UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the quarterly period ended June 30, 2011

¨ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from             to             

Commission File Number: 000-53629

PLAINSCAPITAL CORPORATION

(Exact name of registrant as specified in its charter)

Texas	75-2182440
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2323 Victory Avenue, Suite 1400, Dallas, Texas 75219

(Address of principal executive offices, including zip code)

(214) 252-4000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of August 1, 2011, there were 34,117,989 shares of the registrant’s Original Common Stock, $0.001 par value, and 0 shares of the registrant’s Common Stock, $0.001 par value, outstanding, including 2,483,065 shares that participate in dividends but are not defined as outstanding under generally accepted accounting principles.

PlainsCapital Corporation

Quarterly Report on Form 10-Q for the period ended June 30, 2011

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
Unaudited Consolidated Interim Financial Statements
Consolidated Balance Sheets, June 30, 2011 and December 31, 2010		3
Consolidated Statements of Income, Three and Six Months Ended June 30, 2011 and 2010		4
Consolidated Statements of Shareholders’ Equity, Six Months Ended June 30, 2011 and 2010		5
Consolidated Statements of Cash Flows, Six Months Ended June 30, 2011 and 2010		6
Notes to Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	58
Item 4.	Controls and Procedures	61
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	61
Item 1A.	Risk Factors	62
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 3.	Defaults Upon Senior Securities	62
Item 4.	(Removed and Reserved)	62
Item 5.	Other Information	62
Item 6.	Exhibits	62
Signatures		63

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PlainsCapital Corporation and Subsidiaries

Consolidated Balance Sheets

	June 30, 2011 (Unaudited)			December 31, 2010
	(in thousands)
Assets
Cash and due from banks	$	128,003		$	332,208
Federal funds sold and securities purchased under agreements to resell		91,728			154,501
Loans held for sale		598,965			477,711
Securities
Held to maturity, fair market value $198,993 and $228,730, respectively		193,445			232,913
Available for sale, amortized cost $754,123 and $614,588, respectively		751,317			613,236
Trading, at fair market value		24,836			18,931
		969,598			865,080
Loans, net of unearned income		3,126,328			3,138,170
Allowance for loan losses		(68,308	)		(65,169	)
Loans, net		3,058,020			3,073,001
Broker-dealer and clearing organization receivables		70,540			45,768
Fee award receivable		18,603			19,222
Investment in unconsolidated subsidiaries		2,012			2,012
Premises and equipment, net		91,881			80,183
Accrued interest receivable		16,412			16,615
Other real estate owned		19,678			23,968
Goodwill, net		35,880			35,880
Other intangible assets, net		12,413			13,441
Other assets		146,076			177,064
Total assets	$	5,259,809		$	5,316,654
Liabilities and Shareholders’ Equity
Deposits
Noninterest-bearing	$	288,557		$	256,372
Interest-bearing		3,674,115			3,662,087
Total deposits		3,962,672			3,918,459
Broker-dealer and clearing organization payables		127,408			65,632
Short-term borrowings		454,777			582,134
Capital lease obligation		11,464			11,693
Notes payable		62,099			63,776
Junior subordinated debentures		67,012			67,012
Other liabilities		109,001			160,672
Total liabilities		4,794,433			4,869,378
Commitments and contingencies
Shareholders’ equity
PlainsCapital Corporation shareholders’ equity
Preferred stock, $1.00 par value per share, authorized 50,000,000 shares, respectively;
Series A, 87,631 shares issued		84,944			84,481
Series B, 4,382 shares issued		4,664			4,712
Original Common Stock, $0.001 par value per share, authorized 100,000,000 and 50,000,000 shares, respectively; 31,867,305 and 31,780,828 shares issued, respectively		32			32
Common Stock, $0.001 par value per share, authorized 150,000,000 shares; 0 shares issued		0			0
Surplus		154,435			153,289
Retained earnings		223,623			206,786
Accumulated other comprehensive loss		(1,124	)		(281	)
		466,574			449,019
Unearned ESOP shares (232,381 shares)		(2,528	)		(2,528	)
Total PlainsCapital Corporation shareholders’ equity		464,046			446,491
Noncontrolling interest		1,330			785
Total shareholders’ equity		465,376			447,276
Total liabilities and shareholders’ equity	$	5,259,809		$	5,316,654

See accompanying notes.

3

PlainsCapital Corporation and Subsidiaries

Consolidated Statements of Income - Unaudited

(In thousands, except per share amounts)

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Interest income:
Loans, including fees	$	44,636	$	47,170	$	86,840	$	91,794
Securities
Taxable		5,093		4,783		9,699		8,587
Tax-exempt		2,605		2,662		4,992		5,113
Federal funds sold and securities purchased under agreements to resell		660		11		1,752		20
Interest-bearing deposits with banks		193		140		507		383
Other		1,531		1,286		2,931		2,463
Total interest income		54,718		56,052		106,721		108,360
Interest expense
Deposits		7,496		7,324		15,024		14,468
Short-term borrowings		374		662		772		1,440
Capital lease obligation		135		140		271		281
Notes payable		805		878		1,615		1,759
Junior subordinated debentures		627		628		1,248		1,241
Other		96		118		181		196
Total interest expense		9,533		9,750		19,111		19,385
Net interest income		45,185		46,302		87,610		88,975
Provision for loan losses		7,238		10,245		13,738		33,200
Net interest income after provision for loan losses		37,947		36,057		73,872		55,775
Noninterest income
Service charges on depositor accounts		2,025		2,295		3,867		4,413
Net realized gains on sale of securities		1,245		98		1,245		1,710
Net gains from sale of loans		60,641		51,799		104,975		84,793
Mortgage loan origination fees		18,180		21,222		35,472		35,630
Trust fees		1,044		1,148		2,050		2,221
Investment advisory fees and commissions		16,256		18,509		28,267		34,045
Securities brokerage fees and commissions		5,221		5,755		11,407		11,468
Other		2,977		1,370		5,646		3,348
Total noninterest income		107,589		102,196		192,929		177,628
Noninterest expense
Employees’ compensation and benefits		78,412		73,545		144,758		130,340
Occupancy and equipment, net		15,812		14,349		31,210		28,186
Professional services		6,592		7,257		12,638		13,048
Deposit insurance premium		1,234		1,475		3,090		2,750
Repossession and foreclosure, net of recoveries		732		2,602		2,612		4,054
Other		19,148		17,112		36,663		30,722
Total noninterest expense		121,930		116,340		230,971		209,100
Income before income taxes		23,606		21,913		35,830		24,303
Income tax provision		7,992		7,016		12,500		7,596
Net income		15,614		14,897		23,330		16,707
Less: Net income attributable to noncontrolling interest		184		246		306		370
Net income attributable to PlainsCapital Corporation		15,430		14,651		23,024		16,337
Dividends on preferred stock and other		1,403		1,390		2,803		2,778
Income applicable to PlainsCapital Corporation common shareholders	$	14,027	$	13,261	$	20,221	$	13,559
Earnings per common share
Basic	$	0.43	$	0.40	$	0.62	$	0.41
Diluted	$	0.42	$	0.40	$	0.60	$	0.40

See accompanying notes.

4

PlainsCapital Corporation and Subsidiaries

Consolidated Statements of Shareholders’ Equity - Unaudited

				PlainsCapital Corporation Shareholders
	Comprehensive			Preferred Stock				Common Stock						Retained			Accumulated Other Comprehensive			Unearned ESOP			Noncontrolling
	Income			Shares		Amount		Shares		Amount		Surplus		Earnings			Income (Loss)			Shares			Interest			Total
	(Dollars in thousands)
Balance, January 1, 2010					92,013	$	88,400		31,613,010	$	32	$	150,626	$	186,743		$	(300	)	$	(3,001	)	$	1,659		$	424,159
Stock option plans’ activity, including compensation expense					0		0		65,706		0		340		0			0			0			0			340
Vesting of stock-based compensation					0		0		75,419		0		0		0			0			0			0			0
Stock-based compensation expense					0		0		0		0		665		0			0			0			0			665
ESOP activity					0		0		0		0		0		14			0			0			0			14
Dividends on common stock ($0.10 per share)					0		0		0		0		0		(3,396	)		0			0			0			(3,396	)
Dividends on preferred stock					0		0		0		0		0		(2,388	)		0			0			0			(2,388	)
Preferred stock discount and accretion					0		390		0		0		0		(390	)		0			0			0			0
Cash received from noncontrolling interest					0		0		0		0		0		0			0			0			74			74
Cash distributions to noncontrolling interest					0		0		0		0		0		0			0			0			(137	)		(137	)
Redemption of noncontrolling interest					0		0		0		0		465		0			0			0			(1,378	)		(913	)
Comprehensive income:
Net income	$	16,707			0		0		0		0		0		16,337			0			0			370			16,707
Other comprehensive income (loss):
Unrealized gains on securities available for sale, net of tax of $4.2		8
Unrealized losses on securities held in trust for the Supplemental Executive Retirement Plan, net of tax of $250.2		(474	)
Unrealized losses on customer-related cash flow hedges, net of tax of $8.0		(15	)
Other comprehensive loss		(481	)		0		0		0		0		0		0			(481	)		0			0			(481	)
Total comprehensive income	$	16,226
Balance, June 30, 2010					92,013	$	88,790		31,754,135	$	32	$	152,096	$	196,920		$	(781	)	$	(3,001	)	$	588		$	434,644
Balance, January 1, 2011					92,013	$	89,193		31,780,828	$	32	$	153,289	$	206,786		$	(281	)	$	(2,528	)	$	785		$	447,276
Stock option plans’ activity, including compensation expense					0		0		2,764		0		37		0			0			0			0			37
Vesting of stock-based compensation					0		0		83,713		0		0		0			0			0			0			0
Stock-based compensation expense					0		0		0		0		1,109		0			0			0			0			1,109
ESOP activity					0		0		0		0		0		24			0			0			0			24
Dividends on common stock ($0.10 per share)					0		0		0		0		0		(3,408	)		0			0			0			(3,408	)
Dividends on preferred stock					0		0		0		0		0		(2,388	)		0			0			0			(2,388	)
Preferred stock discount and accretion					0		415		0		0		0		(415	)		0			0			0			0
Cash received from noncontrolling interest					0		0		0		0		0		0			0			0			598			598
Cash distributions to noncontrolling interest					0		0		0		0		0		0			0			0			(359	)		(359	)
Comprehensive income:
Net income	$	23,330			0		0		0		0		0		23,024			0			0			306			23,330
Other comprehensive income (loss):
Unrealized losses on securities available for sale, net of tax of $508.2		(946	)
Unrealized gains on securities held in trust for the Supplemental Executive Retirement Plan, net of tax of $79.4		148
Unrealized losses on customer-related cash flow hedges, net of tax of $24.0		(45	)
Other comprehensive loss		(843	)		0		0		0		0		0		0			(843	)		0			0			(843	)
Total comprehensive income	$	22,487
Balance, June 30, 2011					92,013	$	89,608		31,867,305	$	32	$	154,435	$	223,623		$	(1,124	)	$	(2,528	)	$	1,330		$	465,376

See accompanying notes.

5

PlainsCapital Corporation and Subsidiaries

Consolidated Statements of Cash Flows - Unaudited

(In thousands)

	Six Months Ended June 30,
	2011			2010
Operating Activities
Net income	$	23,330		$	16,707
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Provision for loan losses		13,738			33,200
Net losses on other real estate owned		2,010			2,897
Depreciation and amortization		16,229			6,201
Stock-based compensation expense		1,128			738
Net realized gains on sale of securities		(1,245	)		(1,710	)
Loss on sale of premises and equipment		131			67
Stock dividends received on securities		(13	)		(31	)
Deferred income taxes		3,387			(661	)
Net change in prepaid FDIC assessments		2,706			2,386
Net change in trading securities		(5,905	)		(69,143	)
Net change in broker-dealer and clearing organization receivables		(24,772	)		17,750
Net change in fee award receivable		619			644
Net change in broker-dealer and clearing organization payables		61,776			(26	)
Net change in other assets		(5,815	)		(36,820	)
Net change in other liabilities		(51,489	)		(2,768	)
Net gains from sale of loans		(104,975	)		(84,793	)
Loans originated for sale		(3,407,745	)		(2,949,548	)
Proceeds from loans sold		3,424,069			2,757,140
Net cash provided by (used in) operating activities		(52,836	)		(307,770	)
Investing Activities
Net change in securities purchased under resale agreements		54,570			0
Proceeds from maturities and principal reductions of securities held to maturity		11,857			45,250
Proceeds from sales, maturities and principal reductions of securities available for sale		244,073			120,242
Purchases of securities held to maturity		(1,031	)		(6,173	)
Purchases of securities available for sale		(360,641	)		(262,145	)
Net change in loans		(4,824	)		20,232
Purchases of premises and equipment and other assets		(21,481	)		(6,676	)
Proceeds from sales of premises and equipment and other real estate owned		8,460			8,267
Net cash received (paid) for Federal Home Loan Bank and Federal Reserve Bank stock		34			(1,698	)
Net cash provided by (used in) investing activities		(68,983	)		(82,701	)
Financing Activities
Net change in deposits		44,213			465,831
Net change in short-term borrowings		(127,357	)		(119,712	)
Proceeds from notes payable		4,000			1,700
Payments on notes payable		(5,677	)		(2,800	)
Proceeds from issuance of common stock		18			267
Dividends paid		(5,796	)		(5,784	)
Net cash received from (distributed to) noncontrolling interest		239			(63	)
Other, net		(229	)		(213	)
Net cash provided by (used in) financing activities		(90,589	)		339,226
Net change in cash and cash equivalents		(212,408	)		(51,245	)
Cash and cash equivalents at beginning of period		359,335			160,367
Cash and cash equivalents at end of period	$	146,927		$	109,122
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest	$	21,693		$	19,170
Income taxes	$	2,497		$	2,813
Supplemental Schedule of Noncash Activities
Conversion of loans to other real estate owned	$	6,105		$	9,809

See accompanying notes.

6

PlainsCapital Corporation and Subsidiaries

Notes to Consolidated Interim Financial Statements – Unaudited

June 30, 2011

1. Summary of Significant Accounting and Reporting Policies

Basis of Presentation

The unaudited consolidated financial statements of PlainsCapital Corporation, a Texas corporation, and its subsidiaries (“we,” “us,” “our,” “our company,” or “PlainsCapital”) for the six month periods ended June 30, 2011 and 2010 have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

The consolidated interim financial statements of PlainsCapital and subsidiaries are unaudited, but in the opinion of management, contain all adjustments (consisting primarily of normal recurring accruals) necessary for a fair statement of the results of the interim periods presented. The consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with instructions to Form 10-Q adopted by the SEC. Accordingly, the financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K filed with the SEC on March 22, 2011. Results for interim periods are not necessarily indicative of results to be expected for a full year or any future period. PlainsCapital has evaluated subsequent events for potential recognition and/or disclosure through the date the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q were issued.

PlainsCapital is a financial holding company registered under the Bank Holding Company Act of 1956, as amended by the Graham-Leach-Bliley Act of 1999, headquartered in Dallas, Texas, that provides, through its subsidiaries, an array of financial products and services. In addition to traditional banking services, PlainsCapital provides residential mortgage lending, investment banking, public finance advisory, wealth and investment management, treasury management, capital equipment leasing, fixed income sales and trading, asset management and correspondent clearing services.

PlainsCapital owns 100% of the outstanding stock of PlainsCapital Bank (the “Bank”) and 100% of the membership interest in PlainsCapital Equity, LLC. PlainsCapital owns a 69.75% membership interest in Hester Capital Management, LLC (“Hester Capital”). The Bank owns 100% of the outstanding stock of PrimeLending, a PlainsCapital Company (“PrimeLending”), PNB Aero Services, Inc. and PCB-ARC, Inc. The Bank has a 100% interest in First Southwest Holdings, LLC (“First Southwest”) and PlainsCapital Securities, LLC, as well as a 51% voting interest in PlainsCapital Insurance Services, LLC.

Prime Lending owns a 100% interest in PrimeLending Ventures Management, LLC, the managing member of PrimeLending Ventures, LLC (“Ventures”). Ventures is a residential mortgage lender that operates through a series of joint ventures, each of which is 51% owned by PrimeLending Ventures Management, LLC.

On June 30, 2011, the Bank dissolved Plains Financial Corporation, which had no significant operations at the time of its dissolution.

After the close of business on December 31, 2008, First Southwest Holdings, Inc., a diversified, private investment banking corporation headquartered in Dallas, Texas merged into FSWH Acquisition LLC, a wholly owned subsidiary of the Bank. Following the merger, FSWH Acquisition LLC changed its name to “First Southwest Holdings, LLC.” The principal subsidiaries of First Southwest are First Southwest Company (“FSC”), a broker-dealer registered with the SEC and the Financial Industry Regulatory Authority (“FINRA”), and First Southwest Asset Management, Inc., a registered investment advisor under the Investment Advisors Act of 1940.

7

1. Summary of Significant Accounting and Reporting Policies (continued)

The acquisition cost of First Southwest Holdings, Inc. was approximately $62.2 million. In addition, PlainsCapital placed approximately 1.7 million shares of PlainsCapital Original Common Stock, valued at approximately $19.2 million as of December 31, 2008, into escrow. The percentage of shares to be released from escrow and distributed to former First Southwest stockholders will be determined based upon, among other factors, the valuation of certain auction rate bonds held by First Southwest prior to the merger (or repurchased from investors following the closing of the merger) as of the last day of December 2012 or, if applicable, the aggregate sales price of such auction rate bonds prior to such date. Any shares issued out of the escrow will be accounted for as additional acquisition cost.

PlainsCapital used a third-party valuation specialist to assist in the determination of the fair value of assets acquired, including intangibles, and liabilities assumed in the acquisition. The purchase price allocation resulted in net assets acquired in excess of consideration paid of approximately $12.8 million. That amount has been recorded in other liabilities until the contingent consideration issue described previously is settled. Upon resolution of the contingent consideration issue, the acquisition cost of First Southwest may increase, resulting in a smaller excess of net assets acquired over consideration paid, or in certain circumstances, an excess of consideration paid over net assets acquired that would result in recording goodwill from the transaction. Any remaining excess of net assets acquired over consideration paid will be allocated pro-rata to reduce the carrying value of purchased assets.

The consolidated interim financial statements include the accounts of the above-named entities. All significant intercompany transactions and balances have been eliminated. Noncontrolling interests have been recorded for minority ownership in entities that are not wholly owned and are presented in compliance with the provisions of Noncontrolling Interest in Subsidiary Subsections of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).

PlainsCapital also owns 100% of the outstanding common stock of PCC Statutory Trusts I, II, III and IV (the “Trusts”), which are not included in the consolidated financial statements pursuant to the requirements of the Variable Interest Entities Subsections of the ASC, because the primary beneficiaries of the Trusts are not within the consolidated group.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates regarding the allowance for loan losses are particularly subject to change.

Cash Flow Reporting

For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents are defined as the amount included in the consolidated balance sheets caption “Cash and due from banks” and the portion of the amount in the caption “Federal funds sold and securities purchased under agreements to resell” that represents federal funds sold. Cash equivalents have original maturities of three months or less.

8

1. Summary of Significant Accounting and Reporting Policies (continued)

Comprehensive Income (Loss)

PlainsCapital’s comprehensive income (loss) consists of its net income and unrealized holding gains (losses) on its available for sale securities, investments held in trust for the Supplemental Executive Retirement Plan and derivative instruments designated as cash flow hedges.

The components of accumulated other comprehensive loss, net of taxes, at June 30, 2011 and December 31, 2010 are shown in the following table (in thousands):

	June 30, 2011			December 31, 2010
Unrealized loss on securities available for sale	$	(1,823	)	$	(877	)
Unrealized gain on securities held in trust for the Supplemental Executive Retirement Plan		699			551
Unrealized gain on customer-related cash flow hedges		0			45
	$	(1,124	)	$	(281	)

Reclassification

Certain items in the 2010 financial statements have been reclassified to conform to the 2011 presentation.

9

2. Securities

The amortized cost and fair value of securities, excluding trading securities, as of June 30, 2011, and December 31, 2010 are summarized as follows (in thousands):

	Held to Maturity
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
As of June 30, 2011
U. S. government agencies
Mortgage-backed securities	$	7,666	$	643	$	0		$	8,309
Collateralized mortgage obligations		19,729		516		(142	)		20,103
States and political subdivisions		120,501		3,867		(274	)		124,094
Auction rate bonds		45,549		1,054		(116	)		46,487
Totals	$	193,445	$	6,080	$	(532	)	$	198,993
As of December 31, 2010
U. S. government agencies
Mortgage-backed securities	$	10,369	$	677	$	(8	)	$	11,038
Collateralized mortgage obligations		28,169		615		(101	)		28,683
States and political subdivisions		120,348		1,758		(2,497	)		119,609
Auction rate bonds		74,027		644		(5,271	)		69,400
Totals	$	232,913	$	3,694	$	(7,877	)	$	228,730
	Available for Sale
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
As of June 30, 2011
U. S. government agencies
Bonds	$	109,948	$	193	$	(231	)	$	109,910
Mortgage-backed securities		34,274		957		(365	)		34,866
Collateralized mortgage obligations		496,103		2,384		(2,707	)		495,780
States and political subdivisions		62,220		2,297		(169	)		64,348
Auction rate bonds		51,578		0		(5,165	)		46,413
Totals	$	754,123	$	5,831	$	(8,637	)	$	751,317
As of December 31, 2010
U. S. government agencies
Bonds	$	30,000	$	5	$	(46	)	$	29,959
Mortgage-backed securities		18,907		410		(473	)		18,844
Collateralized mortgage obligations		507,536		2,364		(2,131	)		507,769
States and political subdivisions		35,209		43		(1,042	)		34,210
Auction rate bonds		22,936		0		(482	)		22,454
Totals	$	614,588	$	2,822	$	(4,174	)	$	613,236

10

2. Securities (continued)

Information regarding securities that were in an unrealized loss position as of June 30, 2011 and December 31, 2010 is shown in the following tables (dollars in thousands):

	As of June 30, 2011						As of December 31, 2010
	Number  of Securities		Fair Value		Unrealized Losses		Number  of Securities		Fair Value		Unrealized Losses
Held to maturity
U. S. government agencies
Mortgage-backed securities
Unrealized loss for less than twelve months		0	$	0	$	0		1	$	1,577	$	1
Unrealized loss for more than twelve months		0		0		0		1		495		7
		0		0		0		2		2,072		8
Collateralized mortgage obligations
Unrealized loss for less than twelve months		2		10,397		142		1		6,641		101
Unrealized loss for more than twelve months		0		0		0		0		0		0
		2		10,397		142		1		6,641		101
States and political subdivisions
Unrealized loss for less than twelve months		30		14,591		138		95		50,518		1,996
Unrealized loss for more than twelve months		13		4,867		136		15		5,420		501
		43		19,458		274		110		55,938		2,497
Auction rate bonds
Unrealized loss for less than twelve months		0		0		0		2		10,239		227
Unrealized loss for more than twelve months		2		10,366		116		2		23,474		5,044
		2		10,366		116		4		33,713		5,271
Total held to maturity
Unrealized loss for less than twelve months		32		24,988		280		99		68,975		2,325
Unrealized loss for more than twelve months		15		15,233		252		18		29,389		5,552
		47	$	40,221	$	532		117	$	98,364	$	7,877
Available for sale
U. S. government agencies
Bonds
Unrealized loss for less than twelve months		6	$	59,722	$	231		2	$	19,954	$	46
Unrealized loss for more than twelve months		0		0		0		0		0		0
		6		59,722		231		2		19,954		46
Mortgage-backed securities
Unrealized loss for less than twelve months		2		6,527		365		3		7,670		473
Unrealized loss for more than twelve months		0		0		0		0		0		0
		2		6,527		365		3		7,670		473
Collateralized mortgage obligations
Unrealized loss for less than twelve months		20		244,698		2,707		17		232,135		2,131
Unrealized loss for more than twelve months		0		0		0		0		0		0
		20		244,698		2,707		17		232,135		2,131
States and political subdivisions
Unrealized loss for less than twelve months		8		9,383		148		17		20,126		1,042
Unrealized loss for more than twelve months		1		593		21		0		0		0
		9		9,976		169		17		20,126		1,042
Auction rate bonds
Unrealized loss for less than twelve months		0		0		0		0		0		0
Unrealized loss for more than twelve months		3		46,413		5,165		1		22,454		482
		3		46,413		5,165		1		22,454		482
Total available for sale
Unrealized loss for less than twelve months		36		320,330		3,451		39		279,885		3,692
Unrealized loss for more than twelve months		4		47,006		5,186		1		22,454		482
		40	$	367,336	$	8,637		40	$	302,339	$	4,174

Management has the intent and ability to hold the securities classified as held to maturity until they mature, at which time the Bank expects to receive full value for the securities. As of June 30, 2011, management does not intend to sell any of the securities classified as available for sale in the previous table, and management believes that it is more likely than not that PlainsCapital will not be required to sell any such securities before a recovery of cost. As of June 30, 2011, management believes the impairments detailed in the table are temporary and relate primarily to changes in interest rates and liquidity. No other-than-temporary impairment loss has been recognized in PlainsCapital’s consolidated statements of income.

11

2. Securities (continued)

The amortized cost and fair value of securities, excluding trading securities, as of June 30, 2011 are shown by contractual maturity below (in thousands).

	Securities Held to Maturity				Securities Available for Sale
	Amortized				Amortized
	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	3,972	$	4,000	$	0	$	0
Due after one year through five years		3,276		3,383		23,018		23,116
Due after five years through ten years		15,416		15,961		81,549		81,461
Due after ten years		143,386		147,237		119,179		116,094
		166,050		170,581		223,746		220,671
Mortgage-backed securities		7,666		8,309		34,274		34,866
Collateralized mortgage obligations		19,729		20,103		496,103		495,780
	$	193,445	$	198,993	$	754,123	$	751,317

For both the three and six months ended June 30, 2011, the Bank received proceeds from the sale of available for sale securities of $76.2 million and realized gross gains of $1.2 million. For the three and six months ended June 30, 2010, the Bank received proceeds from the sale of available for sale securities of $38.0 million and $92.3 million, respectively, and recognized gross gains of $0.1 million and $1.7 million, respectively. The Bank determines the cost of securities sold by specific identification.

FSC realized net gains from its trading operations of $0.7 million and $1.7 million for the three and six months ended June 30, 2011, respectively, and $1.0 million and $1.5 million for the three and six months ended June 30, 2010, respectively.

During the first quarter of 2011, auction rate bonds with a net carrying amount of $28.6 million were transferred from held to maturity to available for sale to address a downgrade in credit rating from investment grade to below investment grade. The net carrying amount of the transferred securities included an unrealized loss of $5.1 million that was included, net of tax, in accumulated other comprehensive loss at June 30, 2011, reducing shareholders’ equity. As of both June 30, 2011 and December 31, 2010, the unrealized loss on the transferred securities was $5.0 million.

Securities with a carrying amount of approximately $551.9 million and $624.4 million (fair value of approximately $556.4 million and $623.6 million) at June 30, 2011 and December 31, 2010, respectively, were pledged to secure public and trust deposits, federal funds purchased and securities sold under agreements to repurchase, and for other purposes as required or permitted by law. In addition, the Bank had secured a letter of credit from the Federal Home Loan Bank (“FHLB”) in the amount of $60.0 million at both June 30, 2011 and December 31, 2010, in lieu of pledging securities to secure certain public deposits.

12

3. Loans and Allowance for Loan Losses

Loans summarized by category as of June 30, 2011 and December 31, 2010, are as follows (in thousands):

	June 30,			December 31,
	2011			2010
Commercial and industrial
Commercial	$	1,341,627		$	1,299,654
Lease financing		38,444			50,216
Securities (primarily margin loans)		232,421			289,351
Real estate		1,157,639			1,112,402
Construction and land development		316,831			343,920
Consumer		39,366			42,627
		3,126,328			3,138,170
Allowance for loan losses		(68,308	)		(65,169	)
	$	3,058,020		$	3,073,001

PlainsCapital has lending policies in place with the goal of establishing an asset portfolio that will provide a return on shareholders’ equity sufficient to maintain capital to assets ratios that meet or exceed established regulatory guidelines. Loans are underwritten with careful consideration of the borrower’s financial condition, the specific purpose of the loan, the primary sources of repayment and any collateral pledged to secure the loan.

Underwriting procedures address financial components based on the size or complexity of the credit. The financial components include but are not limited to current and projected global cash flows, shock analysis and/or stress testing, and trends in appropriate balance sheet and income statement ratios. Collateral analysis includes complete description, values, monitoring requirements, loan to value ratios, concentration risk, appraisal requirements and other information determined to be relevant to the collateral being pledged. Guarantor analysis includes liquidity and global cash flow analysis based on the significance the guarantors are expected to serve as secondary repayment sources. PlainsCapital’s underwriting standards are governed by adherence to the loan policy. The loan policy provides for specific guidelines by portfolio segment, including commercial and industrial, real estate, construction and land development, and consumer loans. Within each individual portfolio segment, permissible and impermissible loan types are explicitly outlined. Within the loan types, minimum requirements for the underwriting factors listed above are provided.

PlainsCapital maintains an independent loan review department that reviews credit risk on an ongoing basis. The loan review process reviews the creditworthiness of borrowers and determines compliance with the loan policy. The loan review process compliments and reinforces the risk identification and assessment decisions made by lenders and credit personnel. Results of these reviews are presented to management and the Bank’s Board of Directors.

13

3. Loans and Allowance for Loan Losses (continued)

Impaired loans exhibit a clear indication that the borrower’s cash flow may not be sufficient to meet principal and interest payments as they become due according to the terms of the loan agreement, which is generally when a loan is 90 days past due unless the asset is both well secured and in the process of collection. Impaired loans include non-accrual loans, troubled debt restructurings and partially charged-off loans. Impaired loans as of June 30, 2011 and December 31, 2010 are summarized by class in the following tables (in thousands):

	Unpaid Contractual Principal Balance		Recorded Investment  with No Allowance		Recorded Investment  with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
											Three Months Ended		Six Months Ended
											June 30, 2011		June 30, 2011
As of June 30, 2011
Commercial and industrial
Secured by receivables	$	15,150	$	5,798	$	1,749	$	7,547	$	616	$	7,734	$	11,596
Secured by equipment		2,849		509		0		509		0		869		692
Unsecured		9,410		2,638		2,772		5,410		1,181		4,643		2,760
Lease financing		1,937		1,937		0		1,937		0		3,645		3,983
All other commercial and industrial		935		331		604		935		197		910		4,428
Real estate
Secured by commercial properties		20,785		18,785		0		18,785		0		16,445		17,671
Secured by residential properties		8,024		4,225		3,299		7,524		103		8,167		8,722
Construction and land development
Residential construction loans		817		817		0		817		0		507		1,324
Commercial construction loans and land development		68,676		13,408		41,394		54,802		7,050		56,592		56,160
Consumer		30		30		0		30		0		32		33
	$	128,613	$	48,478	$	49,818	$	98,296	$	9,147	$	99,544	$	107,369

	Unpaid Contractual Principal Balance		Recorded Investment  with No Allowance		Recorded Investment  with Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
As of December 31, 2010
Commercial and industrial
Secured by receivables	$	24,036	$	11,301	$	4,343	$	15,644	$	2,089	$	29,670
Secured by equipment		3,290		638		237		875		57		2,783
Unsecured		4,148		109		0		109		0		227
Lease financing		6,028		6,028		0		6,028		0		5,607
All other commercial and industrial		7,920		4,811		3,109		7,920		2,507		13,989
Real estate
Secured by commercial properties		19,039		16,427		130		16,557		1		8,417
Secured by residential properties		10,420		6,840		3,080		9,920		417		9,472
Construction and land development
Residential construction loans		1,831		1,831		0		1,831		0		1,094
Commercial construction loans and land development		70,801		36,430		21,087		57,517		3,724		33,728
Consumer		35		35		0		35		0		1
	$	147,548	$	84,450	$	31,986	$	116,436	$	8,795	$	104,988

Interest income recorded on impaired loans that were not in non-accrual status was approximately $0.1 million and $0.3 million for the three and six months ended June 30, 2011, respectively. Interest income recorded on non-accrual loans for the three and six months ended June 30, 2011 and 2010 was nominal. At June 30, 2011, PlainsCapital had unadvanced commitments of approximately $0.5 million to borrowers whose loans had been restructured in troubled debt restructurings.

14

3. Loans and Allowance for Loan Losses (continued)

Non-accrual loans as of June 30, 2011 and December 31, 2010 are summarized by class in the following table (in thousands):

	June 30,   2011		December  31, 2010
Commercial and industrial
Secured by receivables	$	7,135	$	7,580
Secured by equipment		509		875
Unsecured		2,841		64
Lease financing		1,937		6,028
All other commercial and industrial		684		3,740
Real estate
Secured by commercial properties		8,854		4,426
Secured by residential properties		7,319		3,609
Construction and land development
Residential construction loans		169		199
Commercial construction loans and land development		54,559		57,423
Consumer		23		27
	$	84,030	$	83,971

The average aggregate balance of non-accrual loans for the three and six months ended June 30, 2010 was approximately $76.1 million and $77.7 million, respectively.

An analysis of the aging of PlainsCapital’s loan portfolio as of June 30, 2011 and December 31, 2010 is shown in the following tables (in thousands):

											Accruing Loans
	Loans Past Due		Loans Past Due		Total		Current		Total		Past Due
	30-89 Days		90 Days or More		Past Due Loans		Loans		Loans		90 Days or More
As of June 30, 2011
Commercial and industrial
Secured by receivables	$	1,168	$	3,571	$	4,739	$	618,665	$	623,404	$	0
Secured by equipment		564		389		953		125,984		126,937		0
Unsecured		112		8		120		104,799		104,919		0
Lease financing		3,363		1,937		5,300		33,144		38,444		0
All other commercial and industrial		1,206		80		1,286		717,502		718,788		0
Real estate
Secured by commercial properties		6,461		3,714		10,175		882,450		892,625		0
Secured by residential properties		1,639		3,119		4,758		260,256		265,014		0
Construction and land development
Residential construction loans		15		0		15		61,938		61,953		0
Commercial construction loans and land development		7,139		1,042		8,181		246,697		254,878		0
Consumer		48		16		64		39,302		39,366		0
	$	21,715	$	13,876	$	35,591	$	3,090,737	$	3,126,328	$	0

15

3. Loans and Allowance for Loan Losses (continued)

											Accruing Loans
	Loans Past Due		Loans Past Due		Total		Current		Total		Past Due
	30-89 Days		90 Days or More		Past Due Loans		Loans		Loans		90 Days or More
As of December 31, 2010
Commercial and industrial
Secured by receivables	$	3,630	$	3,655	$	7,285	$	648,856	$	656,141	$	0
Secured by equipment		1,092		287		1,379		121,011		122,390		0
Unsecured		15		0		15		92,812		92,827		0
Lease financing		2,204		5,343		7,547		42,669		50,216		71
All other commercial and industrial		265		2,778		3,043		714,604		717,647		0
Real estate
Secured by commercial properties		5,834		1,768		7,602		862,521		870,123		395
Secured by residential properties		4,017		1,286		5,303		236,976		242,279		0
Construction and land development
Residential construction loans		23		0		23		55,414		55,437		0
Commercial construction loans and land development		8,492		21,433		29,925		258,558		288,483		0
Consumer		149		0		149		42,478		42,627		0
	$	25,721	$	36,550	$	62,271	$	3,075,899	$	3,138,170	$	466

Management tracks credit quality trends on a monthly basis related to: (i) past due levels, (ii) non-performing asset levels, (iii) classified loan levels, (iv) net charge-offs, and (v) general economic conditions at state and local levels.

PlainsCapital utilizes a risk grading matrix to assign a risk grade to each of the loans in its portfolio. A risk rating is assigned based on an assessment of the borrower’s management, collateral position, financial capacity, and economic factors. The general characteristics of the various risk grades are described below.

Pass – “Pass” loans present a range of acceptable risks to the Bank. Loans that would be considered virtually risk-free are rated Pass – low risk. Loans that exhibit sound standards based on the grading factors above and present a reasonable risk to the Bank are rated Pass – normal risk. Loans that exhibit a minor weakness in one or more of the grading criteria but still present an acceptable risk to the Bank are rated Pass – high risk.

Special Mention – A “Special Mention” asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or the Bank’s credit position at some future date. Special Mention assets are not adversely classified and do not expose the Bank to sufficient risk to require adverse classification.

Substandard – “Substandard” loans are inadequately protected by the current sound worth and paying capacity of the obligor or the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Many substandard loans are considered impaired.

Doubtful – Loans classified “Doubtful” have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. All doubtful loans are considered impaired.

16

3. Loans and Allowance for Loan Losses (continued)

The following tables present the internal risk grades of loans, as described above, in the portfolio as of June 30, 2011 and December 31, 2010 by class (in thousands):

	Pass		Special Mention		Substandard		Total
As of June 30, 2011
Commercial and industrial
Secured by receivables	$	596,137	$	9,106	$	18,161	$	623,404
Secured by equipment		123,724		773		2,440		126,937
Unsecured		89,401		0		3,358		92,759
Lease financing		36,276		0		2,168		38,444
All other commercial and industrial		707,974		13,235		9,739		730,948
Real estate
Secured by commercial properties		857,225		9,294		26,106		892,625
Secured by residential properties		255,561		0		9,453		265,014
Construction and land development
Residential construction loans		56,258		0		5,695		61,953
Commercial construction loans and land development		192,055		3,747		59,076		254,878
Consumer		39,261		0		105		39,366
	$	2,953,872	$	36,155	$	136,301	$	3,126,328
	Pass		Special Mention		Substandard		Total
As of December 31, 2010
Commercial and industrial
Secured by receivables	$	628,464	$	11,636	$	16,041	$	656,141
Secured by equipment		119,948		321		2,121		122,390
Unsecured		91,654		0		1,173		92,827
Lease financing		42,285		0		7,931		50,216
All other commercial and industrial		697,938		16,223		3,486		717,647
Real estate
Secured by commercial properties		834,940		13,078		22,105		870,123
Secured by residential properties		229,503		897		11,879		242,279
Construction and land development
Residential construction loans		55,029		209		199		55,437
Commercial construction loans and land development		222,046		1,205		65,232		288,483
Consumer		42,536		40		51		42,627
	$	2,964,343	$	43,609	$	130,218	$	3,138,170

Net investment in lease financing at June 30, 2011 and December 31, 2010 is shown in the following table (in thousands).

	June 30,			December 31,
	2011			2010
Future minimum lease payments	$	40,005		$	53,178
Unguaranteed residual value		194			139
Guaranteed residual value		2,072			2,096
Initial direct costs, net of amortization		110			166
Unearned income		(3,937	)		(5,363	)
	$	38,444		$	50,216

17

3. Loans and Allowance for Loan Losses (continued)

The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management’s best estimate of probable losses inherent in the existing portfolio of loans. Management has responsibility for determining the level of the allowance for loan losses, subject to review by the Audit Committee of our Board of Directors and the Directors’ Loan Review Committee of the Bank’s Board of Directors.

It is management’s responsibility at the end of each quarter, or more frequently as deemed necessary, to analyze the level of the allowance for loan losses to ensure that it is appropriate for the estimated credit losses in the portfolio consistent with the Interagency Policy Statement on the Allowance for Loan and Lease Losses and the Receivables and Contingencies Topics of the ASC. Estimated credit losses are the probable current amount of loans that we will be unable to collect given facts and circumstances as of the evaluation date. When management determines that a loan or portion thereof, is uncollectible, the loan, or portion thereof, is charged off against the allowance for loan losses. Any subsequent recovery of charged-off loans is added back to the allowance for loan losses.

We have developed a methodology that seeks to determine an allowance within the scope of the Receivables and Contingencies Topics of the ASC. Each of the loans that has been determined to be impaired is within the scope of the Receivables Topic and is individually evaluated for impairment using one of three impairment measurement methods as of the evaluation date: (1) the present value of expected future discounted cash flows on the loan, (2) the loan’s observable market price, or (3) the fair value of the collateral if the loan is collateral dependent. When loans are determined to be impaired, specific reserves are provided in our estimate of the allowance, as appropriate. All non-impaired loans are within the scope of the Contingencies Topic. Estimates of loss for the Contingencies Topic are calculated based on historical loss experience by loan portfolio segment adjusted for changes in trends, conditions, and other relevant factors that affect repayment of loans as of the evaluation date. While historical loss experience provides a reasonable starting point for the analysis, historical losses, or recent trends in losses, are not the sole basis upon which to determine the appropriate level for the allowance for loan losses. Management considers recent qualitative or environmental factors that are likely to cause estimated credit losses associated with the existing portfolio to differ from historical loss experience, including but not limited to: changes in lending policies and procedures; changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses; changes in international, national, regional, and local economic and business conditions and developments that affect the collectibility of the portfolio; the condition of various market segments; changes in the nature and volume of the portfolio and in the terms of loans; changes in the experience, ability, and depth of lending management and other relevant staff; changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans; changes in the quality of the institution’s loan review system; changes in the value of underlying collateral for collateral-dependent loans; and the existence and effect of any concentrations of credit, and changes in the level of such concentrations.

We design our loan review program to identify and monitor problem loans by maintaining a credit grading process, ensuring that timely and appropriate changes are made to the loans with assigned risk grades and coordinating the delivery of the information necessary to assess the appropriateness of the allowance for loan losses. Loans are evaluated for impairment when: (i) payments on the loan are delayed, typically by 90 days or more (unless in the process of collection), (ii) the loan becomes classified, (iii) the loan is being reviewed in the normal course of the loan review scope, or (iv) the loan is identified by the servicing officer as a problem. We review all loan relationships that exhibit probable or observed credit weaknesses, the top 25 loan relationships by dollar amount in each market we serve, and additional relationships necessary to achieve adequate coverage of our various lending markets.

Homogenous loans, such as consumer installment loans, residential mortgage loans and home equity loans, are not individually reviewed and are generally risk graded at the same levels. The risk grade and reserves are established for each homogenous pool of loans based on the expected net charge-offs from current trends in delinquencies, losses or historical experience and general economic conditions. As of June 30, 2011, we had no material delinquencies in these types of loans.

The allowance is subject to regulatory examinations and determinations as to appropriateness, which may take into account such factors as the methodology used to calculate the allowance and the size of the allowance in comparison to peer banks identified by regulatory agencies.

18

3. Loans and Allowance for Loan Losses (continued)

Changes in the allowance for loan losses, distributed by portfolio segment, for the three and six months ended June 30, 2011 were as follows (in thousands):

	Commercial and						Construction and
	Industrial			Real Estate			Land Development			Consumer			Unallocated			Total
Three Months Ended June 30, 2011
Balance at beginning of period	$	40,862		$	11,276		$	13,236		$	442		$	124		$	65,940
Provision charged to operations		4,780			(90	)		2,705			(44	)		(113	)		7,238
Loans charged off		(3,675	)		(358	)		(1,241	)		(17	)		0			(5,291	)
Recoveries on charged off loans		195			23			159			44			0			421
Balance at end of period	$	42,162		$	10,851		$	14,859		$	425		$	11		$	68,308
	Commercial and						Construction and
	Industrial			Real Estate			Land Development			Consumer			Unallocated			Total
Six Months Ended June 30, 2011
Balance at beginning of period	$	41,687		$	11,732		$	11,227		$	523		$	0		$	65,169
Provision charged to operations		7,804			(278	)		6,280			(79	)		11			13,738
Loans charged off		(7,730	)		(775	)		(2,812	)		(80	)		0			(11,397	)
Recoveries on charged off loans		401			172			164			61			0			798
Balance at end of period	$	42,162		$	10,851		$	14,859		$	425		$	11		$	68,308

Changes in the allowance for loan losses for the three and six months ended June 30, 2010 were as follows (in thousands):

	Three Months Ended			Six Months Ended
	June 30, 2010			June 30, 2010
Balance at beginning of period	$	49,971		$	52,092
Provision charged to operations		10,245			33,200
Loans charged off		(4,055	)		(29,402	)
Recoveries on charged off loans		214			485
Balance at end of period	$	56,375		$	56,375

As of June 30, 2011 and December 31, 2010, the loan portfolio was distributed by portfolio segment and impairment methodology as shown below (in thousands):

	Commercial and				Construction and
	Industrial		Real Estate		Land Development		Consumer		Total
As of June 30, 2011
Loans individually evaluated for impairment	$	16,338	$	26,309	$	55,619	$	30	$	98,296
Loans collectively evaluated for impairment		1,596,154		1,131,330		261,212		39,336		3,028,032
	$	1,612,492	$	1,157,639	$	316,831	$	39,366	$	3,126,328
	Commercial and				Construction and
	Industrial		Real Estate		Land Development		Consumer		Total
As of December 31, 2010
Loans individually evaluated for impairment	$	30,576	$	26,477	$	59,348	$	35	$	116,436
Loans collectively evaluated for impairment		1,608,645		1,085,925		284,572		42,592		3,021,734
	$	1,639,221	$	1,112,402	$	343,920	$	42,627	$	3,138,170

19

3. Loans and Allowance for Loan Losses (continued)

As of June 30, 2011 and December 31, 2010, the allowance for loan losses was distributed by portfolio segment and impairment methodology as shown below (in thousands):

	Commercial and				Construction and
	Industrial		Real Estate		Land Development		Consumer		Unallocated		Total
As of June 30, 2011
Loans individually evaluated for impairment	$	1,994	$	103	$	7,050	$	0	$	0	$	9,147
Loans collectively evaluated for impairment		40,168		10,748		7,809		425		11		59,161
	$	42,162	$	10,851	$	14,859	$	425	$	11	$	68,308
	Commercial and				Construction and
	Industrial		Real Estate		Land Development		Consumer		Unallocated		Total
As of December 31, 2010
Loans individually evaluated for impairment	$	4,654	$	417	$	3,724	$	0	$	0	$	8,795
Loans collectively evaluated for impairment		37,033		11,315		7,503		523		0		56,374
	$	41,687	$	11,732	$	11,227	$	523	$	0	$	65,169

Net (charge-offs)/recoveries by class for the three and six months ended June 30, 2011 and 2010 are shown in the following table (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Commercial and industrial
Secured by receivables	$	(2,395	)	$	(1,825	)	$	(3,261	)	$	(11,219	)
Secured by equipment		(292	)		(316	)		(559	)		(2,293	)
Unsecured		(299	)		(250	)		(313	)		(812	)
Lease financing		(476	)		(325	)		(746	)		(452	)
All other commercial and industrial		(18	)		(717	)		(2,450	)		(5,784	)
Real estate
Secured by commercial properties		22			0			61			(7,392	)
Secured by residential properties		(357	)		0			(664	)		(304	)
Construction and land development
Residential construction loans		82			(325	)		59			(423	)
Commercial construction loans and land development		(1,164	)		(36	)		(2,707	)		(128	)
Consumer		27			(47	)		(19	)		(110	)
	$	(4,870	)	$	(3,841	)	$	(10,599	)	$	(28,917	)

20

4. Deposits

Deposits at June 30, 2011 and December 31, 2010 are summarized as follows (in thousands):

	June 30,		December 31,
	2011		2010
Noninterest-bearing demand	$	288,557	$	256,372
Interest-bearing:
NOW accounts		56,883		61,800
Money market		1,647,602		1,416,816
Brokered - money market		274,986		374,972
Demand		47,713		71,547
Savings		198,938		167,398
In foreign branches		132,543		132,131
Time - $100,000 and over		778,631		817,956
Time - other		224,585		218,163
Brokered - time		312,234		401,304
	$	3,962,672	$	3,918,459

5. Short-Term Borrowings

Short-term borrowings at June 30, 2011 and December 31, 2010 were as follows (in thousands):

	June 30,		December 31,
	2011		2010
Federal funds purchased	$	221,450	$	134,675
Securities sold under agreements to repurchase		203,277		304,207
Federal Home Loan Bank notes		25,000		100,000
Treasury tax and loan note option account		2,550		3,002
Short-term bank loans		2,500		40,250
	$	454,777	$	582,134

Federal funds purchased and securities sold under agreements to repurchase generally mature daily, on demand or on some other short-term basis. The Bank and FSC execute transactions to sell securities under agreements to repurchase with both their customers and broker-dealers. Securities involved in these transactions are held by the Bank, FSC or the dealer. Information concerning federal funds purchased and securities sold under agreements to repurchase is shown in the following table (dollar amounts in thousands):

	Six Months Ended June 30,
	2011			2010
Average balance during the period	$	435,077		$	220,965
Average interest rate during the period		0.24	%		0.23	%
	June 30,			December 31,
	2011			2010
Average interest rate at end of period		0.21	%		0.23	%
Securities underlying the agreements at end of period
Carrying value	$	197,373		$	276,284
Estimated fair value	$	250,380		$	336,317

21

5. Short-Term Borrowings (continued)

The estimated fair value of securities underlying repurchase agreements above includes approximately $52.5 million of securities owned by FSC customers and pledged to FSC as collateral for margin loans as of June 30, 2011. FSC is permitted to sell or re-pledge customer securities held as collateral for margin loans under the terms of the margin loan agreements between FSC and its customers.

FHLB notes mature over terms not exceeding 365 days and are collateralized by FHLB Dallas stock, nonspecified real estate loans and certain specific commercial real estate loans. Other information regarding FHLB notes is shown in the following table (dollar amounts in thousands).

	Six Months Ended June 30,
	2011			2010
Average balance during the period	$	34,392		$	299,862
Average interest rate during the period		0.42	%		0.67	%
	June 30,			December 31,
	2011			2010
Average interest rate at end of period		0.41	%		0.43	%

FSC uses short-term bank loans periodically to finance securities owned, customers’ margin accounts, and other short-term operating activities. Interest on the borrowings varies with the federal funds rate. The weighted average interest rate on the borrowings at both June 30, 2011 and December 31, 2010 was 1.50%.

6. Notes Payable

Notes payable at June 30, 2011 and December 31, 2010 consisted of the following (in thousands):

	June 30,		December 31,
	2011		2010
Term note with JPMorgan Chase, due July 31, 2012. Principal payments of $0.9 million and interest are payable quarterly.	$	17,700	$	17,700
Revolving credit line with JPMorgan Chase not to exceed $5.0 million. Facility matures July 31, 2012 with interest payable quarterly.		5,000		1,000
Term note with JPMorgan Chase, due July 31, 2011. Principal payments of $1.9 million and interest are payable quarterly.		1,913		5,738
Term note with JPMorgan Chase, due July 31, 2012, Principal payments of $0.5 million and interest are payable semi-annually.		2,500		3,000
Term note with JPMorgan Chase, due October 27, 2015, Principal payments of $25,000 and interest are payable quarterly.		500		500
Subordinated note with JPMorgan Chase, not to exceed $20 million. Facility matures October 27, 2015 with interest payable quarterly.		20,000		20,000
First Southwest nonrecourse notes, due January 25, 2035 with interest payable quarterly.		14,486		15,838
	$	62,099	$	63,776

22

6. Notes Payable (continued)

The agreements underlying the JPMorgan Chase debt include certain restrictive covenants, including limitations on the ability to incur additional debt, limitations on the disposition of assets and requirements to maintain various financial ratios, including a non-performing asset ratio, at acceptable levels.

In July 2011, PlainsCapital made the final payment of $1.9 million on its term note with JPMorgan Chase that was scheduled to mature on July 31, 2011.

The previous table reflects July 2011 amendments (“July 2011 Amendments”) to loan agreements between PlainsCapital and JPMorgan Chase governing PlainsCapital’s existing line of credit and term notes. The July 2011 Amendments converted PlainsCapital’s $17.7 million revolving line of credit to a term note, extended the maturity of PlainsCapital’s remaining line of credit and term notes expiring July 31, 2011 to July 31, 2012 and, where applicable, decreased the acceptable non-performing asset ratio for the Bank from 4.50% to 4.00%, effective beginning September 30, 2011. At June 30, 2011, the Bank’s non-performing asset ratio, as defined, was 3.17%, which was in compliance with the non-performing asset ratio covenant.

7. Income Taxes

PlainsCapital’s effective tax rate was 33.86% and 32.02% for the three months ended June 30, 2011 and 2010, respectively. For the six months ended June 30, 2011 and 2010, PlainsCapital’s effective tax rate was 34.89% and 31.26%, respectively. Due to lower levels of pre-tax income in the first quarter of 2010, the portion of our pre-tax income that was taxed at the highest marginal rate decreased. Accordingly, the effective tax rate for the six months ended June 30, 2010 was lower than the effective tax rate in the comparable period in 2011.

PlainsCapital files income tax returns in the U.S. federal jurisdiction and several U.S. state jurisdictions. PlainsCapital is no longer subject to U.S. federal income tax examinations by tax authorities for years before 2007.

8. Commitments and Contingencies

The Bank acts as agent on behalf of certain correspondent banks in the purchase and sale of federal funds that aggregated $4.7 million and $0.5 million at June 30, 2011 and December 31, 2010, respectively.

Legal Matters

In November 2006, FSC received subpoenas from the SEC and the United States Department of Justice (the “DOJ”) in connection with an investigation of possible antitrust and securities law violations, including bid-rigging, in the procurement of guaranteed investment contracts and other investment products for the reinvestment of bond proceeds by municipalities. The investigation is industry-wide and includes approximately 30 or more firms, including some of the largest U.S. investment firms.

As a result of these SEC and DOJ investigations into industry-wide practices, FSC was initially named as a co-defendant in cases filed in several different federal courts by various state and local governmental entities suing on behalf of themselves and a purported class of similarly situated governmental entities and a similar set of lawsuits filed by various California local governmental entities suing on behalf of themselves and a purported class of similarly situated governmental entities. All claims asserted against FSC in these purported class actions were subsequently dismissed. However, the plaintiffs in these purported class actions have filed amended complaints against other entities, and FSC is identified in these complaints not as a defendant, but as an alleged co-conspirator with the named defendants.

23

8. Commitments and Contingencies (continued)

Additionally, as a result of these SEC and DOJ investigations into industry-wide practices, FSC has been named as a defendant in 20 individual lawsuits. These lawsuits have been brought by several California public entities and two New York non-profit corporations that do not seek to certify a class. The Judicial Panel on Multidistrict Litigation has transferred these cases to the United States District Court, Southern District of New York. The California plaintiffs allege violations of Section 1 of the Sherman Act and the California Cartwright Act. The New York plaintiffs allege violations of Section 1 of the Sherman Act and the New York Donnelly Act. The allegations against FSC are very limited in scope. FSC has filed answers in each of the twenty lawsuits denying the allegations and asserting several affirmative defenses. FSC intends to defend itself vigorously in these individual actions. The relief sought is unspecified monetary damages.

PlainsCapital and subsidiaries are defendants in various other legal matters arising in the normal course of business. Management believes that the ultimate liability, if any, arising from these matters will not materially affect the consolidated financial statements.

Other Contingencies

PlainsCapital and its subsidiaries lease space, primarily for branch facilities and automated teller machines, under noncancelable operating leases with remaining terms, including renewal options, of 1 to 17 years and under capital leases with remaining terms of 11 to 18 years. Future minimum payments under these leases have not changed significantly from the amounts reported at December 31, 2010 in the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K filed with the SEC on March 22, 2011. Rental expense under the operating leases was approximately $5.8 million and $5.2 million for the three months ended June 30, 2011 and 2010, respectively. For the six months ended June 30, 2011 and 2010, rental expense was approximately $11.4 million and $10.4 million, respectively.

9. Financial Instruments with Off-Balance Sheet Risk

The Bank is party to financial instruments with off-balance sheet risk that are used in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit that involve varying degrees of credit and interest rate risk in excess of the amount recognized in the consolidated financial statements. Such financial instruments are recorded in the financial statements when they are funded or related fees are incurred or received. The contract amounts of those instruments reflect the extent of involvement (and therefore the exposure to credit loss) the Bank has in particular classes of financial instruments.

Commitments to extend credit are agreements to lend to a customer provided that the terms established in the contract are met. Commitments generally have fixed expiration dates and may require payment of fees. Because certain commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan commitments to customers.

The Bank had in the aggregate outstanding unused commitments to extend credit of $896.5 million at June 30, 2011. The Bank had outstanding standby letters of credit of $47.3 million at June 30, 2011.

The Bank uses the same credit policies in making commitments and standby letters of credit as they do for on-balance sheet instruments. The amount of collateral obtained, if deemed necessary, upon extension of credit is based on management’s credit evaluation of the borrower. Collateral held varies but may include real estate, accounts receivable, marketable securities, interest-bearing deposit accounts, inventory, and property, plant and equipment.

In the normal course of business, FSC executes, settles and finances various securities transactions that may expose FSC to off-balance sheet risk in the event that a customer or counterparty does not fulfill its contractual obligations. Examples of such transactions include the sale of securities not yet purchased by customers or for the account of FSC, clearing agreements between FSC and various clearinghouses and broker-dealers, secured financing arrangements that involve pledged securities, and when-issued underwriting and purchase commitments.

24

10. Stock-Based Compensation

PlainsCapital has several stock option plans (the “Stock Option Plans”) that provide for the granting of stock options to officers and key employees. PlainsCapital has also granted restricted stock to a group of officers and key employees.

In addition, the PlainsCapital Corporation 2010 Long-Term Incentive Plan (the “2010 Plan”) allows for the granting of nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, dividend equivalent rights and other awards to employees of PlainsCapital, its subsidiaries and outside directors of PlainsCapital. In the aggregate, 1.0 million shares of Original Common Stock may be delivered pursuant to awards granted under the 2010 Plan.

Stock-based compensation cost was approximately $0.6 million and $0.4 million for the three months ended June 30, 2011 and 2010, respectively. For the six months ended June 30, 2011 and 2010, stock-based compensation cost was $1.1 million and $0.7 million.

At June 30, 2011, unrecognized cost related to unvested restricted stock and restricted stock units was $5.4 million and $5.9 million, respectively. The vesting of the unvested restricted stock and restricted stock units will automatically accelerate in full under certain conditions. Upon a change in control of PlainsCapital, the entire unrecognized cost related to both unvested restricted stock and restricted stock units would be recognized in noninterest expense immediately. On the date upon which our common stock is listed and traded on an exchange registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the entire unrecognized cost related to unvested restricted stock would be recognized in noninterest expense immediately.

At June 30, 2011, a total of 189,441 shares were available for grant under the Stock Option Plans and 253,687 shares were available for awards under the 2010 Plan. PlainsCapital typically issues new shares upon exercise of option grants.

Information regarding unvested restricted stock and restricted stock units for the six months ended June 30, 2011 is as follows:

	2011					2011
	Unvested			Weighted					Weighted
	Restricted			Average Grant		Restricted			Average Grant
	Stock			Date Fair Value		Stock Units			Date Fair Value
Outstanding, January 1		535,862		$	11.48		290,057		$	12.58
Granted		76,383			11.26		298,592			11.26
Vested		(83,713	)		11.47		0			0.00
Cancellations and expirations		0			0.00		(2,000	)		11.26
Outstanding, June 30		528,532		$	11.45		586,649		$	11.91

Information regarding the Stock Option Plans for the six months ended June 30, 2011 is as follows:

	2011
				Weighted
				Average
				Exercise
	Shares			Price
Outstanding, January 1		725,651		$	9.62
Exercised		(2,764	)		6.70
Cancellations and expirations		(9,780	)		12.88
Outstanding, June 30		713,107		$	9.59

25

11. Regulatory Matters

The Bank and PlainsCapital are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory—and possibly additional discretionary—actions by regulators that, if undertaken, could have a direct, material effect on the consolidated financial statements. The regulations require us to meet specific capital adequacy guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the companies to maintain minimum amounts and ratios (set forth in the table below) of Tier 1 capital (as defined in the regulations) to total average assets (as defined), and minimum ratios of Tier 1 and total capital (as defined) to risk-weighted assets (as defined). A comparison of the Bank’s and PlainsCapital’s actual capital amounts and ratios to the minimum requirements is as follows (dollar amounts in thousands):

	At June 30, 2011
	Required					Actual
	Amount		Ratio			Amount		Ratio
PlainsCapital Bank:
Tier 1 capital (to average assets)	$	209,378		4	%	$	500,797		9.57	%
Tier 1 capital (to risk-weighted assets)		154,830		4	%		500,797		12.94	%
Total capital (to risk-weighted assets)		309,659		8	%		549,437		14.19	%
PlainsCapital Corporation:
Tier 1 capital (to average assets)	$	209,640		4	%	$	482,797		9.21	%
Tier 1 capital (to risk-weighted assets)		155,253		4	%		482,797		12.44	%
Total capital (to risk-weighted assets)		310,505		8	%		547,568		14.11	%

	At December 31, 2010
	Required					Actual
	Amount		Ratio			Amount		Ratio
PlainsCapital Bank:
Tier 1 capital (to average assets)	$	206,270		4	%	$	485,013		9.41	%
Tier 1 capital (to risk-weighted assets)		152,091		4	%		485,013		12.76	%
Total capital (to risk-weighted assets)		304,181		8	%		532,769		14.01	%
PlainsCapital Corporation:
Tier 1 capital (to average assets)	$	206,664		4	%	$	462,823		8.96	%
Tier 1 capital (to risk-weighted assets)		152,946		4	%		462,823		12.10	%
Total capital (to risk-weighted assets)		305,891		8	%		526,843		13.78	%

26

11. Regulatory Matters (continued)

To be considered adequately capitalized (as defined) under the regulatory framework for prompt corrective action, the Bank must maintain minimum Tier 1 capital to total average assets and Tier 1 capital to risk-weighted assets ratios of 4%, and a total capital to risk-weighted assets ratio of 8%. Based on the actual capital amounts and ratios shown in the previous table, the Bank’s ratios place it in the well capitalized (as defined) capital category under the regulatory framework for prompt corrective action. The minimum required capital amounts and ratios for the well capitalized category are summarized as follows (dollar amounts in thousands):

	At June 30, 2011
	Required					Actual
	Amount		Ratio			Amount		Ratio
PlainsCapital Bank:
Tier 1 capital (to average assets)	$	261,722		5	%	$	500,797		9.57	%
Tier 1 capital (to risk-weighted assets)		232,244		6	%		500,797		12.94	%
Total capital (to risk-weighted assets)		387,074		10	%		549,437		14.19	%

	At December 31, 2010
	Required					Actual
	Amount		Ratio			Amount		Ratio
PlainsCapital Bank:
Tier 1 capital (to average assets)	$	257,838		5	%	$	485,013		9.41	%
Tier 1 capital (to risk-weighted assets)		228,136		6	%		485,013		12.76	%
Total capital (to risk-weighted assets)		380,227		10	%		532,769		14.01	%

Pursuant to the net capital requirements of the Exchange Act, FSC has elected to determine its net capital requirements using the alternative method. Accordingly, FSC is required to maintain minimum net capital, as defined in Rule 15c3-1, equal to the greater of $250,000 or 2% of aggregate debit balances, as defined in Rule 15c3-3. At June 30, 2011, FSC had net capital of $57.0 million; the minimum net capital requirement was $3.4 million; net capital maintained by FSC was 33% of aggregate debits; and net capital in excess of the minimum requirement was $53.6 million.

As a mortgage originator, PrimeLending is subject to minimum net worth requirements established by the United States Department of Housing and Urban Development (“HUD”). PrimeLending determines its compliance with the minimum net worth requirements on an annual basis. As of December 31, 2010, PrimeLending was required to have net worth of $1.0 million. PrimeLending’s adjusted net worth as defined by the Consolidated Audit Guide for Audits of HUD Programs was $54.1 million as of December 31, 2010, resulting in adjusted net worth above the required amount of $53.1 million.

12. Shareholders’ Equity

The Bank is subject to certain restrictions on the amount of dividends it may declare without prior regulatory approval. At June 30, 2011, approximately $53.1 million of retained earnings was available for dividend declaration without prior approval from the Federal Reserve.

13. Assets Segregated for Regulatory Purposes

FSC was not required to segregate cash and securities in a special reserve account for the benefit of customers under Rule 15c3-3 of the Exchange Act at June 30, 2011 or December 31, 2010. Assets segregated under the provisions of the Exchange Act are not available for general corporate purposes.

FSC was not required to segregate cash or securities in a special reserve account for the benefit of proprietary accounts of introducing broker-dealers at June 30, 2011 or December 31, 2010.

27

14. Broker-Dealer and Clearing Organization Receivables and Payables

Broker-dealer and clearing organization receivables and payables at June 30, 2011 and December 31, 2010 consisted of the following (in thousands):

	June 30,		December 31,
	2011		2010
Receivables
Securities borrowed	$	66,934	$	34,495
Securities failed to deliver		1,452		4,287
Clearing organizations		2,117		6,926
Due from dealers		37		60
	$	70,540	$	45,768
Payables
Securities loaned	$	69,710	$	39,660
Correspondents		51,565		24,171
Securities failed to receive		4,957		1,140
Clearing organizations		1,176		661
	$	127,408	$	65,632

15. Fair Value Measurements

Fair Value Measurements and Disclosures

PlainsCapital determines fair values in compliance with the Fair Value Measurements and Disclosures Topic of the ASC (“Fair Value Topic”). The Fair Value Topic defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and requires disclosures about fair value measurements. The Fair Value Topic defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The Fair Value Topic assumes that transactions upon which fair value measurements are based occur in the principal market for the asset or liability being measured. Further, fair value measurements made under the Fair Value Topic exclude transaction costs and are not the result of forced transactions.

The Fair Value Topic creates a fair value hierarchy that classifies fair value measurements based upon the inputs used in valuing the assets or liabilities that are the subject of fair value measurements. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs, as indicated below.

• Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities that PlainsCapital can access at the measurement date.

• Level 2 Inputs: Observable inputs other than Level 1 prices. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g. interest rates and credit risks), and inputs that are derived from or corroborated by market data, among others.

• Level 3 Inputs: Unobservable inputs that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities. Level 3 inputs include pricing models and discounted cash flow techniques, among others.

28

15. Fair Value Measurements (continued)

Fair Value Option

PlainsCapital has elected to measure substantially all of PrimeLending’s mortgage loans held for sale and certain time deposits at fair value under the provisions of the Fair Value Option Subsections of the ASC (“Fair Value Option”). PlainsCapital elected to apply the provisions of the Fair Value Option to these items so that it would have the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. PlainsCapital determines the fair value of the financial instruments accounted for under the provisions of the Fair Value Option in compliance with the provisions of the Fair Value Topic discussed above.

At June 30, 2011, the aggregate fair value of PrimeLending loans held for sale accounted for under the Fair Value Option was $597.8 million, while the unpaid principal balance of those loans was $583.4 million. At December 31, 2010, the aggregate fair value of PrimeLending loans held for sale accounted for under the Fair Value Option was $476.4 million, while the unpaid principal balance of those loans was $465.3 million. The fair value excludes interest, which is reported as interest income on loans in the income statement.

PlainsCapital holds a number of financial instruments that are measured at fair value on a recurring basis, either by the application of the Fair Value Option or other authoritative pronouncements. The fair values of those instruments are determined primarily using Level 2 inputs. Those inputs include quotes from mortgage loan investors and derivatives dealers, data from an independent pricing service and rates paid in the brokered certificate of deposit market.

At June 30, 2011, the Bank held auction rate bonds purchased as a result of the First Southwest acquisition. The estimated fair value of the auction rate bonds is determined quarterly by a third-party valuation specialist using Level 3 inputs, primarily due to the lack of observable market data. Inputs for the valuation were developed using terms of the auction rate bonds, market interest rates, asset appropriate credit transition matrices and recovery rates and assumptions regarding the term to maturity of the auction rate bonds. The following table reconciles the beginning and ending balances of assets measured at fair value using Level 3 inputs (in thousands).

	Auction
	Rate Bonds
Balance, January 1, 2011	$	22,454
Unrealized losses in other comprehensive income, net		(4,682	)
Transfers from held to maturity		28,564
Premium amortization and discount accretion, net		77
Balance, June 30, 2011	$	46,413

During the first quarter of 2011, auction rate bonds with a net carrying amount of $28.6 million were transferred from held to maturity to available for sale to address a downgrade in credit rating from investment grade to below investment grade. The Bank uses the date of the transfer to determine when the auction rate bonds entered Level 3.

29

15. Fair Value Measurements (continued)

The following tables present information regarding financial assets and liabilities measured at fair value on a recurring basis, including changes in fair value for those instruments that are reported at fair value under an election under the Fair Value Option (in thousands).

	At June 30, 2011
	Level 1		Level 2		Level 3		Total
	Inputs		Inputs		Inputs		Fair Value
Loans held for sale	$	0	$	597,783	$	0	$	597,783
Securities available for sale		0		704,904		46,413		751,317
Trading securities		0		24,836		0		24,836
Derivative assets		0		6,688		0		6,688
Time deposits		0		1,045		0		1,045
Trading liabilities		0		3,120		0		3,120
Derivative liabilities		0		135		0		135

	Changes in Fair Value for Assets and Liabilities Reported  at Fair Value under Fair Value Option
	Three Months Ended June 30, 2011								Three Months Ended June 30, 2010
			Other			Total					Other			Total
	Net Gains from		Noninterest			Changes in			Net Gains from		Noninterest			Changes in
	Sale of Loans		Income			Fair Value			Sale of Loans		Income			Fair Value
Loans held for sale	$	2,754	$	0		$	2,754		$	7,410	$	0		$	7,410
Time deposits		0		(1	)		(1	)		0		(3	)		(3	)

	Six Months Ended June 30, 2011								Six Months Ended June 30, 2010
			Other			Total					Other			Total
	Net Gains from		Noninterest			Changes in			Net Gains from		Noninterest			Changes in
	Sale of Loans		Income			Fair Value			Sale of Loans		Income			Fair Value
Loans held for sale	$	3,322	$	0		$	3,322		$	8,239	$	0		$	8,239
Time deposits		0		(3	)		(3	)		0		(4	)		(4	)

PlainsCapital also determines the fair value of assets and liabilities on a non-recurring basis. For example, facts and circumstances may dictate a fair value measurement when there is evidence of impairment. Assets and liabilities measured on a non-recurring basis include the items discussed below.

Impaired Loans – PlainsCapital reports impaired loans at fair value through allocations of the allowance for loan losses. PlainsCapital determines fair value using Level 2 inputs consisting of observable loss experience for similar loans. At June 30, 2011, loans with a carrying amount of $49.8 million had been reduced by allocations of the allowance for loan losses of $9.1 million, resulting in a reported fair value of $40.7 million.

Other Real Estate Owned – PlainsCapital reports other real estate owned at fair value through use of valuation allowances that are charged against the allowance for loan losses when property is initially transferred to other real estate. Subsequent to the initial transfer to other real estate, valuation adjustments are charged against earnings. PlainsCapital determines fair value using Level 2 inputs consisting of independent appraisals. At June 30, 2011, the estimated fair value of other real estate owned was $19.7 million.

The Fair Value of Financial Instruments Subsection of the ASC requires disclosure of the fair value of financial assets and liabilities, including the financial assets and liabilities previously discussed. The methods for determining estimated fair value for financial assets and liabilities is described in detail in Note 21 to the consolidated financial statements included in our Annual Report on Form 10-K filed with the SEC on March 22, 2011.

30

15. Fair Value Measurements (continued)

The estimated fair values of PlainsCapital’s financial instruments are shown below (in thousands):

	At June 30, 2011				At December 31, 2010
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
Financial assets
Cash and short-term investments	$	219,731	$	219,731	$	486,709	$	486,709
Loans held for sale		598,965		598,965		477,711		477,711
Securities		969,598		975,146		865,080		860,897
Loans, net		3,058,020		3,098,182		3,073,001		3,116,532
Broker-dealer and clearing organization receivables		70,540		70,540		45,768		45,768
Fee award receivable		18,603		18,603		19,222		19,222
Cash surrender value of life insurance policies		22,769		22,769		22,410		22,410
Interest rate swaps, interest rate lock commitments (“IRLCs”) and forward purchase commitments		6,688		6,688		4,107		4,107
Accrued interest receivable		16,412		16,412		16,615		16,615
Financial liabilities
Deposits		3,962,672		3,970,214		3,918,459		3,924,188
Broker-dealer and clearing organization payables		127,408		127,408		65,632		65,632
Other trading liabilities		3,120		3,120		4,944		4,944
Short-term borrowings		454,777		454,777		582,134		582,134
Debt		129,111		129,111		130,788		130,788
Forward purchase commitments		135		135		317		317
Accrued interest payable		3,367		3,367		5,949		5,949

16. Derivative Financial Instruments

The Bank and PrimeLending use various derivative financial instruments to mitigate interest rate risk. The Bank’s interest rate risk management strategy involves effectively modifying the re-pricing characteristics of certain assets and liabilities so that changes in interest rates do not adversely affect the net interest margin. PrimeLending has interest rate risk relative to its inventory of mortgage loans held for sale and IRLCs. PrimeLending is exposed to such rate risk from the time an IRLC is made to an applicant to the time the related mortgage loan is sold.

Cash Flow Hedges

The Bank entered into interest rate swap agreements to manage interest rate risk associated with certain customer contracts. The swaps were originally designated as cash flow hedges. The swaps were highly effective in offsetting future cash flow volatility caused by changes in interest rates. The Bank has recorded the fair value of the swaps in other assets and unrealized gains (losses) associated with the swaps in other comprehensive income.

Non-Hedging Derivative Instruments and the Fair Value Option

As discussed in Note 15, PrimeLending elected to measure substantially all mortgage loans held for sale at fair value under the provisions of the Fair Value Option. The election provides PrimeLending the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without applying complex hedge accounting provisions. PrimeLending provides IRLCs to its customers and executes forward purchase commitments to sell mortgage loans. The fair values of both IRLCs and purchase commitments are recorded in other assets or other liabilities, as appropriate. Changes in the fair values of these derivative instruments produced a net gain of approximately $2.3 million for the three months ended June 30, 2011, and a loss of $0.5 million for the three months ended June 30, 2010. For the six months ended June 30, 2011 and 2010, changes in the fair value of these instruments produced net gains of $2.8 million and $1.1 million, respectively. The net gains were recorded as a component of gain on sale of loans.

31

16. Derivative Financial Instruments (continued)

Derivative positions at June 30, 2011 and December 31, 2010 are presented in the following table (in thousands):

	At June 30, 2011				At December 31, 2010
	Notional		Estimated		Notional		Estimated
	Amount		Fair Value		Amount		Fair Value
Non-hedging derivative instruments
IRLCs	$	616,537	$	3,835	$	442,270	$	274
Interest rate swaps		1,969		114		1,969		129
Forward purchase commitments		623,799		2,604		436,241		3,387

The Bank recorded unrealized gains (losses), net of reclassifications adjustments, on the swaps designated as cash flow hedges in other comprehensive income as shown in the following table (in thousands).

	Three Months Ended June 30, 2011								Three Months Ended June 30, 2010
	Before-Tax			Tax Benefit		After-Tax			Before-Tax			Tax Benefit		After-Tax
	Amount			(Expense)		Amount			Amount			(Expense)		Amount
Change in market value	$	0		$	0	$	0		$	0		$	0	$	0
Reclassification adjustments		(18	)		6		(12	)		(18	)		6		(12	)
Other comprehensive income (loss)	$	(18	)	$	6	$	(12	)	$	(18	)	$	6	$	(12	)

	Six Months Ended June 30, 2011								Six Months Ended June 30, 2010
	Before-Tax			Tax Benefit		After-Tax			Before-Tax			Tax Benefit		After-Tax
	Amount			(Expense)		Amount			Amount			(Expense)		Amount
Change in market value	$	0		$	0	$	0		$	0		$	0	$	0
Reclassification adjustments		(69	)		24		(45	)		(23	)		8		(15	)
Other comprehensive income (loss)	$	(69	)	$	24	$	(45	)	$	(23	)	$	8	$	(15	)

17. Segment and Related Information

PlainsCapital has three reportable segments that are organized primarily by the core products offered to the segments’ respective customers. The banking segment includes the operations of the Bank. The operations of PrimeLending comprise the mortgage origination segment. The financial advisory segment is composed of Hester Capital and First Southwest.

Balance sheet amounts for the operations of PlainsCapital and its remaining subsidiaries not discussed in the previous paragraph are included in “All Other and Eliminations.”

32

17. Segment and Related Information (continued)

The following tables present information about the revenues, profits and assets of PlainsCapital’s reportable segments (in thousands).

Income Statement Data

	Three Months Ended June 30, 2011
			Mortgage			Financial		Intercompany			PlainsCapital
	Banking		Origination			Advisory		Eliminations			Consolidated
Interest income	$	51,627	$	5,439		$	3,760	$	(6,108	)	$	54,718
Interest expense		8,385		9,209			795		(8,856	)		9,533
Net interest income (expense)		43,242		(3,770	)		2,965		2,748			45,185
Provision for loan losses		7,250		(12	)		0		0			7,238
Noninterest income		8,985		79,176			22,279		(2,851	)		107,589
Noninterest expense		25,824		71,768			24,491		(153	)		121,930
Income before taxes		19,153		3,650			753		50			23,606
Income tax provision		6,499		1,238			255		0			7,992
Consolidated net income		12,654		2,412			498		50			15,614
Less: net income attributable to noncontrolling interest		0		110			74		0			184
Net income attributable to PlainsCapital Corporation	$	12,654	$	2,302		$	424	$	50		$	15,430
	Six Months Ended June 30, 2011
			Mortgage			Financial		Intercompany			PlainsCapital
	Banking		Origination			Advisory		Eliminations			Consolidated
Interest income	$	100,519	$	9,306		$	7,327	$	(10,431	)	$	106,721
Interest expense		16,886		16,611			1,545		(15,931	)		19,111
Net interest income (expense)		83,633		(7,305	)		5,782		5,500			87,610
Provision for loan losses		13,750		(12	)		0		0			13,738
Noninterest income		16,331		140,837			41,466		(5,705	)		192,929
Noninterest expense		54,459		129,929			46,981		(398	)		230,971
Income before taxes		31,755		3,615			267		193			35,830
Income tax provision		11,138		1,268			94		0			12,500
Consolidated net income		20,617		2,347			173		193			23,330
Less: net income attributable to noncontrolling interest		0		178			128		0			306
Net income attributable to PlainsCapital Corporation	$	20,617	$	2,169		$	45	$	193		$	23,024

33

17. Segment and Related Information (continued)

Income Statement Data

	Three Months Ended June 30, 2010
			Mortgage			Financial		Intercompany			PlainsCapital
	Banking		Origination			Advisory		Eliminations			Consolidated
Interest income	$	54,248	$	6,785		$	2,825	$	(7,806	)	$	56,052
Interest expense		9,171		11,728			935		(12,084	)		9,750
Net interest income (expense)		45,077		(4,943	)		1,890		4,278			46,302
Provision for loan losses		9,510		735			0		0			10,245
Noninterest income		8,770		72,796			25,051		(4,421	)		102,196
Noninterest expense		30,140		61,137			25,221		(158	)		116,340
Income before taxes		14,197		5,981			1,720		15			21,913
Income tax provision		4,549		1,916			551		0			7,016
Consolidated net income		9,648		4,065			1,169		15			14,897
Less: net income attributable to noncontrolling interest		0		161			85		0			246
Net income attributable to PlainsCapital Corporation	$	9,648	$	3,904		$	1,084	$	15		$	14,651
	Six Months Ended June 30, 2010
			Mortgage			Financial		Intercompany			PlainsCapital
	Banking		Origination			Advisory		Eliminations			Consolidated
Interest income	$	105,152	$	11,276		$	5,217	$	(13,285	)	$	108,360
Interest expense		18,447		21,014			1,767		(21,843	)		19,385
Net interest income (expense)		86,705		(9,738	)		3,450		8,558			88,975
Provision for loan losses		32,465		735			0		0			33,200
Noninterest income		19,383		120,250			46,838		(8,843	)		177,628
Noninterest expense		55,773		106,078			47,569		(320	)		209,100
Income before taxes		17,850		3,699			2,719		35			24,303
Income tax provision		5,587		1,158			851		0			7,596
Consolidated net income		12,263		2,541			1,868		35			16,707
Less: net income attributable to noncontrolling interest		0		220			150		0			370
Net income attributable to PlainsCapital Corporation	$	12,263	$	2,321		$	1,718	$	35		$	16,337

34

17. Segment and Related Information (continued)

Balance Sheet Data

	June 30, 2011
			Mortgage		Financial		All Other and			PlainsCapital
	Banking		Origination		Advisory		Eliminations			Consolidated
Cash and due from banks	$	125,206	$	77,954	$	4,245	$	(79,402	)	$	128,003
Loans held for sale		1,182		597,783		0		0			598,965
Securities		944,762		0		24,836		0			969,598
Loans, net		3,427,850		2,237		229,995		(602,062	)		3,058,020
Broker-dealer and clearing organization receivables		0		0		70,540		0			70,540
Investment in subsidiaries		190,800		0		0		(190,800	)		0
Goodwill and other intangible assets, net		7,862		23,706		16,725		0			48,293
Other assets		248,732		27,864		119,255		(9,461	)		386,390
Total assets	$	4,946,394	$	729,544	$	465,596	$	(881,725	)	$	5,259,809
Deposits	$	4,019,052	$	0	$	57,784	$	(114,164	)	$	3,962,672
Broker-dealer and clearing organization payables		0		0		127,408		0			127,408
Short-term borrowings		333,697		0		121,080		0			454,777
Notes payable		0		565,109		16,372		(519,382	)		62,099
Junior subordinated debentures		0		0		0		67,012			67,012
Other liabilities		50,882		67,882		58,763		(57,062	)		120,465
PlainsCapital Corporation shareholders’ equity		542,763		95,664		84,189		(258,570	)		464,046
Noncontrolling interest		0		889		0		441			1,330
Total liabilities and shareholders’ equity	$	4,946,394	$	729,544	$	465,596	$	(881,725	)	$	5,259,809
	December 31, 2010
			Mortgage		Financial		All Other and			PlainsCapital
	Banking		Origination		Advisory		Eliminations			Consolidated
Cash and due from banks	$	329,300	$	79,428	$	4,420	$	(80,940	)	$	332,208
Loans held for sale		1,269		476,442		0		0			477,711
Securities		846,149		0		18,931		0			865,080
Loans, net		3,275,433		2,305		286,661		(491,398	)		3,073,001
Broker-dealer and clearing organization receivables		0		0		45,768		0			45,768
Investment in subsidiaries		240,664		0		0		(240,664	)		0
Goodwill and other intangible assets, net		7,862		23,706		17,753		0			49,321
Other assets		280,277		22,269		129,087		41,932			473,565
Total assets	$	4,980,954	$	604,150	$	502,620	$	(771,070	)	$	5,316,654
Deposits	$	3,954,711	$	0	$	79,770	$	(116,022	)	$	3,918,459
Broker-dealer and clearing organization payables		0		0		65,632		0			65,632
Short-term borrowings		404,541		0		177,593		0			582,134
Notes payable		39,220		453,449		18,492		(447,385	)		63,776
Junior subordinated debentures		0		0		0		67,012			67,012
Other liabilities		41,998		61,558		77,916		(9,107	)		172,365
PlainsCapital Corporation shareholders’ equity		540,484		88,796		83,217		(266,006	)		446,491
Noncontrolling interest		0		347		0		438			785
Total liabilities and shareholders’ equity	$	4,980,954	$	604,150	$	502,620	$	(771,070	)	$	5,316,654

35

18. Earnings per Common Share

The following table presents the computation of basic and diluted earnings per common share for the three and six months ended June 30, 2011 and 2010 (in thousands, except per share data).

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Income applicable to PlainsCapital Corporation common shareholders	$	14,027	$	13,261	$	20,221	$	13,559
Less: income applicable to participating securities		518		487		727		485
Income applicable to PlainsCapital Corporation common shareholders for basic earnings per common share	$	13,509	$	12,774	$	19,494	$	13,074
Weighted-average shares outstanding		32,847,678		32,677,426		32,810,850		32,637,571
Less: participating securities included in weighted-average shares outstanding		1,213,192		1,199,158		1,180,823		1,169,326
Weighted-average shares outstanding for basic earnings per common share		31,634,486		31,478,268		31,630,027		31,468,245
Basic earnings per common share	$	0.43	$	0.40	$	0.62	$	0.41
Income applicable to PlainsCapital Corporation common shareholders	$	14,027	$	13,261	$	20,221	$	13,559
Weighted-average shares outstanding		31,634,486		31,478,268		31,630,027		31,468,244
Dilutive effect of contingently issuable shares due to First Southwest acquisition		1,722,152		1,720,740		1,722,152		1,720,740
Dilutive effect of stock options and non-vested stock awards		219,728		274,134		198,787		426,101
Weighted-average shares outstanding for diluted earnings per common share		33,576,366		33,473,142		33,550,966		33,615,085
Diluted earnings per common share	$	0.42	$	0.40	$	0.60	$	0.40

PlainsCapital uses the two-class method prescribed by the Earnings Per Share Topic of the ASC to compute earnings per common share. Participating securities include non-vested restricted stock and shares of PlainsCapital stock held in escrow pending the resolution of contingencies with respect to the First Southwest acquisition.

The weighted-average shares outstanding used to compute diluted earnings per common share do not include outstanding options of 265,179 for the three and six months ended June 30, 2011 and 57,000 for the three months and six months ended June 30, 2010. The exercise price of the excluded options exceeded the estimated average market price of PlainsCapital stock in the periods shown. Accordingly, the assumed exercise of the excluded options would have been antidilutive.

36

19. Recently Issued Accounting Standards

Improving Disclosures about Fair Value Measurements

In January 2010, the FASB amended the Fair Value Measurements and Disclosures Topic of the ASC to expand required disclosures related to fair value measurements (“Improved Fair Value Disclosure Amendment”). The Improved Fair Value Disclosure Amendment requires disclosures regarding significant transfers between Level 1 and Level 2 of the fair value hierarchy and the reasons for the transfers, reasons for transfers in or out of Level 3 of the fair value hierarchy, as well as separate disclosure of significant transfers, and policies for determining when transfers between levels of the fair value hierarchy are recognized. In addition, the Improved Fair Value Disclosure Amendment requires gross presentation of purchases, sales, issuances and settlements of financial instruments that are measured on a recurring basis using Level 3 inputs.

The Improved Fair Value Disclosure Amendment also clarifies that fair value measurement disclosures should be provided for each class of assets and liabilities, rather than major category, and that valuation techniques and inputs used to measure fair value on a recurring or nonrecurring basis should be provided for each class of assets and liabilities included in Levels 2 and 3 of the fair value hierarchy. The Improved Fair Value Disclosure Amendment became effective for PlainsCapital on January 1, 2010, except for the provisions relating to gross presentation of purchases, sales, issuances and settlements of assets and liabilities included in Level 3 of the fair value hierarchy, which became effective January 1, 2011. The adoption of the Improved Fair Value Disclosure Amendment did not have a significant effect on PlainsCapital’s financial position, results of operations or cash flows. PlainsCapital has included the disclosures required by the Improved Fair Value Disclosure Amendment in Note 15.

Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses

In July 2010, the FASB amended the Receivables Topic of the ASC to require entities to provide disclosures designed to facilitate financial statement users’ evaluation of (i) the nature of credit risk inherent in the entity’s portfolio of financing receivables, (ii) how that risk is analyzed and assessed in arriving at the allowance for credit losses and (iii) the changes and reasons for those changes in the allowance for credit losses. Disclosures must be disaggregated by portfolio segment, the level at which an entity develops and documents a systematic method for determining its allowance for credit losses, and class of financing receivable, which is generally a disaggregation of portfolio segment. The required disclosures include, among other things, a rollforward of the allowance for credit losses as well as information about modified, impaired, non-accrual and past due loans and credit quality indicators. These amendments to the Receivables Topic became effective for PlainsCapital as of December 31, 2010, as it relates to disclosures required as of the end of a reporting period. Disclosures that relate to activity during a reporting period became effective January 1, 2011. PlainsCapital has included the required disclosures regarding credit quality of financing receivables and the allowance for credit losses in Note 3.

A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring

In April 2011, the FASB amended the Receivables Topic of the ASC to clarify when creditors should classify loan modifications as troubled debt restructurings (“TDR Amendment”). The TDR Amendment requires creditors to separately conclude that a creditor has granted a concession to a debtor and that the debtor is experiencing financial difficulties in order to classify a loan modification as a troubled debt restructuring. The TDR Amendment became effective for PlainsCapital on July 1, 2011, and will be applied retrospectively to the beginning of the annual period of adoption. As a result of applying the TDR amendment, PlainsCapital may identify receivables that are newly considered impaired. For purposes of measuring impairment of receivables so identified, PlainsCapital applied the TDR amendment prospectively beginning July 1, 2011. PlainsCapital does not expect the adoption of the TDR Amendment to have a significant effect on its financial position, results of operations or cash flows.

Comprehensive Income

In June 2011, the FASB amended the Comprehensive Income Topic of the ASC to revise the manner in which entities present comprehensive income in their financial statements. Beginning January 1, 2012, PlainsCapital will present the components of comprehensive income in either a continuous statement of comprehensive income or two separate but consecutive statements, rather than in the statement of shareholders’ equity, as it does currently.

37

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

As used in this Quarterly Report on Form 10-Q (this “Quarterly Report”), unless the context otherwise indicates, the references to “we,” “us,” “our,” “our company” or “PlainsCapital” refer to PlainsCapital Corporation, a Texas corporation, and its consolidated subsidiaries as a whole, references to the “Bank” refer to PlainsCapital Bank, a Texas banking association (a wholly owned subsidiary of PlainsCapital Corporation), references to “First Southwest” refer to First Southwest Holdings, LLC, a Delaware limited liability company (a wholly owned subsidiary of the Bank), and its subsidiaries as a whole, references to “FSC” refer to First Southwest Company, a Delaware corporation (a wholly owned subsidiary of First Southwest Holdings, LLC), and references to “PrimeLending” refer to PrimeLending, a PlainsCapital Company, a Texas corporation (a wholly owned subsidiary of the Bank), and its subsidiaries as a whole. In addition, unless the context otherwise requires, references to “shareholders” are to the holders of our voting securities, which consist of our Common Stock, par value $0.001 per share, and our Original Common Stock, par value $0.001 per share, and references to our “common stock” are to our Common Stock and our Original Common Stock, collectively.

The following discussion and analysis should be read in conjunction with (i) the accompanying unaudited condensed consolidated financial statements and notes thereto for the three and six months ended June 30, 2011, and with our consolidated financial statements and notes thereto for the year ended December 31, 2010 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 22, 2011 (our “Annual Report”) and (ii) the discussion under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report.

Forward-Looking Statements

Certain statements contained in this Quarterly Report that are not statements of historical fact are forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Words such as “anticipate,” “believes,” “budget,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “potential,” “predicts,” “project,” “should,” “will,” “would,” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. We make forward-looking statements regarding topics including, without limitation, our projected sources of funds, expectations concerning mortgage loan origination volume, expectations concerning the hiring of additional mortgage bankers, anticipated changes in our revenues or earnings, expectations regarding financial or other market conditions, the effects of government regulation applicable to our operations, the appropriateness of our allowance for loan losses and provision for loan losses, and the collectability of margin loans. We have based these forward-looking statements on our current assumptions, expectations and projections about future events.

Forward-looking statements involve significant risks and uncertainties that could cause our actual results to differ materially from those anticipated in such statements. Most of these factors are outside our control and difficult to predict. Factors that may cause such differences include, but are not limited to:

(1) changes in the default rate of our loans and risks associated with concentration in real estate related loans;

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

(3) changes in the interest rate environment;

(4) cost and availability of capital;

(5) changes in state and federal laws, regulations or policies affecting one or more of our business segments, including changes in regulatory fees, deposit insurance premiums, capital requirements, and the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”);

(6) changes in the auction rate securities we hold and their markets, including ongoing liquidity problems related thereto and the credit ratings thereof;

(7) our participation in governmental programs implemented under the Emergency Economic Stabilization Act of 2008, as amended (the “EESA”), and the American Recovery and Reinvestment Act of 2009 (the “ARRA”), including, without limitation, the Troubled Asset Relief Program (“TARP”), the Capital Purchase Program and the impact of such programs and related regulations on us and on international, national and local economic and financial markets and conditions;

38

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

(9) 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.

For a more detailed discussion of these and other factors that may affect our business, see the discussion under the caption “Risk Factors” set forth in Item 1A of our Annual Report, the discussion under the caption “Risk Factors” set forth in Item 1A of Part II below and the discussion in this Management’s Discussion and Analysis of Financial Condition and Results of Operations. We caution that the foregoing list of factors is not exhaustive, and new factors may emerge, or changes to the foregoing factors may occur, that could impact 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 Quarterly Report except to the extent required by federal securities laws.

Overview

We are a Texas corporation and a financial holding company registered under the Bank Holding Company Act of 1956, as amended by the Gramm-Leach-Bliley Act of 1999. As of June 30, 2011, on a consolidated basis, we had total assets of approximately $5.3 billion, total deposits of approximately $4.0 billion, total loans, including loans held for sale, of approximately $3.7 billion, and shareholders’ equity of approximately $464.0 million. The Bank, one of our wholly owned subsidiaries, provides a broad array of financial 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 financial products and services such as mortgage origination and financial advisory services.

We generate revenue from net interest income and from noninterest income. Net interest income represents the difference between the income earned on our assets, including our loans and investment securities, and our cost of funds, including the interest paid on the deposits and borrowings that are used to support our assets. Net interest income is a significant contributor to our operating results. Fluctuations in interest rates, as well as the amounts and types of interest-earning assets and interest-bearing liabilities we hold, affect net interest income. During the first half of 2011, we generated $87.6 million in net interest income, compared with $89.0 million in the first half of 2010. Net interest margin is a measure of net interest income as a percentage of average interest-earning assets. Our taxable equivalent net interest margin was 3.60% for the six months ended June 30, 2011, as compared to 4.11% for the six months ended June 30, 2010.

The other component of our revenue is noninterest income, which is primarily comprised of the following:

(i) Mortgage loan origination fees and net gains from sale of loans. Through our wholly owned subsidiary, PrimeLending, we generate noninterest income by originating and selling mortgage loans. During the first half of 2011, we generated $140.4 million in mortgage loan origination fees and net gains from sale of loans, a 16.63% increase compared to the six-month period ended June 30, 2010. PrimeLending continued to add staff and open mortgage banking offices on an opportunistic basis in 2010. This increase in staff led to increased market share that resulted in a higher volume of mortgage originations for home purchases during the first half of 2011. Total dollar volume of mortgage loan originations increased 16.39% in the first half of 2011 compared to the six-month period ended June 30, 2010.

(ii) Investment advisory fees and commissions and securities brokerage fees and commissions. Through our wholly owned subsidiary, First Southwest, we provide public finance advisory and various investment banking and brokerage services. We generated $39.7 million and $45.5 million in investment advisory fees and commissions and securities brokerage fees and commissions during the six months ended June 30, 2011 and 2010, respectively.

In the aggregate, we generated $192.9 million and $177.6 million in noninterest income during the six months ended June 30, 2011 and 2010, respectively. The increase in noninterest income was primarily due to an increase in net gains on the sale of mortgage loans. The contribution of noninterest income to net revenues (net interest income plus noninterest income) was 68.77% during the six months ended June 30, 2011 versus 66.63% during the six months ended June 30, 2010.

39

We also incur noninterest expenses in the operation of our businesses. Our businesses engage in labor intensive activities and, consequently, employees’ compensation and benefits represent the majority of our noninterest expenses. Employees’ compensation and benefits were 62.67% and 62.33% of total noninterest expense for the six months ended June 30, 2011 and 2010, respectively.

Segment and Related Information

We have three reportable segments that are organized primarily by the core products offered to the segments’ respective customers. The banking segment includes the operations of the Bank. The operations of PrimeLending comprise the mortgage origination segment. The financial advisory segment is comprised of First Southwest and Hester Capital. The principal subsidiaries of First Southwest are FSC, a broker-dealer registered with the SEC and FINRA, and First Southwest Asset Management, Inc., a registered investment advisor under the Investment Advisors Act of 1940. Segment net revenue percentages reflect net revenue from external customers.

Our reportable segments also serve as reporting units for the purpose of testing our goodwill for impairment. We do not believe that our reporting units are currently at risk of failing the Step 1 impairment test prescribed in the Goodwill Subtopic of the FASB Accounting Standards Codification.

How We Generate Revenue and Net Income

We derive our revenue and net income primarily from the banking segment and the mortgage origination segment, while the remainder of our revenue and net income is generated from the financial advisory segment. The relative share of total revenue provided by our banking and mortgage origination segments fluctuates depending on market conditions, and operating results for the mortgage origination segment tend to be more volatile than operating results for the banking segment.

The banking segment provides primarily business banking and personal banking products and services and generated 35.61% and 39.75% of our net revenue for the six months ended June 30, 2011 and 2010, respectively. The banking segment generates revenue from earning assets, and its results of operations are primarily dependent on net interest income. The banking segment also derives revenue from other sources, primarily service charges on customer deposit accounts and trust fees.

The mortgage origination segment generated 47.56% and 41.41% of our net revenue for the six months ended June 30, 2011 and 2010, respectively. The mortgage origination segment offers a variety of loan products from offices in 34 states and generates revenue primarily from fees charged on the origination of loans and from selling these loans in the secondary market.

We generate the remainder of our net revenue from our financial advisory services. The financial advisory segment generated 16.83% and 18.84% of our net revenue for the six months ended June 30, 2011 and 2010, respectively. The majority of revenues in the financial advisory segment are generated from fees and commissions earned from investment advisory and securities brokerage services at First Southwest.

In recent years, PrimeLending has expanded into new markets through hiring individual, as well as groups of, mortgage bankers as opportunities arise. The hiring of these mortgage bankers has allowed PrimeLending to increase its share of the national market for mortgage loan originations, which has contributed to the increase in the net revenues of our mortgage origination segment relative to our other segments. Although we expect this trend to continue throughout at least the remainder of 2011, given the opportunistic nature of this growth, it may be discontinued at any time. Such increases in segment revenue may not result in corresponding increases in the percentage of our net income contributed by our mortgage origination segment.

40

Operating Results

Consolidated net income for the second quarter of 2011 was $15.4 million, or $0.42 per diluted share, compared to $14.7 million, or $0.40 per diluted share, for the second quarter of 2010. Consolidated net income for the six months ended June 30, 2011 was $23.0 million, or $0.60 per diluted share, compared to $16.3 million, or $0.40 per diluted share, for the six months ended June 30, 2010. The improvement in net income for both the three- and six-month periods is primarily due to a lower amount of provision for loan losses.

We consider the ratios shown in the table below to be key indicators of our performance:

	Six Months Ended June  30, 2011			Year Ended December 31, 2010			Six Months Ended June  30, 2010
Return on average shareholders’ equity		10.28	%		7.44	%		7.74	%
Return on average assets		0.87	%		0.65	%		0.69	%
Net interest margin (taxable equivalent)		3.60	%		3.95	%		4.11	%
Leverage ratio		9.21	%		8.96	%		9.41	%

The return on average shareholders’ equity ratio is calculated by dividing annualized net income by average shareholders’ equity for the period. The return on average assets ratio is calculated by dividing annualized net income by average total assets for the period. Net interest margin is calculated by dividing annualized net interest income (taxable equivalent) by average interest-earning assets. The leverage ratio is discussed in the “Liquidity and Capital Resources” section below.

The changes in our earnings during the periods described above are primarily attributable to the factors listed below (in thousands):

	Earnings Increase (Decrease)			Earnings Increase (Decrease)
	Three Months Ended June 30, 2011 v. 2010			Six Months Ended June 30, 2011 v. 2010
Net interest income	$	(1,117	)	$	(1,365	)
Provision for loan losses		3,007			19,462
Mortgage loan origination fees and net gains from sale of loans		5,800			20,024
Investment advisory and brokerage fees and commissions		(2,787	)		(5,839	)
Noninterest expense		(5,590	)		(21,871	)
All other (including tax effects)		1,466			(3,724	)
	$	779		$	6,687

41

Net Interest Income

The following table summarizes the components of net interest income (in thousands):

	Three Months Ended June 30,							Six Months Ended June 30,
					Variance							Variance
	2011		2010		2011 v. 2010			2011		2010		2011 v. 2010
Interest income
Loans, including fees	$	44,636	$	47,170	$	(2,534	)	$	86,840	$	91,794	$	(4,954	)
Securities		5,093		4,783		310			9,699		8,587		1,112
Securities - tax exempt		2,605		2,662		(57	)		4,992		5,113		(121	)
Federal funds sold and securities purchased under agreements to resell		660		11		649			1,752		20		1,732
Interest-bearing deposits with banks		193		140		53			507		383		124
Other securities		1,531		1,286		245			2,931		2,463		468
Total interest income		54,718		56,052		(1,334	)		106,721		108,360		(1,639	)
Interest expense
Deposits		7,496		7,324		172			15,024		14,468		556
Notes payable and other borrowings		2,037		2,426		(389	)		4,087		4,917		(830	)
Total interest expense		9,533		9,750		(217	)		19,111		19,385		(274	)
Net interest income	$	45,185	$	46,302	$	(1,117	)	$	87,610	$	88,975	$	(1,365	)

Net interest income decreased $1.1 million for the second quarter of 2011 and $1.4 million for the six months ended June 30, 2011 compared with the corresponding periods in 2010. The decrease in net interest income for both periods was primarily due to declines in yields on the banking segment’s loan portfolio and, to a lesser degree, lower average loan volumes. These factors are discussed further in the “Lines of Business” section later in this section.

Noninterest Income

Noninterest income was $107.6 million for the second quarter of 2011 compared to $102.2 million for the second quarter of 2010, an increase of $5.4 million. Noninterest income was $192.9 million for the six months ended June 30, 2011 compared to $177.6 million for the six months ended June 30, 2010, an increase of $15.3 million. The increase for both periods was primarily due to increased mortgage loan origination volume, which increased 7.83% during the second quarter of 2011 and 16.39% during the six months ended June 30, 2011 compared with the corresponding periods in 2010. The increased mortgage loan origination volume, which resulted from our continuing efforts to add staff and open mortgage banking offices at PrimeLending during 2010, led to higher net gains on the sale of mortgage loans compared with the first half of 2010.

Noninterest Expense

The following table summarizes noninterest expense for the periods indicated below (in thousands):

	Three Months Ended June 30,							Six Months Ended June 30,
					Variance							Variance
	2011		2010		2011 v. 2010			2011		2010		2011 v. 2010
Noninterest expense
Employees’ compensation and benefits	$	78,412	$	73,545	$	4,867		$	144,758	$	130,340	$	14,418
Occupancy and equipment, net		15,812		14,349		1,463			31,210		28,186		3,024
Professional services		6,592		7,257		(665	)		12,638		13,048		(410	)
Deposit insurance premium		1,234		1,475		(241	)		3,090		2,750		340
Repossession and foreclosure, net of recoveries		732		2,602		(1,870	)		2,612		4,054		(1,442	)
Other		19,148		17,112		2,036			36,663		30,722		5,941
Total noninterest expense	$	121,930	$	116,340	$	5,590		$	230,971	$	209,100	$	21,871

Noninterest expense increased $5.6 million for the second quarter of 2011 and $21.9 million for the six months ended June 30, 2011 compared with the corresponding periods in 2010. The largest components of these increases were employees’ compensation and benefits, other expenses, and occupancy and equipment expenses, net of rental income.

42

Employees’ compensation and benefits increased $4.9 million for the second quarter of 2011 and $14.4 million for the six months ended June 30, 2011 compared with the corresponding periods in 2010. The increase for both periods was primarily attributable to increased costs in the mortgage origination segment. PrimeLending continued adding staff in 2010. This increased staffing resulted in increased market share that led to a 7.83% increase in the dollar volume of mortgage loan originations during the second quarter of 2011 and 16.39% during the first half of 2011 compared with the corresponding periods in 2010. As a result, the mortgage origination segment incurred higher variable costs for commissions, as well as higher fixed costs for salaries and employee benefits.

Other expenses increased $2.0 million for the second quarter of 2011 and $5.9 million for the six months ended June 30, 2011 compared with the corresponding periods in 2010. The increase in both periods was primarily attributable to increased unreimbursed closing costs in the mortgage origination segment resulting from customers choosing a higher interest rate on their mortgage loans rather than paying origination and other required loan fees at closing.

Occupancy and equipment expenses, net of rental income, increased $1.5 million for the second quarter of 2011 and $3.0 million for the six months ended June 30, 2011 compared with the corresponding periods in 2010. The increase for both periods was primarily attributable to the continued opening of additional mortgage banking offices at PrimeLending.

Lines of Business

Banking Segment

The following table summarizes the results for the banking segment for the indicated periods (in thousands):

	Three Months Ended June 30,							Six Months Ended June 30,
					Variance							Variance
	2011		2010		2011 v. 2010			2011		2010		2011 v. 2010
Net interest income	$	43,242	$	45,077	$	(1,835	)	$	83,633	$	86,705	$	(3,072	)
Provision for loan losses		7,250		9,510		(2,260	)		13,750		32,465		(18,715	)
Noninterest income		8,985		8,770		215			16,331		19,383		(3,052	)
Noninterest expense		25,824		30,140		(4,316	)		54,459		55,773		(1,314	)
Income before taxes		19,153		14,197		4,956			31,755		17,850		13,905
Income tax provision		6,499		4,549		1,950			11,138		5,587		5,551
Net income	$	12,654	$	9,648	$	3,006		$	20,617	$	12,263	$	8,354

Net income was $12.6 million for the second quarter of 2011, an increase of $3.0 million compared to second quarter of 2010. Net income increased due to lower noninterest expenses and a decrease in the provision for loan losses, partially offset by a decrease in net revenue.

For the six months ended June 30, 2011, net income was $20.6 million, an increase of $8.3 million compared with the corresponding period in 2010. The increase was primarily due to a decrease in the provision for loan losses, partially offset by a decrease in net revenue.

Net interest income decreased $1.8 million for the second quarter of 2011 and $3.1 million for the six months ended June 30, 2011 compared with the corresponding periods in 2010. The decrease for both periods was due primarily to decreased interest income on the loan portfolio, resulting from lower yields on the loan portfolio and, to a lesser degree, lower average loan volumes compared to the corresponding periods in 2010.

Provision for loan losses decreased by $2.3 million for the second quarter of 2011 and $18.7 million for the six months ended June 30, 2011 compared with the corresponding periods in 2010. The decrease in the provision for loan losses for the six months ended June 30, 2011 was primarily a result of a decrease in loan charge-offs compared to the six months ended June 30, 2010.

Noninterest expense decreased $4.3 million for the second quarter of 2011 and $1.3 million for the six months ended June 30, 2011 compared with the corresponding periods in 2010. The decreases were primarily due to decreases in professional services, repossession and foreclosure, and other expenses.

43

The following table summarizes the changes in the banking segment’s net interest income for the periods indicated below, including the component changes in the volume of average interest-earning assets and interest-bearing liabilities and changes in the rates earned or paid on those items (in thousands):

	Three Months Ended June 30,									Six Months Ended June 30,
	2011 v. 2010									2011 v. 2010
	Change Due To(1)									Change Due To(1)
	Volume			Yield/Rate			Change			Volume			Yield/Rate			Change
Interest income
Loans	$	(277	)	$	(2,786	)	$	(3,063	)	$	(1,447	)	$	(4,747	)	$	(6,194	)
Investment securities(2)		925			(659	)		266			4,302			(3,429	)		873
Federal funds sold and securities purchased under agreements to resell		2			89			91			21			529			550
Interest-bearing deposits in other financial institutions		55			(8	)		47			193			(80	)		113
Other securities		(19	)		7			(12	)		(73	)		41			(32	)
Total interest income(2)		686			(3,357	)		(2,671	)		2,996			(7,686	)		(4,690	)
Interest expense
Deposits		328			(144	)		184			1,449			(869	)		580
Notes payable and other borrowings		(123	)		(822	)		(945	)		(522	)		(1,547	)		(2,069	)
Total interest expense		205			(966	)		(761	)		927			(2,416	)		(1,489	)
Net interest income(2)	$	481		$	(2,391	)	$	(1,910	)	$	2,069		$	(5,270	)	$	(3,201	)

(1) Changes attributable to both volume and yield/rate are included in yield/rate.

(2) Taxable equivalent.

Taxable equivalent net interest income decreased $1.9 million for the second quarter of 2011 compared with the corresponding period in 2010. Changes in the yields earned on interest-earning assets decreased taxable equivalent net interest income by $3.4 million, primarily due to lower yields on the loan portfolio. Yields on loans decreased due to significant pay downs on higher-yielding real estate and commercial loans during the second quarter of 2011. Changes in rates paid on interest-bearing liabilities increased taxable equivalent net interest income by $1.0 million, primarily due to a decrease in market interest rates on deposits during the second quarter of 2011 compared to prevailing market rates during the second quarter of 2010. Increases in the volume of interest-earning assets, primarily investment securities, increased taxable equivalent net interest income by $0.7 million, while increases in the volume of interest-bearing liabilities, primarily deposits, reduced taxable equivalent net interest income by $0.2 million.

Taxable equivalent net interest income decreased $3.2 million for the six months ended June 30, 2011 compared with the corresponding period in 2010. Changes in the yields earned on interest-earning assets decreased taxable equivalent net interest income by $7.7 million, primarily due to lower yields on the loan portfolio and the investment securities portfolio. Yields on loans decreased due to significant pay downs on higher-yielding real estate and commercial loans. Yields on investment securities were lower due to a number of factors, including reinvestment of proceeds from sales and principal repayments at lower market rates and higher premium amortization on mortgage-backed securities and collateralized mortgage obligations. Changes in rates paid on interest-bearing liabilities increased taxable equivalent net interest income by $2.4 million, primarily due to a decrease in market interest rates on deposits during the first half of 2011 compared to prevailing market rates during the first half of 2010. Increases in the volume of interest-earning assets, primarily investment securities, increased taxable equivalent net interest income by $3.0 million, while increases in the volume of interest-bearing liabilities, primarily deposits, reduced taxable equivalent net interest income by $0.9 million.

44

The tables below provide additional details regarding the banking segment’s net interest income (dollars in thousands):

	Three Months Ended June 30, 2011								Three Months Ended June 30, 2010
	Average Outstanding Balance			Interest Earned or Paid		Annualized Yield or Rate			Average Outstanding Balance			Interest Earned or Paid		Annualized Yield or Rate
Assets
Interest-earning assets
Loans, gross(1)	$	3,289,452		$	44,060		5.37	%	$	3,368,476		$	47,123		5.61	%
Investment securities - taxable		720,601			4,797		2.66	%		415,894			4,363		4.20	%
Investment securities - non-taxable(2)		241,374			3,518		5.83	%		212,289			3,686		6.95	%
Federal funds sold and securities purchased under agreements to resell		23,003			102		1.78	%		12,598			11		0.35	%
Interest-bearing deposits in other financial institutions		253,663			181		0.29	%		95,645			134		0.56	%
Other securities		13,544			142		4.19	%		26,962			154		2.28	%
Interest-earning assets, gross		4,541,637			52,800		4.66	%		4,131,864			55,471		5.38	%
Allowance for loan losses		(65,605	)							(51,078	)
Interest-earning assets, net		4,476,032								4,080,786
Noninterest-earning assets		479,533								453,174
Total assets	$	4,955,565							$	4,533,960
Liabilities and Shareholders’ Equity
Interest-bearing liabilities
Interest-bearing deposits	$	3,848,823			7,530		0.78	%	$	3,266,655			7,346		0.90	%
Notes payable and other borrowings		316,278			299		0.38	%		522,339			1,244		0.96	%
Total interest-bearing liabilities		4,165,101			7,829		0.75	%		3,788,994			8,590		0.91	%
Noninterest-bearing liabilities
Noninterest-bearing deposits		216,039								192,365
Other liabilities		36,024								28,532
Total liabilities		4,417,164								4,009,891
Shareholders’ equity		538,401								524,069
Total liabilities and shareholders’ equity	$	4,955,565							$	4,533,960
Net interest income(2)				$	44,971							$	46,881
Net interest spread(2)							3.91	%							4.47	%
Net interest margin(2)							3.97	%							4.55	%

(1) Average loans include non-accrual loans.

(2) Taxable equivalent adjustments are based on a 35% tax rate. The adjustment to interest income was $1.2 million for the second quarter of both 2011 and 2010.

45

	Six Months Ended June 30, 2011								Six Months Ended June 30, 2010
	Average Outstanding Balance			Interest Earned or Paid		Annualized Yield or Rate			Average Outstanding Balance			Interest Earned or Paid		Annualized Yield or Rate
Assets
Interest-earning assets
Loans, gross(1)	$	3,193,647		$	85,480		5.40	%	$	3,296,882		$	91,674		5.61	%
Investment securities - taxable		733,442			9,166		2.50	%		370,921			8,052		4.34	%
Investment securities - non-taxable(2)		237,184			6,777		5.71	%		214,733			7,018		6.54	%
Federal funds sold and securities purchased under agreements to resell		38,240			570		3.01	%		12,510			20		0.32	%
Interest-bearing deposits in other financial institutions		349,997			491		0.28	%		174,095			378		0.44	%
Other securities		14,234			286		4.02	%		26,413			318		2.41	%
Interest-earning assets, gross		4,566,744			102,770		4.54	%		4,095,554			107,460		5.29	%
Allowance for loan losses		(64,751	)							(51,427	)
Interest-earning assets, net		4,501,993								4,044,127
Noninterest-earning assets		471,085								460,887
Total assets	$	4,973,078							$	4,505,014
Liabilities and Shareholders’ Equity
Interest-bearing liabilities
Interest-bearing deposits	$	3,820,738			15,102		0.80	%	$	3,189,308			14,522		0.92	%
Notes payable and other borrowings		362,220			659		0.37	%		583,516			2,728		0.94	%
Total interest-bearing liabilities		4,182,958			15,761		0.76	%		3,772,824			17,250		0.92	%
Noninterest-bearing liabilities
Noninterest-bearing deposits		219,183								178,503
Other liabilities		35,164								29,940
Total liabilities		4,437,305								3,981,267
Shareholders’ equity		535,773								523,747
Total liabilities and shareholders’ equity	$	4,973,078							$	4,505,014
Net interest income(2)				$	87,009							$	90,210
Net interest spread(2)							3.78	%							4.37	%
Net interest margin(2)							3.84	%							4.44	%

(1) Average loans include non-accrual loans.

(2) Taxable equivalent adjustments are based on a 35% tax rate. The adjustment to interest income was $2.3 million for each of the six months ended June 30, 2011 and 2010.

The banking segment’s net interest margin shown above exceeds our consolidated net interest margin. Our consolidated net interest margin includes the yields and costs associated with certain items within interest-earning assets and interest-bearing liabilities in the financial advisory segment, as well as the borrowing costs of PlainsCapital at the holding company level, both of which reduce our consolidated net interest margin.

46

Mortgage Origination Segment

The following table summarizes the results for the mortgage origination segment for the indicated periods (in thousands):

	Three Months Ended June 30,									Six Months Ended June 30,
							Variance									Variance
	2011			2010			2011 v. 2010			2011			2010			2011 v. 2010
Net interest income (loss)	$	(3,770	)	$	(4,943	)	$	1,173		$	(7,305	)	$	(9,738	)	$	2,433
Provision for loan losses		(12	)		735			(747	)		(12	)		735			(747	)
Noninterest income		79,176			72,796			6,380			140,837			120,250			20,587
Noninterest expense		71,768			61,137			10,631			129,929			106,078			23,851
Income before taxes		3,650			5,981			(2,331	)		3,615			3,699			(84	)
Income tax provision		1,238			1,916			(678	)		1,268			1,158			110
Net income	$	2,412		$	4,065		$	(1,653	)	$	2,347		$	2,541		$	(194	)

Net income was $2.4 million for the second quarter of 2011 and $2.3 million for the six months ended June 30, 2011, a decrease of $1.7 million and $0.2 million, respectively, compared with the corresponding periods in 2010. The decrease for both periods was primarily due to increases in noninterest expense, partially offset by an increase in net revenue. Employees’ compensation and benefits and other expenses accounted for the majority of the increase in noninterest expense.

Net interest loss decreased $1.2 million for the second quarter of 2011 and $2.4 million for the six months ended June 30, 2011, respectively, compared with the corresponding periods in 2010. The decreases were primarily due to decreases in intercompany financing costs.

Noninterest income increased $6.4 million for the second quarter of 2011 and $20.6 million for the six months ended June 30, 2011 compared with the corresponding periods in 2010. Mortgage loan origination volume was $1.927 billion for the second quarter of 2011 compared to $1.787 billion for the second quarter of 2010, an increase of 7.83%. Mortgage loan origination volume was $3.423 billion for the six months ended June 30, 2011 compared to $2.941 billion for the six months ended June 30, 2010, an increase of 16.39%. The increase in loan origination volume resulted in increased noninterest income from gains on the sale of loans. Mortgage loan origination fees decreased $3.0 million during the second quarter of 2011 and $0.1 million during the six months ended June 30, 2011 compared with the corresponding periods in 2010.

During the second quarter of 2011, refinancings and home purchases accounted by dollar volume for 20.96% and 79.04%, respectively, of the total mortgage loan origination volume. For the six months ended June 30, 2011, refinancings and home purchases accounted by dollar volume for 25.87% and 74.13%, respectively, of the total mortgage loan origination volume.

Employees’ compensation and benefits increased $5.4 million for the second quarter of 2011 and $13.1 million for the six months ended June 30, 2011 compared with the corresponding periods in 2010. The increase was attributable to an increase in staffing levels, as well as higher commission costs due to higher loan origination volumes subject to commissions.

Other expenses increased $3.2 million for the second quarter of 2011 and $6.2 million for the six months ended June 30, 2011 compared with the corresponding periods in 2010, which was primarily due to increased funding fees and unreimbursed closing costs.

Our mortgage loan origination volume has grown in the first half of 2011 compared to the first half of 2010, but estimates of the national market for mortgage loan originations indicate that total national mortgage loan origination volume in 2011 will be below 2010 levels. Similarly, we do not expect our mortgage loan origination volume in 2011 to reach the levels we achieved in 2010, although we expect our share of the national market in 2011 to increase compared to our market share in 2010.

47

Financial Advisory Segment

The following table summarizes the results for the financial advisory segment for the indicated periods (in thousands):

	Three Months Ended June 30,							Six Months Ended June 30,
					Variance							Variance
	2011		2010		2011 v. 2010			2011		2010		2011 v. 2010
Net interest income	$	2,965	$	1,890	$	1,075		$	5,782	$	3,450	$	2,332
Noninterest income		22,279		25,051		(2,772	)		41,466		46,838		(5,372	)
Noninterest expense		24,491		25,221		(730	)		46,981		47,569		(588	)
Income before taxes		753		1,720		(967	)		267		2,719		(2,452	)
Income tax provision		255		551		(296	)		94		851		(757	)
Net income	$	498	$	1,169	$	(671	)	$	173	$	1,868	$	(1,695	)

Net income was $0.5 million for the second quarter of 2011 and $0.2 million for the six months ended June 30, 2011, a decrease of $0.7 million and $1.7 million, respectively, compared with the corresponding periods in 2010. The decrease was due primarily to decreases in noninterest income, partially offset by an increase in net interest income.

Net interest income increased $1.1 million for the second quarter of 2011 and $2.3 million for the six months ended June 30, 2011 compared with the corresponding periods in 2010. The increase resulted from higher customer margin loan balances and from an increased level of securities used to support sales, underwriting, and other customer activities during the first half of 2011.

The majority of noninterest income is generated from fees and commissions earned from investment advisory and securities brokerage activities, which decreased $2.8 million for the second quarter of 2011 and $5.9 million for the six months ended June 30, 2011 compared with the corresponding periods in 2010. The decrease was attributable to a significant slowing of activity in the public finance market that resulted in lower public finance advisory revenues. This slowing of activity is industry-wide and results from factors such as volatile interest rates, reduced property tax bases, budget pressures on certain tax-exempt issuers caused by uncertain economic times and other factors.

Noninterest expense decreased $0.7 million for the second quarter of 2011 and $0.6 million for the six months ended June 30, 2011 compared with the corresponding periods in 2010. Employees’ compensation and benefits accounted for the majority of the decrease in noninterest expense primarily due to decreases in compensation costs that vary with noninterest income, which declined for both periods.

48

Financial Condition

The following discussion contains a more detailed analysis of our financial condition at June 30, 2011 and as compared to December 31, 2010.

Securities Portfolio

The securities portfolio plays a role in the management of our interest rate sensitivity and generates additional interest income. In addition, the securities portfolio is used to meet collateral requirements for public and trust deposits, federal funds purchased and securities sold under agreements to repurchase and other purposes. The available for sale securities portfolio serves as a source of liquidity. Historically, our policy has been to invest primarily in securities of the U.S. government and its agencies, obligations of municipalities in the State of Texas and other high grade fixed income securities to minimize credit risk. In connection with our acquisition of First Southwest, we purchased a portfolio of auction rate bonds for which an active market does not currently exist.

The securities portfolio consists of three major components: securities held to maturity, securities available for sale and trading securities. Securities are classified as held to maturity based on the intent and ability of our management, at the time of purchase, to hold such securities to maturity. These securities are carried at amortized cost. Securities that may be sold in response to changes in market interest rates, changes in securities’ prepayment risk, increases in loan demand, general liquidity needs and other similar factors are classified as available for sale and are carried at estimated fair value, with holding gains and losses recorded in accumulated other comprehensive income. Trading securities are carried at fair market value, marked to market through operations and held at First Southwest, which as a broker-dealer is required to carry its securities at fair value. These trading securities are used to support sales, underwriting and other customer activities. The table below summarizes our securities portfolio (in thousands):

	June 30,		December 31,
	2011		2010
Securities held to maturity, at amortized cost
U.S. government agencies
Mortgage-backed securities	$	7,666	$	10,369
Collateralized mortgage obligations		19,729		28,169
States and political subdivisions		120,501		120,348
Auction rate bonds		45,549		74,027
		193,445		232,913
Securities available for sale, at fair value
U.S. government agencies
Bonds		109,910		29,959
Mortgage-backed securities		34,866		18,844
Collateralized mortgage obligations		495,780		507,769
States and political subdivisions		64,348		34,210
Auction rate bonds		46,413		22,454
		751,317		613,236
Trading securities, at fair value		24,836		18,931
Total securities portfolio	$	969,598	$	865,080

We had a net unrealized loss of $2.8 million related to the available for sale investment portfolio at June 30, 2011, compared to a net unrealized loss of $1.3 million at December 31, 2010. Net unrealized loss at June 30, 2011, included $5.2 million related to certain auction rate bonds transferred from held to maturity to available for sale during the first half of 2011 due to a downgrade in the credit rating of the auction rate bonds from investment grade to below investment grade.

49

The market value of securities held to maturity at June 30, 2011 was $5.5 million above book value. At December 31, 2010, the market value of held to maturity securities was $4.2 million below book value.

We hold auction rate bonds issued by Access to Loans for Learning Student Loan Corporation that exceed 10% of our shareholders’ equity. The aggregate book value and aggregate estimated market value of these auction rate bonds at June 30, 2011, was $97.1 million and $92.9 million, respectively.

Loan Portfolio

Consolidated loans held for investment are detailed in the table below (in thousands) and classified by type:

	June 30,			December 31,
	2011			2010
Commercial and industrial
Commercial	$	1,341,627		$	1,299,654
Lease financing		38,444			50,216
Securities (including margin loans)		232,421			289,351
Real estate		1,157,639			1,112,402
Construction and land development		316,831			343,920
Consumer		39,366			42,627
Loans, gross		3,126,328			3,138,170
Allowance for loan losses		(68,308	)		(65,169	)
Loans, net	$	3,058,020		$	3,073,001

Banking Segment

The loan portfolio constitutes the major earning asset of the banking segment and typically offers the best alternative for obtaining the maximum interest spread above the banking segment’s cost of funds. The overall economic strength of the banking segment generally parallels the quality and yield of its loan portfolio. The banking segment’s total loans, net of the allowance for loan losses, were $3.4 billion and $3.3 billion as of June 30, 2011 and December 31, 2010, respectively. The banking segment’s loan portfolio includes warehouse lines of credit extended to PrimeLending and First Southwest that aggregated $0.6 billion and $0.5 billion at June 30, 2011 and December 31, 2010, respectively, and are eliminated from net loans on our consolidated balance sheet.

The banking segment does not generally participate in syndicated loan transactions and has no foreign loans in its portfolio. At June 30, 2011, the banking segment had loan concentrations (loans to borrowers engaged in similar activities) that exceeded 10% of total loans in its real estate loan portfolio. The areas of concentration within our real estate portfolio were construction and land development loans and non-construction commercial real estate loans. At June 30, 2011, construction and land development loans were 10% of total loans, while non-construction commercial real estate loans were 27% of total loans. The banking segment’s loan concentrations were within regulatory guidelines as of June 30, 2011.

Mortgage Origination Segment

The loan portfolio of the mortgage origination segment consists of loans held for sale, primarily single-family residential mortgages funded through PrimeLending, and pipeline loans, which are loans in various stages of the application process, but not yet closed and funded. Pipeline loans may not close if potential borrowers elect in their sole discretion not to proceed with the loan application. Total loans held for sale were $597.8 million and $476.4 million as of June 30, 2011 and December 31, 2010, respectively.

50

The components of the mortgage origination segment’s loans held for sale and pipeline loans are shown in the following table (in thousands):

	June 30,		December 31,
	2011		2010
Loans held for sale
Unpaid principal balance	$	583,362	$	465,342
Fair value adjustment		14,422		11,100
	$	597,784	$	476,442
Pipeline loans
Unpaid principal balance	$	616,537	$	442,270
Fair value adjustment		3,836		274
	$	620,373	$	442,544

Financial Advisory Segment

The loan portfolio of the financial advisory segment consists primarily of margin loans to customers and correspondents. These loans are collateralized by the securities purchased or by other securities owned by the clients and, because of collateral coverage ratios, are believed to present minimal collectability exposure. Additionally, these loans are subject to a number of regulatory requirements as well as First Southwest’s internal policies. The financial advisory segment’s total loans, net of the allowance for loan losses, were $230.0 million and $286.7 million as of June 30, 2011 and December 31, 2010, respectively. The decrease was primarily attributable to decreased borrowings in margin accounts held by First Southwest customers and correspondents.

Allowance for Loan Losses

The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management’s best estimate of probable losses inherent in the existing portfolio of loans held for investment. Our management has responsibility for determining the level of the allowance for loan losses, subject to review by the Audit Committee of our Board of Directors and the Directors’ Loan Review Committee of the Bank’s Board of Directors.

It is our management’s responsibility at the end of each quarter, or more frequently as deemed necessary, to analyze the level of the allowance for loan losses to ensure that it is appropriate for the estimated credit losses in the portfolio consistent with the Interagency Policy Statement on the Allowance for Loan and Lease Losses and the Receivables and Contingencies Topics of the ASC. Estimated credit losses are the probable current amount of loans that we will be unable to collect given facts and circumstances as of the evaluation date. When management determines that a loan, or portion thereof, is uncollectible, the loan, or portion thereof, is charged off against the allowance for loan losses. Any subsequent recovery of charged-off loans is added back to the allowance for loan losses.

51

We have developed a methodology that seeks to determine an allowance within the scope of the Receivables and Contingencies Topics of the ASC. Each of the loans that has been determined to be impaired is within the scope of the Receivables Topic and is individually evaluated for impairment using one of three impairment measurement methods as of the evaluation date: (1) the present value of expected future discounted cash flows on the loan, (2) the loan’s observable market price, or (3) the fair value of the collateral if the loan is collateral dependent. When loans are determined to be impaired, specific reserves are provided in our estimate of the allowance, as appropriate. All non-impaired loans are within the scope of the Contingencies Topic. Estimates of loss for the Contingencies Topic are calculated based on historical loss experience by loan portfolio segment adjusted for changes in trends, conditions, and other relevant factors that affect repayment of loans as of the evaluation date. While historical loss experience provides a reasonable starting point for the analysis, historical losses, or recent trends in losses, are not the sole basis upon which to determine the appropriate level for the allowance for loan losses. Management considers recent qualitative or environmental factors that are likely to cause estimated credit losses associated with the existing portfolio to differ from historical loss experience, including but not limited to: changes in lending policies and procedures; changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses; changes in international, national, regional, and local economic and business conditions and developments that affect the collectability of the portfolio; the condition of various market segments; changes in the nature and volume of the portfolio and in the terms of loans; changes in the experience, ability, and depth of lending management and other relevant staff; changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans; changes in the quality of the institution’s loan review system; changes in the value of underlying collateral for collateral-dependent loans; and the existence and effect of any concentrations of credit, and changes in the level of such concentrations.

We design our loan review program to identify and monitor problem loans by maintaining a credit grading process, ensuring that timely and appropriate changes are made to the loans with assigned risk grades and coordinating the delivery of the information necessary to assess the appropriateness of the allowance for loan losses. Loans are evaluated for impairment when: (i) payments on the loan are delayed, typically by 90 days or more (unless in the process of collection), (ii) the loan becomes classified, (iii) the loan is being reviewed in the normal course of the loan review scope, or (iv) the loan is identified by the servicing officer as a problem. We review all loan relationships that exhibit probable or observed credit weaknesses, the top 25 loan relationships by dollar amount in each market we serve, and additional relationships necessary to achieve adequate coverage of our various lending markets.

Homogenous loans, such as consumer installment loans, residential mortgage loans and home equity loans, are not individually reviewed and are generally risk graded at the same levels. The risk grade and reserves are established for each homogenous pool of loans based on the expected net charge-offs from current trends in delinquencies, losses or historical experience and general economic conditions. As of June 30, 2011, we had no material delinquencies in these types of loans.

The allowance is subject to regulatory examinations and determinations as to appropriateness, which may take into account such factors as the methodology used to calculate the allowance and the size of the allowance in comparison to peer banks identified by regulatory agencies. While we believe we have an appropriate allowance for our existing portfolio as of June 30, 2011, additional provisions for losses on existing loans may be necessary in the future. We recorded net charge-offs in the amount of $4.9 million for the second quarter of 2011 compared to $3.8 million for the second quarter of 2010. For the six months ended June 30, 2011 and 2010, net charge-offs were $10.6 million and $28.9 million, respectively. Our allowance for loan losses totaled $68.3 million at June 30, 2011 and $65.2 million at December 31, 2010. The ratio of the allowance for loan losses to total loans held for investment at June 30, 2011 and December 31, 2010 was 2.18% and 2.08%, respectively.

Provisions for loan losses are charged to operations to record the total allowance for loan losses at a level deemed appropriate by the banking segment’s management based on such factors as the volume and type of lending it conducted, the amount of non-performing loans and related collateral security, the present level of the allowance for loan losses, the results of recent regulatory examinations, generally accepted accounting principles, general economic conditions and other factors related to the ability to collect loans in its portfolio.

The provision for loan losses, primarily in the banking segment, was $13.7 million for the six months ended June 30, 2011, a decrease of $19.5 million compared to the six months ended June 30, 2010. The decrease was primarily a result of a decrease in net charge-offs of $18.3 million during the first half of 2011 compared to the first half of 2010.

52

The following table presents the activity in our allowance for loan losses for the dates indicated (dollars in thousands). Substantially all of the activity shown below occurred within the banking segment:

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Balance at beginning of period	$	65,940		$	49,971		$	65,169		$	52,092
Provisions charged to operating expenses		7,238			10,245			13,738			33,200
Recoveries of loans previously charged off
Commercial and industrial		195			(49	)		401			115
Real estate		23			0			172			2
Construction and land development		159			9			164			15
Consumer		44			254			61			353
Total recoveries		421			214			798			485
Loans charged off
Commercial and industrial		3,675			3,032			7,730			20,323
Real estate		358			0			775			7,698
Construction and land development		1,241			370			2,812			566
Consumer		17			653			80			815
Total charge-offs		5,291			4,055			11,397			29,402
Net charge-offs		(4,870	)		(3,841	)		(10,599	)		(28,917	)
Balance at end of period	$	68,308		$	56,375		$	68,308		$	56,375
Net charge-offs to average loans outstanding		0.64	%		0.51	%		0.71	%		1.93	%

The distribution of the allowance for loan losses among loan types and the percentage of the loans for that type to gross loans, excluding unearned income, are presented in the table below (dollars in thousands). Amounts shown in “Unallocated” include the portion of the allowance that is attributable to factors that cannot be distributed by type. Those factors include credit concentrations, trends in loan growth, and various other market, economic and regulatory considerations. We expect that the unallocated portion of the allowance will remain relatively small in future periods as we continue to refine our methodology for the distribution of the allowance.

	June 30,					December 31,
	2011					2010
			% of					% of
			Gross					Gross
	Reserve		Loans			Reserve		Loans
Commercial and industrial	$	42,162		51.58	%	$	41,687		48.66	%
Real estate (including construction and land development)		25,710		47.16	%		22,959		49.74	%
Consumer		425		1.26	%		523		1.60	%
Unallocated		11					0
Total	$	68,308		100.00	%	$	65,169		100.00	%

Potential Problem Loans

Potential problem loans consist of loans that are performing in accordance with contractual terms but for which management has concerns about the ability of an obligor to continue to comply with repayment terms because of the obligor’s potential operating or financial difficulties. Management monitors these loans and reviews their performance on a regular basis. As of June 30, 2011, we had 20 credit relationships totaling $36.2 million of potential problem loans.

53

Non-Performing Assets

The following table presents our components of non-performing assets at the dates indicated (dollars in thousands):

	June 30,			December 31,			June 30,
	2011			2010			2010
Loans accounted for on a non-accrual basis
Commercial and industrial	$	11,168		$	12,259		$	39,030
Lease financing		1,937			6,027			6,201
Real estate		16,173			8,035			17,537
Construction and land development		54,728			57,622			9,515
Consumer		24			28			0
	$	84,030		$	83,971		$	72,283
Non-performing loans as a percentage of total loans		2.26	%		2.32	%		1.95	%
Other Real Estate Owned	$	19,678		$	23,968		$	16,822
Other repossessed assets	$	9,934		$	6,365		$	1,876
Non-performing assets	$	113,642		$	114,304		$	90,981
Non-performing assets as a percentage of total assets		2.16	%		2.15	%		1.85	%
Loans past due 90 days or more and still accruing	$	0		$	466		$	1,381
Troubled debt restructurings included in accruing loans	$	14,266		$	28,160		$	25,917

At June 30, 2011, total non-performing assets decreased $0.7 million to $113.6 million compared to $114.3 million at December 31, 2010, primarily due to a decrease in Other Real Estate Owned, partially offset by the increase in other repossessed assets. Non-accrual loans were $84.0 million at both June 30, 2011 and December 31, 2010. Of these non-accrual loans, $11.2 million were characterized as commercial and industrial loans as of June 30, 2011, a decrease of $1.1 million compared to December 31, 2010. The commercial and industrial loans included five loan relationships in a variety of industries with an aggregate balance of approximately $8.9 million and secured by accounts receivable and inventory and equipment.

Non-accrual loans also included $16.2 million characterized as real estate loans at June 30, 2011, including four commercial real estate loan relationships totaling approximately $12.5 million and secured by occupied single family residential property, occupied commercial real estate and occupied industrial property.

Non-accrual loans at June 30, 2011 also included $54.7 million characterized as construction and land development loans. Two loan relationships account for approximately $41.4 million of the non-performing construction and land development loans. Collateral securing the loans includes residential land developments and unimproved land.

Loans restructured in troubled debt restructurings bearing market rates of interest at the time of restructuring and performing in compliance with their modified terms are considered impaired in the calendar year of the restructuring. At June 30, 2011, troubled debt restructurings totaled $68.1 million, of which $14.3 million were included in accruing loans and $53.8 million were reported in non-accrual loans.

54

Other Real Estate Owned decreased $4.3 million to $19.7 million at June 30, 2011 compared to $24.0 million at December 31, 2010. The decrease was primarily due to the lower level of foreclosed properties compared to December 31, 2010. At June 30, 2011, Other Real Estate Owned included $15.8 million of commercial real estate property consisting of single family residences under development and $3.9 million of residential lots at various levels of completion.

Additional interest income that would have been recorded if the non-accrual loans had been current during the six months ended June 30, 2011 totaled $1.8 million and $2.9 million during the six months ended June 30, 2010.

Borrowings

Our borrowings as of June 30, 2011 and December 31, 2010 are shown in the table below (in thousands):

	June 30,		December 31,		Variance
	2011		2010		2011 v. 2010
Short-term borrowings	$	454,777	$	582,134	$	(127,357	)
Notes payable		62,099		63,776		(1,677	)
Junior subordinated debentures		67,012		67,012		0
Capital lease obligations		11,464		11,693		(229	)
	$	595,352	$	724,615	$	(129,263	)

Short-term borrowings consist of federal funds purchased, securities sold under agreements to repurchase, borrowings from the FHLB and short-term bank loans. The $129.3 million decrease in short-term borrowings at June 30, 2011 compared to December 31, 2010 was due primarily to decreases in borrowings of $82.2 million under repurchase agreements.

Notes payable is comprised of borrowings under term notes and a revolving line of credit with JPMorgan Chase and nonrecourse notes owed by First Southwest. In July 2011, the loan agreements between PlainsCapital and JPMorgan Chase governing PlainsCapital’s existing line of credit and term notes were amended (“July 2011 Amendments”). The July 2011 Amendments converted PlainsCapital’s $17.7 million revolving line of credit to a term note, extended the maturity of PlainsCapital’s remaining line of credit and term notes expiring July 31, 2011 to July 31, 2012 and, where applicable, decreased the acceptable non-performing asset ratio for the Bank from 4.50% to 4.00%, effective beginning September 30, 2011. As of June 30, 2011, our revolving line of credit with JPMorgan Chase had an outstanding principal balance of $5.0 million and was fully advanced. As of June 30, 2011, the Bank’s non-performing asset ratio, as defined, was 3.17%.

Liquidity and Capital Resources

Liquidity refers to the measure of our ability to meet our customers’ short-term and long-term deposit withdrawals and anticipated and unanticipated increases in loan demand without penalizing earnings. Interest rate sensitivity involves the relationships between rate-sensitive assets and liabilities and is an indication of the probable effects of interest rate fluctuations on our net interest income. We discuss our management of interest rate and other risks in Item 3, “Quantitative and Qualitative Disclosures about Market Risk,” below.

Our asset and liability group is responsible for continuously monitoring our liquidity position to ensure that assets and liabilities are managed in a manner that will meet our short-term and long-term cash requirements. Funds invested in short-term marketable instruments, the continuous maturing of other interest-earning assets, cash flows from self-liquidating investments such as mortgage-backed securities and collateralized mortgage obligations, the possible sale of available for sale securities, and the ability to securitize certain types of loans provide sources of liquidity from an asset perspective. The liability base provides sources of liquidity through deposits and the maturity structure of short-term borrowed funds. For short-term liquidity needs, we utilize federal fund lines of credit with correspondent banks, securities sold under agreements to repurchase, borrowings from the Federal Reserve and borrowings under lines of credit with other financial institutions. For intermediate liquidity needs, we utilize advances from the FHLB. To supply liquidity over the longer term, we have access to brokered certificates of deposit, term loans at the FHLB and borrowings under lines of credit with other financial institutions.

55

On December 19, 2008, we sold approximately $87.6 million of Series A and Series B Preferred Stock to the U.S. Treasury pursuant to the TARP Capital Purchase Program. The shares of Series B Preferred Stock were issued to the U.S. Treasury upon the exercise of a warrant issued in conjunction with the Series A Preferred Stock. The Series A and Series B Preferred Stock are senior to shares of our Original Common Stock with respect to dividends and liquidation preference. The aggregate liquidation preference of the Series A and Series B Preferred Stock is $92.0 million. 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 14, 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 shareholders (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 will be required to, among other things, increase the per share 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 (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 is redeemed in whole or the U.S. Treasury 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 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. We have paid all required dividends on Series A and Series B Preferred Stock.

We are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements may prompt certain actions by regulators that, if undertaken, could have a direct material adverse effect on our financial condition and results of operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

At June 30, 2011, we exceeded all regulatory capital requirements and were considered to be “well-capitalized” with a total capital to risk weighted assets ratio of 14.11%, Tier 1 capital to risk weighted assets ratio of 12.44% and a Tier 1 capital to average assets, or leverage, ratio of 9.21%. At June 30, 2011, the Bank was also considered to be “well-capitalized.” We discuss regulatory capital requirements in more detail in Note 11 to our unaudited consolidated interim financial statements.

Cash and cash equivalents (consisting of cash and due from banks and federal funds sold), totaled $146.9 million at June 30, 2011, an increase of $37.8 million from $109.1 million at June 30, 2010. Deposit flows, calls of investment securities and borrowed funds, and prepayments of loans and mortgage-backed securities are strongly influenced by interest rates, general and local economic conditions and competition in the marketplace. These factors reduce the predictability of the timing of these sources of funds.

Cash used in operations during the first half of 2011 was $52.8 million, a decrease in cash used of $255.0 million compared with the first half of 2010. Cash used by operations decreased primarily due to a decrease in the net cash used in our mortgage origination segment’s operations.

We use cash primarily to originate loans and purchase securities for our investment portfolio. During the first half of 2011, our loan portfolio increased marginally and the amount of cash generated by lending activities decreased by $25.0 million from $20.2 million for the first half of 2010. On the other hand, our investment securities portfolio grew by $104.5 million during the first half of 2011. Cash used in our investment activities included net purchases of securities for our investment portfolio during the first half of 2011, which were $105.7 million compared to net purchases of $102.8 million during the first half of 2010. The increase in net purchases of securities during the first half of 2011 resulted from the purchase of both municipal securities and collateralized mortgage obligations to take advantage of attractive yields and provide collateral to pledge as security for public and trust deposits and, with respect to collateralized mortgage obligations, repurchase agreements. We sold approximately $76.2 million and $92.3 million of available for sale securities during the first half of 2011 and 2010, respectively.

56

Cash used by financing activities during the first half of 2011 was $90.6 million, an increase in cash used of $429.8 million compared with the first half of 2010, when our financing activities provided, rather than used, cash. The increase in cash used was due primarily to a slower net increase in deposits during the first half of 2011 compared to the net increase in deposits during the first half of 2010. During 2010, cash held by individuals and businesses in bank deposits increased in response to an uncertain economic outlook.

We had deposits of $4.0 billion at June 30, 2011, an increase of $44.2 million from $3.9 billion at December 31, 2010. Deposit flows are affected by the level of market interest rates, the interest rates and products offered by competitors, the volatility of equity markets and other factors. Within the deposits portfolio, money market deposits, noninterest-bearing demand deposits, and savings increased by $230.8 million, $32.2 million and $31.5 million, respectively. This was partially offset by decreases in brokered deposits and time deposits over $100,000, which decreased $189.0 million and $39.3 million, respectively.

Our 15 largest depositors, excluding our indirect wholly owned subsidiary, First Southwest, accounted for approximately 20.20% of our total deposits, and our five largest depositors, excluding First Southwest, accounted for approximately 11.17% of our total deposits at June 30, 2011. The loss of one or more of our largest customers, or a significant decline in the deposit balances due to ordinary course fluctuations related to these customers’ businesses, would adversely affect our liquidity and could require us to raise deposit rates to attract new deposits, purchase federal funds or borrow funds on a short-term basis to replace such deposits. We have not experienced any liquidity issues to date with respect to brokered deposits or our other large balance deposits, and we believe alternative sources of funding are available to more than compensate for the loss of one or more of these customers.

PrimeLending funds the mortgage loans it originates through a warehouse line of credit of up to $600.0 million maintained with the Bank. At June 30, 2011, PrimeLending had outstanding borrowings of $565.1 million against the warehouse line of credit. 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.

FSC relies on its equity capital, short-term bank borrowings, interest-bearing and non-interest-bearing client credit balances, correspondent deposits, securities lending arrangements, repurchase agreement financings and other payables to finance its assets and operations. FSC has credit arrangements with unrelated commercial banks of up to $140.0 million, which are used to finance securities owned, securities held for correspondent accounts and receivables in customer margin accounts. These credit arrangements are provided on an “as offered” basis and are not committed lines of credit. At June 30, 2011, FSC had borrowed approximately $2.5 million under these credit arrangements.

Off-Balance Sheet Arrangements; Commitments; Guarantees

In the normal course of business, we enter into various transactions, which, in accordance with accounting principles generally accepted in the United States, are not included in our consolidated balance sheets. We enter into these transactions to meet the financing needs of our customers. These transactions include commitments to extend credit and standby letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in our consolidated balance sheets.

We enter into contractual loan commitments to extend credit, normally with fixed expiration dates or termination clauses, at specified rates and for specific purposes. Substantially all of our commitments to extend credit are contingent upon customers maintaining specific credit standards until the time of loan funding. We minimize our exposure to loss under these commitments by subjecting them to credit approval and monitoring procedures. We assess the credit risk associated with certain commitments to extend credit in determining the level of the allowance for possible loan losses.

Standby letters of credit are written conditional commitments issued by us to guarantee the performance of a customer to a third party. In the event the customer does not perform in accordance with the terms of the agreement with the third party, we would be required to fund the commitment. The maximum potential amount of future payments we could be required to make is represented by the contractual amount of the commitment. If the commitment is funded, we would be entitled to seek recovery from the customer. Our policies generally require that standby letter of credit arrangements contain security and debt covenants similar to those contained in loan agreements.

57

In the normal course of business, FSC executes, settles and finances various securities transactions that may expose FSC to off-balance sheet risk in the event that a customer or counterparty does not fulfill its contractual obligations. Examples of such transactions include the sale of securities not yet purchased by customers or for the account of FSC, clearing agreements between FSC and various clearinghouses and broker-dealers, secured financing arrangements that involve pledged securities, and when-issued underwriting and purchase commitments.

Critical Accounting Policies and Estimates

Our accounting policies are integral to understanding the results reported. Our accounting policies are described in detail in Note 1 to our consolidated financial statements for the year ended December 31, 2010, which are included in our Annual Report. You are encouraged to read in its entirety Note 1 to our consolidated financial statements for the year ended December 31, 2010 for additional insight into management’s approach and methodology in estimating the allowance for loan losses. We believe that of our significant accounting policies, the allowance for loan losses may involve a higher degree of judgment and complexity.

The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio. Loans are charged to the allowance when the loss is confirmed or when a determination is made that a probable loss has occurred on a specific loan. Recoveries are credited to the allowance at the time of recovery. Throughout the year, management estimates the probable level of losses to determine whether the allowance for credit losses is appropriate to absorb losses in the existing portfolio. Based on these estimates, an amount is charged to the provision for loan losses and credited to the allowance for loan losses in order to adjust the allowance to a level determined to be appropriate to absorb losses. Management’s judgment regarding the appropriateness of the allowance for loan losses involves the consideration of current economic conditions and their estimated effects on specific borrowers; an evaluation of the existing relationships among loans, potential loan losses and the present level of the allowance; results of examinations of the loan portfolio by regulatory agencies; and management’s internal review of the loan portfolio. In determining the ability to collect certain loans, management also considers the fair value of any underlying collateral. The amount ultimately realized may differ from the carrying value of these assets because of economic, operating or other conditions beyond our control. For a complete discussion of allowance for loan losses and provisions for loan losses, see the section entitled “Allowance for Loan Losses” earlier in this Item 2.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Some of the information below contains forward-looking statements. The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks. The disclosure is not meant to be a precise indicator of expected future losses, but rather an indicator of reasonably possible losses, and therefore our actual results may differ from any of the following projections. This forward-looking information provides an indicator of how we view and manage our ongoing market risk exposures. See the discussion under the caption “Forward-Looking Statements” in Item 2, above.

We are engaged primarily in the business of investing funds obtained from deposits and borrowings in interest-earning loans and investments, and our primary component of market risk is interest rate risk volatility. Consequently, our earnings depend to a significant extent on our net interest income, which is the difference between interest income on loans and investments and our interest expense on deposits and borrowing. To the extent that our interest-bearing liabilities do not reprice or mature at the same time as our interest-bearing assets, we are subject to interest rate risk and corresponding fluctuations in net interest income.

Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The magnitude of the change in earnings and market value of equity resulting from interest rate changes is impacted by the time remaining to maturity on fixed-rate obligations, the contractual ability to adjust rates prior to maturity, competition, the general level of interest rates and customer actions. Our objective is to measure the effect of interest rate changes on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income.

There are several common sources of interest rate risk that must be effectively managed if there is to be minimal impact on our earnings and capital. Repricing risk arises largely from timing differences in the pricing of assets and liabilities. Reinvestment risk refers to the reinvestment of cash flows from interest payments and maturing assets at lower or higher rates. Basis risk exists when different yield curves or pricing indices do not change at precisely the same time or in the same magnitude such that assets and liabilities with the same maturity are not all affected equally. Yield curve risk refers to unequal movements in interest rates across a full range of maturities.

58

We have employed asset/liability management policies that attempt to manage our interest-earning assets and interest-bearing liabilities, thereby attempting to control the volatility of net interest income, without having to incur unacceptable levels of credit or investment risk. We manage our exposure to interest rates by structuring our balance sheet in the ordinary course of business. In addition, the asset/liability management policies permit the use of various derivative instruments to manage interest rate risk or hedge specified assets and liabilities. We manage our interest rate sensitivity position consistent with our established asset/liability management policies.

An interest rate sensitive asset or liability is one that, within a defined time period, either matures or experiences an interest rate change in line with general market interest rates. The management of interest rate risk is performed by analyzing the maturity and repricing relationships between interest-earning assets and interest-bearing liabilities at specific points in time (“GAP”) and by analyzing the effects of interest rate changes on net interest income over specific periods of time by projecting the performance of the mix of assets and liabilities in varied interest rate environments. Interest rate sensitivity reflects the potential effect on net interest income resulting from a movement in interest rates. A company is considered to be asset sensitive, or have a positive GAP, when the amount of its interest-earning assets maturing or repricing within a given period exceeds the amount of its interest-bearing liabilities also maturing or repricing within that time period. Conversely, a company is considered to be liability sensitive, or have a negative GAP, when the amount of its interest-bearing liabilities maturing or repricing within a given period exceeds the amount of its interest-earning assets also maturing or repricing within that time period. During a period of rising interest rates, a negative GAP would tend to affect net interest income adversely, while a positive GAP would tend to result in an increase in net interest income. During a period of falling interest rates, a negative GAP would tend to result in an increase in net interest income, while a positive GAP would tend to affect net interest income adversely. However, it is our intent to achieve a proper balance so that incorrect rate forecasts should not have a significant impact on earnings.

Interest rate sensitivity analysis presents the amount of assets and liabilities that are estimated to reprice through specified periods. The interest rate sensitivity analysis in the table below reflects changes in banking segment earnings and costs resulting from changes in assets and liabilities on June 30, 2011 that will either be repriced in accordance with market rates, mature or are estimated to mature early within the periods indicated. This is a one-day position that is continually changing and is not necessarily indicative of our position at any other time.

As illustrated in the table below, the banking segment is asset sensitive overall. Loans that adjust daily or monthly to the Wall Street Journal Prime rate comprise a large percentage of interest sensitive assets and are the primary cause of the banking segment’s asset sensitivity. To help neutralize interest rate sensitivity, the banking segment has kept the terms of most of its borrowings under one year. It also attempts to match longer term assets with certificates of deposit with terms of three to five years (dollars in thousands):

	June 30, 2011
	3 Months or			> 3 Months to			> 1 Year to			> 3 Years to
	Less			1 Year			3 Years			5 Years			> 5 Years			Total
Interest sensitive assets:
Loans	$	2,497,261		$	360,723		$	365,270		$	75,206		$	193,593		$	3,492,053
Securities		136,682			225,898			204,958			33,503			343,721			944,762
Federal funds sold and securities purchased under agreements to resell		18,964			5,484			0			0			0			24,448
Other interest sensitive assets		54,574			0			0			0			0			54,574
Total interest sensitive assets		2,707,481			592,105			570,228			108,709			537,314			4,515,837
Interest sensitive liabilities:
Interest bearing checking	$	1,489,693		$	0		$	0		$	0		$	0		$	1,489,693
Savings		198,938			0			0			0			0			198,938
Time deposits		726,343			460,449			115,212			1,901			11,545			1,315,450
Notes payable & other borrowings		333,924			695			1,976			1,059			7,507			345,161
Total interest sensitive liabilities		2,748,898			461,144			117,188			2,960			19,052			3,349,242
Interest sensitivity gap	$	(41,417	)	$	130,961		$	453,040		$	105,749		$	518,262		$	1,166,595
Cumulative interest sensitivity gap	$	(41,417	)	$	89,544		$	542,584		$	648,333		$	1,166,595
Percentage of cumulative gap to total interest sensitive assets		-0.92	%		1.98	%		12.02	%		14.36	%		25.83	%

59

The positive GAP in the interest rate sensitivity analysis indicates that banking segment net interest income would generally rise if rates increase. Because of inherent limitations in interest rate sensitivity analysis, the banking segment uses multiple interest rate risk measurement techniques. Simulation analysis is used to subject the current repricing conditions to rising and falling interest rates in increments and decrements of 1%, 2% and 3% to determine the effect on net interest income changes for the next 12 months. The banking segment also measures the effects of changes in interest rates on market value of equity by discounting projected cash flows of deposits and loans. Market value changes in the investment portfolio are estimated by discounting future cash flows and using duration analysis. Investment security prepayments are estimated using current market information. We believe the simulation analysis presents a more accurate picture than the GAP analysis. Simulation analysis recognizes that deposit products may not react to changes in interest rates as quickly or with the same magnitude as earning assets contractually tied to a market rate index. The sensitivity to changes in market rates varies across deposit products. Also, unlike GAP analysis, simulation analysis takes into account the effect of embedded options in the securities and loan portfolios as well as any off-balance-sheet derivatives.

The table below shows the estimated impact of increases of 1%, 2% and 3% and a decrease of 0.5% in interest rates on net interest income and on market value of portfolio equity for the banking segment as of June 30, 2011 (dollars in thousands):

June 30, 2011
Change  in Interest Rates (basis points)		Changes in Net Interest Income						Changes in Market Value of Equity
		Amount			Percent			Amount			Percent
	+300	$	224			0.12	%	$	(18,393	)		-2.83	%
	+200	$	(3,880	)		-2.09	%	$	(14,063	)		-2.16	%
	+100	$	(2,832	)		-1.53	%	$	13,454			2.07	%
	-50	$	(1,032	)		-0.56	%	$	(24,513	)		-3.77	%

The projected changes in net interest income and market value of equity to changes in interest rates at June 30, 2011 were in compliance with established internal policy guidelines. These projected changes are based on numerous assumptions of growth and changes in the mix of assets or liabilities.

The historically low level of interest rates, combined with the existence of rate floors that are in effect for a significant portion of the loan portfolio, are projected to cause yields on our earning assets to rise more slowly than increases in market interest rates. As a result, in a rising interest rate environment, our interest rate margins are projected to compress until the rise in market interest rates is sufficient to allow our loan portfolio to reprice above applicable rate floors.

60

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out by the our management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the fiscal quarter ended June 30, 2011, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In November 2006, FSC received subpoenas from the SEC and the DOJ in connection with an investigation of possible antitrust and securities law violations, including bid-rigging, in the procurement of guaranteed investment contracts and other investment products for the reinvestment of bond proceeds by municipalities. The investigation is industry-wide and includes approximately 30 or more firms, including some of the largest U.S. investment firms.

As a result of these SEC and DOJ investigations into industry-wide practices, FSC was initially named as a co-defendant in cases filed in several different federal courts by various state and local governmental entities suing on behalf of themselves and a purported class of similarly situated governmental entities and a similar set of lawsuits filed by various California local governmental entities suing on behalf of themselves and a purported class of similarly situated governmental entities. All claims asserted against FSC in these purported class actions were subsequently dismissed. However, the plaintiffs in these purported class actions have filed amended complaints against other entities, and FSC is identified in these complaints not as a defendant, but as an alleged co-conspirator with the named defendants.

Additionally, as a result of these SEC and DOJ investigations into industry-wide practices, FSC has been named as a defendant in 20 individual lawsuits. These lawsuits have been brought by several California public entities and two New York non-profit corporations that do not seek to certify a class. The Judicial Panel on Multidistrict Litigation has transferred these cases to the United States District Court, Southern District of New York. The California plaintiffs allege violations of Section 1 of the Sherman Act and the California Cartwright Act. The New York plaintiffs allege violations of Section 1 of the Sherman Act and the New York Donnelly Act. The allegations against FSC are very limited in scope. FSC has filed answers in each of the twenty lawsuits denying the allegations and asserting several affirmative defenses. FSC intends to defend itself vigorously in these individual actions. The relief sought is unspecified monetary damages.

Like other financial institutions, we are subject to various federal, state and local laws and regulations relating to environmental matters. Under these laws and regulations, we could be held liable for costs relating to environmental contamination at or from properties that secure our loan portfolio. With respect to our borrowers’ properties, the potential liabilities may far exceed the original amount of the loan made by us and secured by the property. Currently, we are not a defendant in any environmental legal proceeding.

For additional information concerning our legal proceedings, please see the discussion under the caption “Legal Proceedings” set forth in Part I, Item 3 of our Annual Report and the discussion under the caption “Legal Proceedings” set forth in Part II, Item 1 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 filed with the SEC on May 5, 2011.

61

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed under “Item 1A. Risk Factors” of our Annual Report. For more information concerning our risk factors, please refer to “Item 1A. Risk Factors” of our Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the second quarter of 2011, we issued 518 shares of Original Common Stock to an employee upon the exercise of outstanding stock options at an average exercise price of $6.70 per share. These options were awarded pursuant to the exemption from compliance with the registration requirements of the Securities Act provided by Rule 701 promulgated thereunder. The issuance of shares of our Original Common Stock pursuant to the exercise of such options was therefore also exempt from registration under the Securities Act pursuant to Rule 701.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. (Removed and Reserved)

Item 5. Other Information

Not applicable.

Item 6. Exhibits

A list of exhibits filed herewith is contained in the Exhibit Index that immediately precedes such exhibits and is incorporated by reference herein.

62

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PLAINSCAPITAL CORPORATION
Date: August 4, 2011	By:	/s/ JOHN A. MARTIN
	Name:	John A. Martin
	Title:	Executive Vice President and Chief Financial Officer (Duly authorized officer and principal financial officer)
Date: August 4, 2011	By:	/s/ JEFF ISOM
	Name:	Jeff Isom
	Title:	Executive Vice President of Finance and Accounting (Principal accounting officer)

63

Exhibit Index

				Incorporated by Reference
Exhibit No.		Exhibit Description	Filed Herewith	Form	File No.	Exhibit	Filing Date
3.1	–	Third Amended and Restated Certificate of Formation of PlainsCapital Corporation, as amended.	X
3.2	–	Amended and Restated Bylaws of PlainsCapital Corporation.		8-K	000-53629	3.1	08/31/09
4.1	–	Letter Agreement and Securities Purchase Agreement—Standard Terms incorporated therein, dated as of December 19, 2008, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and the United States Department of the Treasury.		10	000-53629	4.1	04/17/09
4.2	–	Amended and Restated Declaration of Trust, dated as of July 31, 2001, by and among State Street Bank and Trust Company of Connecticut, National Association, PlainsCapital Corporation (f/k/a Plains Capital Corporation), and Alan B. White, George McCleskey, and Jeff Isom, as Administrators.		10	000-53629	4.2	04/17/09
4.3	–	First Amendment to Amended and Restated Declaration of Trust, dated as of August 7, 2006, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and U.S. Bank National Association.		10	000-53629	4.3	04/17/09
4.4	–	Indenture, dated as of July 31, 2001, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and State Street Bank and Trust Company of Connecticut, National Association.		10	000-53629	4.4	04/17/09
4.5	–	First Supplemental Indenture, dated as of August 7, 2006, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and U.S. Bank National Association.		10	000-53629	4.5	04/17/09
4.6	–	Amended and Restated Floating Rate Junior Subordinated Deferrable Interest Debenture of PlainsCapital Corporation (f/k/a Plains Capital Corporation), dated as of August 7, 2006, by PlainsCapital Corporation in favor of U.S. Bank National Association.		10	000-53629	4.6	04/17/09
4.7	–	Guarantee Agreement, dated as of July 31, 2001, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and State Street Bank and Trust Company of Connecticut, National Association, as trustee.		10	000-53629	4.7	04/17/09
4.8	–	First Amendment to Guarantee Agreement, dated as of August 7, 2006, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and U.S. Bank National Association.		10	000-53629	4.8	04/17/09

				Incorporated by Reference
Exhibit No.		Exhibit Description	Filed Herewith	Form	File No.	Exhibit	Filing Date
4.9	–	Amended and Restated Declaration of Trust, dated as of March 26, 2003, by and among U.S. Bank National Association, PlainsCapital Corporation (f/k/a Plains Capital Corporation), and Alan B. White, George McCleskey, and Jeff Isom, as Administrators.		10	000-53629	4.9	04/17/09
4.10	–	Indenture, dated as of March 26, 2003, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and U.S. Bank National Association.		10	000-53629	4.10	04/17/09
4.11	–	Floating Rate Junior Subordinated Deferrable Interest Debenture of PlainsCapital Corporation (f/k/a Plains Capital Corporation), dated as of March 26, 2003, by PlainsCapital Corporation in favor of U.S. Bank National Association.		10	000-53629	4.11	04/17/09
4.12	–	Guarantee Agreement, dated as of March 26, 2003, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and U.S. Bank National Association, as trustee.		10	000-53629	4.12	04/17/09
4.13	–	Amended and Restated Declaration of Trust, dated as of September 17, 2003, by and among U.S. Bank National Association, PlainsCapital Corporation (f/k/a Plains Capital Corporation), and Alan B. White, George McCleskey, and Jeff Isom, as Administrators.		10	000-53629	4.13	04/17/09
4.14	–	Indenture, dated as of September 17, 2003, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and U.S. Bank National Association.		10	000-53629	4.14	04/17/09
4.15	–	Floating Rate Junior Subordinated Deferrable Interest Debenture of PlainsCapital Corporation (f/k/a Plains Capital Corporation), dated as of September 17, 2003, by PlainsCapital Corporation in favor of U.S. Bank National Association.		10	000-53629	4.15	04/17/09
4.16	–	Guarantee Agreement, dated as of September 17, 2003, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and U.S. Bank National Association, as trustee.		10	000-53629	4.16	04/17/09
4.17	–	Amended and Restated Trust Agreement, dated as of February 22, 2008, by and among PlainsCapital Corporation (f/k/a Plains Capital Corporation), Wells Fargo Bank, N.A., Wells Fargo Delaware Trust Company, and Alan B. White, DeWayne Pierce, and Jeff Isom, as Administrative Trustees.		10	000-53629	4.17	04/17/09
4.18	–	Junior Subordinated Indenture, dated as of February 22, 2008, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and Wells Fargo Bank, N.A.		10	000-53629	4.18	04/17/09

				Incorporated by Reference
Exhibit No.		Exhibit Description	Filed Herewith	Form	File No.	Exhibit	Filing Date
4.19	–	PlainsCapital Corporation (f/k/a Plains Capital Corporation) Floating Rate Junior Subordinated Note due 2038, dated as of February 22, 2008, by PlainsCapital Corporation in favor of Wells Fargo Bank, N.A., as trustee of the PCC Statutory Trust IV.		10	000-53629	4.19	04/17/09
4.20	–	Guarantee Agreement, dated as of February 22, 2008, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and Wells Fargo Bank, N.A.		10	000-53629	4.20	04/17/09
4.21	–	Registration Rights Agreement, dated as of December 31, 2008, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and Hill A. Feinberg, as Stockholders’ Representative.		10/A	000-53629	4.21	06/26/09
10.1	–	Agreement and Plan of Merger, dated as of November 7, 2008, by and among PlainsCapital Corporation (f/k/a Plains Capital Corporation), PlainsCapital Bank, First Southwest Holdings, Inc., and Hill A. Feinberg, as Stockholders’ Representative.		10	000-53629	10.1	04/17/09
10.2	–	First Amendment to Agreement and Plan of Merger, dated as of December 8, 2008, by and among PlainsCapital Corporation (f/k/a Plains Capital Corporation), PlainsCapital Bank, First Southwest Holdings, Inc., and Hill A. Feinberg, as Stockholders’ Representative.		10	000-53629	10.2	04/17/09
10.3	–	Second Amendment to Agreement and Plan of Merger, dated as of December 8, 2008, by and among PlainsCapital Corporation (f/k/a Plains Capital Corporation), PlainsCapital Bank, FSWH Acquisition LLC, First Southwest Holdings, Inc., and Hill A. Feinberg, as Stockholders’ Representative.		10	000-53629	10.3	04/17/09
10.4*	–	Amended and Restated Employment Agreement, dated as of January 1, 2009, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and Alan White.		10	000-53629	10.4	04/17/09
10.5*	–	First Amendment to Amended and Restated Employment Agreement, dated as of March 2, 2009, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and Alan White.		10	000-53629	10.5	04/17/09
10.6*	–	Employment Agreement, effective as of December 31, 2008, by and among First Southwest Holdings, LLC, PlainsCapital Corporation (f/k/a Plains Capital Corporation) and Hill A. Feinberg.		10	000-53629	10.6	04/17/09
10.7*	–	First Amendment to Employment Agreement, dated as of March 2, 2009, by and among First Southwest Holdings, LLC, PlainsCapital Corporation (f/k/a Plains Capital Corporation) and Hill A. Feinberg.		10	000-53629	10.7	04/17/09
10.8*	–	Employment Agreement, dated as of January 1, 2009, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and Jerry L. Schaffner.		10	000-53629	10.8	04/17/09

				Incorporated by Reference
Exhibit No.		Exhibit Description	Filed Herewith	Form	File No.	Exhibit	Filing Date
10.9*	–	First Amendment to Employment Agreement, dated as of March 2, 2009, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and Jerry L. Schaffner.		10	000-53629	10.9	04/17/09
10.10*	–	Employment Agreement, dated as of January 1, 2009, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and Jeff Isom.		10	000-53629	10.10	04/17/09
10.11*	–	First Amendment to Employment Agreement, dated as of March 2, 2009, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and Jeff Isom.		10	000-53629	10.11	04/17/09
10.12*	–	Employment Agreement, dated as of December 18, 2008, by and among PlainsCapital Corporation (f/k/a Plains Capital Corporation), First Southwest Holdings, LLC and W. Allen Custard III.		8-K	000-53629	10.1	07/08/09
10.13*	–	First Amendment to Employment Agreement, dated as of March 2, 2009, by and among PlainsCapital Corporation (f/k/a Plains Capital Corporation), First Southwest Holdings, LLC and W. Allen Custard III.		8-K	000-53629	10.2	07/08/09
10.14*	–	Second Amendment to Employment Agreement, dated as of November 15, 2010, between W. Allen Custard III and PlainsCapital Corporation.		8-K	000-53629	10.5	11/16/10
10.15*	–	Employment Agreement, dated as of April 1, 2010, between PlainsCapital Corporation and Roseanna McGill.		8-K	000-53629	10.1	03/23/10
10.16*	–	First Amendment to Employment Agreement, dated as of November 15, 2010, between Roseanna McGill and PlainsCapital Corporation.		8-K	000-53629	10.6	11/16/10
10.17*	–	Employment Agreement, dated as of January 1, 2009, between James R. Huffines and PlainsCapital Corporation.		8-K	000-53629	10.1	11/16/10
10.18*	–	First Amendment to Employment Agreement, dated as of March 2, 2009, between James R. Huffines and PlainsCapital Corporation.		8-K	000-53629	10.2	11/16/10
10.19*	–	Second Amendment to Employment Agreement, dated as of November 15, 2010, between James R. Huffines and PlainsCapital Corporation.		8-K	000-53629	10.3	11/16/10
10.20*	–	Employment Agreement, dated as of November 15, 2010, between John A. Martin and PlainsCapital Corporation.		8-K	000-53629	10.4	11/16/10
10.21*		Employment Agreement, dated as of April 1, 2010, between Todd Salmans and PlainsCapital Corporation.		10-K	000-53629	10.21	03/22/11
10.22*	–	Plains Capital Corporation Incentive Stock Option Plan, dated October 16, 1996 (the “1996 Incentive Stock Option Plan”).		10	000-53629	10.12	04/17/09

				Incorporated by Reference
Exhibit No.		Exhibit Description	Filed Herewith	Form	File No.	Exhibit	Filing Date
10.23*	–	Plains Capital Corporation Incentive Stock Option Plan, dated March 25, 1998 (the “1998 Incentive Stock Option Plan”).		10	000-53629	10.13	04/17/09
10.24*	–	Plains Capital Corporation Incentive Stock Option Plan, dated April 18, 2001 (the “2001 Incentive Stock Option Plan”).		10	000-53629	10.14	04/17/09
10.25*	–	Plains Capital Corporation Incentive Stock Option Plan, dated March 25, 2003 (the “2003 Incentive Stock Option Plan”).		10	000-53629	10.15	04/17/09
10.26*	–	Plains Capital Corporation 2005 Incentive Stock Option Plan, dated April 20, 2005.		10	000-53629	10.16	04/17/09
10.27*	–	Amended and Restated Plains Capital Corporation 2007 Nonqualified and Incentive Stock Option Plan, dated December 31, 2008.		10	000-53629	10.17	04/17/09
10.28*	–	PlainsCapital Corporation 2009 Long-Term Incentive Plan.		8-K	000-53629	10.1	08/31/09
10.29*	–	PlainsCapital Corporation 2010 Long-Term Incentive Plan.		8-K	000-53629	10.2	03/23/10
10.30*	–	PNB Financial Bank Supplemental Executive Pension Plan, effective as of January 1, 2008.		10	000-53629	10.18	04/17/09
10.31*	–	First Amendment to PlainsCapital Bank Supplemental Executive Pension Plan, effective as of March 19, 2009.		10	000-53629	10.19	04/17/09
10.32*	–	Plains Capital Corporation Employee Stock Ownership Plan, effective January 1, 2004 and as amended and restated as of January 1, 2006.		10	000-53629	10.20	04/17/09
10.33*	–	First Amendment to Plains Capital Corporation Employees’ Stock Ownership Plan, effective as of January 1, 2007.		10	000-53629	10.21	04/17/09
10.34*	–	Second Amendment to Plains Capital Corporation Employees’ Stock Ownership Plan, dated as of December 1, 2008.		10	000-53629	10.22	04/17/09
10.35*	–	Form of Restricted Stock Award Agreement for restricted stock awards issued to Messrs. Isom, Schaffner and White on December 17, 2008.		10	000-53629	10.23	04/17/09
10.36*	–	Form of Restricted Stock Award Agreement for restricted stock awards issued to Messrs. Custard and Feinberg, effective as of December 31, 2008.		10	000-53629	10.24	04/17/09
10.37*	–	Form of Stock Option Agreement under the 1996 Incentive Stock Option Plan.		10	000-53629	10.25	04/17/09
10.38*	–	Form of Stock Option Agreement under the 1998 Incentive Stock Option Plan.		10	000-53629	10.26	04/17/09
10.39*	–	Form of Stock Option Agreement under the 2001 Incentive Stock Option Plan.		10	000-53629	10.27	04/17/09

				Incorporated by Reference
Exhibit No.		Exhibit Description	Filed Herewith	Form	File No.	Exhibit	Filing Date
10.40*	–	Form of Stock Option Agreement under the 2003 Incentive Stock Option Plan.		10	000-53629	10.28	04/17/09
10.41*	–	Form of Stock Option Agreement under the PlainsCapital Corporation 2005 Incentive Stock Option Plan.		10	000-53629	10.29	04/17/09
10.42*	–	Form of Stock Option Agreement under the Amended and Restated PlainsCapital Corporation 2007 Nonqualified and Incentive Stock Option Plan.		10	000-53629	10.30	04/17/09
10.43*	–	Form of Restricted Stock Award Agreement under the PlainsCapital Corporation 2010 Long-Term Incentive Plan.		8-K	000-53629	10.3	03/23/10
10.44*	–	Form of Restricted Stock Unit Award Agreement under the PlainsCapital Corporation 2010 Long-Term Incentive Plan.		8-K	000-53629	10.4	03/23/10
10.45	–	Amended and Restated Subordinate Credit Agreement, dated as of December 19, 2007, between JP Morgan Chase Bank, N.A. and PlainsCapital Corporation (f/k/a Plains Capital Corporation).		10	000-53629	10.31	04/17/09
10.46	–	Renewal, Extension and Modification Agreement, dated as of June 19, 2009, between JPMorgan Chase Bank, NA and PlainsCapital Corporation (f/k/a Plains Capital Corporation).		10-Q	000-53629	10.32	10/21/09
10.47	–	Third Amended and Restated Subordinate Promissory Note, dated as of June 19, 2009, by PlainsCapital Corporation (f/k/a Plains Capital Corporation) in favor of JPMorgan Chase Bank, NA.		10-Q	000-53629	10.33	10/21/09
10.48	–	Amended and Restated Loan Agreement, dated as of October 1, 2001, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and JPMorgan Chase Bank, NA (f/k/a Bank One, NA).		10	000-53629	10.33	04/17/09
10.49	–	First Amendment to Amended and Restated Loan Agreement, dated as of August 1, 2002, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and JPMorgan Chase Bank, NA (f/k/a Bank One, NA).		10	000-53629	10.34	04/17/09
10.50	–	Second Amendment to Amended and Restated Loan Agreement, dated as of August 1, 2003, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and JPMorgan Chase Bank, NA (f/k/a Bank One, NA).		10	000-53629	10.35	04/17/09
10.51	–	Third Amendment to Amended and Restated Loan Agreement, dated as of June 1, 2004, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and JPMorgan Chase Bank, NA (f/k/a Bank One, NA).		10	000-53629	10.36	04/17/09

				Incorporated by Reference
Exhibit No.		Exhibit Description	Filed Herewith	Form	File No.	Exhibit	Filing Date
10.52	–	Fourth Amendment to Amended and Restated Loan Agreement, dated as of November 21, 2005, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and JPMorgan Chase Bank, NA.		10	000-53629	10.37	04/17/09
10.53	–	Fifth Amendment to Amended and Restated Loan Agreement, dated as of October 16, 2006, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and JPMorgan Chase Bank, NA.		10	000-53629	10.38	04/17/09
10.54	–	Sixth Amendment to Amended and Restated Loan Agreement, dated as of December 19, 2007, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and JPMorgan Chase Bank, NA.		10	000-53629	10.39	04/17/09
10.55	–	Seventh Amendment to Amended and Restated Loan Agreement, dated as of June 19, 2009, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and JPMorgan Chase Bank, NA.		10-Q	000-53629	10.41	10/21/09
10.56	–	Eighth Amendment to Amended and Restated Loan Agreement, dated as of April 23, 2010, between JPMorgan Chase Bank, NA and PlainsCapital Corporation.		8-K	000-53629	10.1	04/29/10
10.57	–	Ninth Amendment to Amended and Restated Loan Agreement, dated as of July 30, 2010, between JPMorgan Chase Bank, NA and PlainsCapital Corporation.		8-K	000-53629	10.1	08/05/10
10.58	–	Tenth Amendment to Amended and Restated Loan Agreement, dated as of January 10, 2011, between PlainsCapital Corporation and JPMorgan Chase Bank, NA.		8-K	000-53629	10.1	01/25/11
10.59		Eleventh Amendment to Amended and Restated Loan Agreement, dated as of July 26, 2011, between JPMorgan Chase Bank, NA and PlainsCapital Corporation.		8-K	000-53629	10.1	08/01/11
10.60	–	Commercial Pledge and Security Agreement, dated as of November 1, 2000, by PlainsCapital Corporation (f/k/a Plains Capital Corporation) for the benefit of JPMorgan Chase Bank, NA (f/k/a Bank One, Texas N.A.).		10	000-53629	10.40	04/17/09
10.61	–	Sixth Amended and Restated Promissory Note, dated as of July 26, 2011, by PlainsCapital Corporation in favor of JPMorgan Chase Bank, NA.		8-K	000-53629	10.2	08/01/11
10.62	–	Loan Agreement, dated as of September 22, 2004, between JPMorgan Chase Bank, NA (f/k/a Bank One, NA) and PlainsCapital Corporation (f/k/a Plains Capital Corporation).		10	000-53629	10.42	04/17/09

				Incorporated by Reference
Exhibit No.		Exhibit Description	Filed Herewith	Form	File No.	Exhibit	Filing Date
10.63	–	Renewal, Extension and Modification Agreement, dated as of June 19, 2009, between JPMorgan Chase Bank, NA and PlainsCapital Corporation (f/k/a Plains Capital Corporation).		10-Q	000-53629	10.45	10/21/09
10.64	–	Renewal, Extension and Modification Agreement, dated as of July 30, 2010, between JPMorgan Chase Bank, NA and PlainsCapital Corporation.		8-K	000-53629	10.6	08/05/10
10.65		Renewal, Extension and Modification Agreement, dated as of July 26, 2011, between JPMorgan Chase Bank, NA and PlainsCapital Corporation.		8-K	000-53629	10.5	08/01/11
10.66	–	Third Amended and Restated Promissory Note, dated as of July 26, 2011, by PlainsCapital Corporation in favor of JPMorgan Chase Bank, NA.		8-K	000-53629	10.6	08/01/11
10.67	–	Loan Agreement, dated as of October 27, 2004, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and JPMorgan Chase Bank, NA (f/k/a Bank One, NA).		10	000-53629	10.44	04/17/09
10.68	–	Renewal, Extension and Modification Agreement, dated as of June 19, 2009, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and JPMorgan Chase Bank, NA.		10-Q	000-53629	10.48	10/21/09
10.69	–	Renewal, Extension and Modification Agreement, dated as of July 30, 2010, between PlainsCapital Corporation and JPMorgan Chase Bank, NA.		8-K	000-53629	10.8	08/05/10
10.70	–	Fourth Amended and Restated Promissory Note, dated as of July 30, 2010, by PlainsCapital Corporation in favor of JPMorgan Chase Bank, NA.		8-K	000-53629	10.9	08/05/10
10.71	–	Credit Agreement, dated as of October 13, 2006, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and JPMorgan Chase Bank, N.A.		10	000-53629	10.47	04/17/09
10.72	–	Renewal, Extension and Modification Agreement, dated as of June 19, 2009, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and JPMorgan Chase Bank, NA.		10-Q	000-53629	10.51	10/21/09
10.73	–	Modification Agreement, dated as of April 23, 2010, between JPMorgan Chase Bank, NA and PlainsCapital Corporation.		8-K	000-53629	10.2	04/29/10
10.74	–	Renewal, Extension and Modification Agreement, dated as of July 30, 2010, between PlainsCapital Corporation and JPMorgan Chase Bank, NA.		8-K	000-53629	10.3	08/05/10
10.75	–	Modification Agreement, dated as of January 10, 2011, between PlainsCapital Corporation and JPMorgan Chase Bank, NA.		8-K	000-53629	10.2	01/25/11

				Incorporated by Reference
Exhibit No.		Exhibit Description	Filed Herewith	Form	File No.	Exhibit	Filing Date
10.76		Renewal, Extension and Modification Agreement, dated as of July 26, 2011, between JPMorgan Chase Bank, NA and PlainsCapital Corporation.		8-K	000-53629	10.3	08/01/11
10.77	–	Fourth Amended and Restated Promissory Note, dated as of July 26, 2011, by PlainsCapital Corporation in favor of JPMorgan Chase Bank, NA.		8-K	000-53629	10.4	08/01/11
10.78	–	Promissory Note, dated as of July 30, 2010, by PlainsCapital Corporation in favor of JPMorgan Chase Bank, NA.		8-K	000-53629	10.5	08/05/10
10.79	–	Office Lease, dated as of February 7, 2007, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and Block L Land, L.P.		10	000-53629	10.49	04/17/09
10.80	–	First Amendment to Office Lease, dated as of April 3, 2007, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and Block L Land, L.P.		10	000-53629	10.50	04/17/09
10.81	–	Second Amendment to Office Lease, dated as of November 14, 2008, between PlainsCapital Corporation (f/k/a Plains Capital Corporation) and H/H Victory Holdings, L.P.		10	000-53629	10.51	04/17/09
31.1	–	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X
31.2	–	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X
32.1	–	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	X
101.INS**	–	XBRL Instance Document.	X
101.SCH**	–	XBRL Taxonomy Extension Schema Document.	X
101.CAL**	–	XBRL Taxonomy Extension Calculation Linkbase Document.	X
101.DEF**	–	XBRL Taxonomy Extension Definition Linkbase Document.	X
101.LAB**	–	XBRL Taxonomy Extension Label Linkbase Document.	X
101.PRE**	–	XBRL Taxonomy Extension Presentation Linkbase Document.	X

* Management contract or compensatory plan or arrangement.

** In accordance with Rule 406T of Regulation S-T, the information in these exhibits is “furnished” and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.