits and other restrictions. For a description of the limitations and restrictions imposed by our participation in the TARP Capital Purchase Program, see the section entitled “Executive Compensation – Compensation Discussion and Analysis – TARP Capital Purchase Program” beginning on page 59 of this registration statement on Form 10.

We elected to participate in the TLGP’s enhanced deposit insurance program. As a result of the enhancements to deposit insurance protection and demands on the FDIC’s deposit insurance fund, we expect our deposit insurance costs to increase significantly during 2009.

Although it is possible that further regulatory actions will arise as the Federal government attempts to address the economic situation, we are not aware of any further recommendations by regulatory authorities that, if implemented, would have or would be reasonably likely to have a material effect on our liquidity, capital ratios or results of operations.

Segment and Related Information

We have three reportable segments that are organized primarily by the core products offered to the segments’ respective customers, although numerous opportunities for cross-selling exist between segments. The banking segment includes the operations of the Bank and PlainsCapital Leasing. The operations of PrimeLending constitute the mortgage origination segment. The financial advisory segment is composed of Hester Capital and, as of the December 31, 2008 acquisition date, First Southwest.

How We Generate Revenue and Net Income

We are substantially dependent on our banking segment for revenue, which provides primarily business banking and personal banking products and services. During 2008, approximately 69% of our revenue was derived from the banking segment. The banking segment generates revenue from, and its results of operations are primarily dependent on, net interest income. Net interest income represents the difference between the income earned on the banking segment’s assets, including its loans and investment securities, and the banking segment’s cost of funds, including the interest paid by the banking segment on its deposits and borrowings that are used to support the banking segment’s assets. The banking segment also derives revenue from other sources, primarily service charges on customer deposit accounts and trust fees.

Our mortgage origination segment’s operations have historically represented our second largest source of revenue. During 2008, the mortgage origination segment generated approximately 32% of our revenue. The mortgage origination segment offers a wide array of loan products from offices in 17 states, including California, Colorado, Nevada, Texas and Washington. We generate the remainder of our revenue primarily from our financial advisory services. While the financial advisory segment contributed less than 2% to total revenue for the year ended 2008, it did not include First Southwest, whose operations will be included in the financial advisory segment beginning January 1, 2009. We expect the financial advisory segment to contribute an increasing portion of revenue in 2009 and future years. The revenues above include intersegment revenue that is eliminated in consolidation.

Our noninterest expense includes salary and employee benefits, occupancy, professional services, and other expense. Our results of operations are also affected by the provisions for loan losses and income taxes.

Overview of Operating Results

We had net income of $24.1 million, or $2.76 per diluted share, for the year ended December 31, 2008, compared with $28.6 million, or $3.27 per diluted share, for the year ended December 31, 2007, and $25.7 million, or $2.97 per diluted

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share, for the year ended December 31, 2006. Return on average stockholders’ equity and return on average assets was 7.6% and 0.7%, respectively, for the year ended December 31, 2008, compared with 13.0% and 1.0%, respectively, for the year ended December 31, 2007, and 13.2% and 1.0%, respectively, for the year ended December 31, 2006. During 2008, net income was adversely affected by a larger increase to the provision for loan losses than prior years. The return on average assets ratio is calculated by dividing net income by average total assets for the year. The return on average stockholders’ equity ratio is calculated by dividing net income by average stockholders’ equity for the year.

In addition to the return on average stockholders’ equity and return on average assets ratios above, we consider the ratios shown in the table below to be key indicators of our performance.

The leverage ratio is discussed in the “Liquidity and Capital Resources” section below. The dividend payout ratio is calculated by dividing the total dividends paid by net income for the year. Net interest margin is detailed in the “Net Interest Income” section below. The efficiency ratio is calculated by dividing noninterest expenses by the sum of total noninterest income and net interest income for the year. The efficiency ratio is a measure of how well the Bank utilizes its resources and manages its expenses.

The changes in our earnings during the periods described above are attributable to the factors listed below (dollar amounts in millions).

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The table below provides additional details regarding the banking segment’s net interest income (dollar amounts in thousands).