On May 26th, 1862 the Army of the Trans-Mississippi was created covering states and territories west of the Mississippi River. A number of battles were fought in this area including the Battle of Palmito Ranch on May 12th and 13th of 1865, making it the last battle of the Civil War. The war had officially ended on May 9th. The Confederates won the battle, but had already given up on the war. The last of the Army of the Trans-Mississippi wouldn't surrender until May 26th, 1865.
The flag reversed the red and blue colors of the battle flag to red stripes on a blue field and was used by units such as the 3rd TX Infantry, Walker's Texas Division and others.