EFTA01198069.pdf

Li SUBJECT TO COMPLETION, DATED JULY 27, 2015 0 PROSPECTUS SUPPLEMENT k • (To Prospectus dated December 15, 2014) ... Char/eS SCHWAB -0... ,... CP The Charles Schwab Corporation 4.aI Asi Depositary Shares, Each Representing a 1/40th Interest in a O 0 2• b Share of % Non-Cumulative Perpetual Preferred Stock, Series C i.;,3 We are offering depositary shares, each representing a 1/40th ownership interest in a share of 34 Non- os co Cumulative Perpetual Preferred Stock, Series C, $0.01 par value, with a liquidation preference of $1,000 per share g 1 (equivalent to $25 per depositary share)(the "Series C Preferred Stocks). The depositary shares are represented by p, receipts. As a holder of depositary shares, you will be entitled to all proportional rights and preferences of g o 9 the Series C Preferred Stock (including dividend, voting, redemption and liquidation rights). You must exercise such & 0 rights through the depositary. O ... O 0 We will pay dividends on the Series C Preferred Stock, when, as, and if declared by our board of directors or a duly Oct0 authorized committee of our board of directors. Dividends will accrue on a non-cumulative basis and be payable from the date of initial issuance, at a rate of per annum, payable quarterly, in arrears, on March 1, June 1, September 1 °LP and December 1 of each year, beginning on December 1, 2015. Dividends on the Series C Preferred Stock will not be cumulative. If our board of directors or a duly authorized ...., ea 7:j t committee of our board of directors does not declare a dividend on the Series C Preferred Stock in respect of a dividend 2 period, then no dividend shall be deemed to have accrued for such dividend period, be payable on the applicable O >, dividend payment date, or be cumulative, and we will have no obligation to pay any dividend for that dividend period to F0. al 0 the holder of Series C Preferred Stock, including the depositary, and no related distribution will be made on the depositary shares, whether or not our board of directors or a duly authorized committee of our board of directors 1 t0 declares a dividend on the Series C Preferred Stock for any future dividend period. We may redeem the Series C Preferred Stock at our option: g .S.. ..a • in whole or in part, from time to time, on any dividend payment date on or after , 2020 at a redemption ag 0 price equal to $1,000 per share (equivalent to $25 per depositary share), plus any declared and unpaid dividends, Ja 01 without accumulation of any undeclared dividends; or >i ta 0 ,.. • in whole but not in part, at any time within 90 days following a regulatory capital treatment event (as defined herein), a .2 at a redemption price equal to $1,000 per share (equivalent to $25 per depositary share), plus any declared and unpaid dividends, without accumulation of any undeclared dividends. w The Series C Preferred Stock will not have any voting rights, except as set forth under "Description of Series C Preferred • 0 4.. 0 Stock - Voting Rights" on page S-20. 0 0 04 .... The depositary shares will not be insured by the Federal Deposit Insurance Corporation or any other governmental •-• agency or instrumentality. The depositary shares will not be savings accounts, deposits or other obligations of any bank. 0 -a :). 9 The depositary shares are a new issue of securities with no established trading market. We intend to apply to list the O oi. depositary shares on the New York Stock Exchange ("NYSE') under the symbol "SCRIM PrC". If the application is O .54 .... .,.. approved, we expect trading of the depositary shares on the NYSE to begin within the 30-day period after the initial • t: O O delivery of the depositary shares. • El a Investing in the depositary shares involves risks. See "Risk Factors" beginning on page S-13. a 0. a Neither the Securities and Exchange Commission ("SEC") nor any state securities commission has approved or 04 ca disapproved of the depositary shares or passed upon the adequacy or accuracy of this prospectus supplement or 0 f.. the accompanying prospectus. Any representation to the contrary is a criminal offense. Per Depositary Share Total a c' i • ' Public offering pricern $ $ 0. 2 k Underwriting discounts and commissions0) $ $ o 0 Proceeds, before expenses0) $ $ k ▪' o 0) The public offering price does not include dividends, if any, that may be declared. Dividends, if declared, will accrue 9 from the date of initial issuance, which is expected to be , 2015. .2 '6 (2) Reflects depositary shares sold to institutional investors, for which the underwriters received an underwriting 2 ° discount of $ per share, and depositary shares sold to retail investors, for which the underwriters received an 71 .2 underwriting discount of $ per share. 0 0) Assumes no exercise of the underwriters' over-allotment option described below. p. O 0 We have granted the underwriters the right to purchase up to an additional depositary shares at the public '0 .. 0 ord w w offering price, less underwriting discounts and commissions, within 30 days from the date of this prospectus 0 0 supplement to cover over-allotments, if any. -. s. v a a..g The underwriters expect to deliver the depositary shares to purchasers in book-entry form throuiil he facilities of The .2 0) ri Depository Trust Company CDTC") and its direct participants, including Euroclear Bank SA/ , as operator of the tiq .5.. ° g, ....O Euroclear System ("Euroclearl and Clearstream Banking, a societo anonyme C'Clearstream'D on or about , 2015. o 0, pi Joint Book-Running Managers 2 . . BofA Merrill Lynch Morgan Stanley UBS Investment Bank Wells Fargo Securities 0 alo C', 0w, , 2015 EFTA01198069  TABLE OF CONTENTS PAGE PROSPECTUS SUPPLEMENT ABOUT THIS PROSPECTUS SUPPLEMENT S-ii WHERE YOU CAN FIND MORE INFORMATION S-ii FORWARD-LOOKING STATEMENTS S-iii SUMMARY 5-1 THE OFFERING S-6 RISK FACTORS S-13 CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS S-17 USE OF PROCEEDS S-18 CAPITALIZATION S-19 DESCRIPTION OF SERIES C PREFERRED STOCK S-20 DESCRIPTION OF DEPOSITARY SHARES S-28 BOOK-ENTRY ISSUANCE S-30 CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS S-33 CERTAIN ERISA CONSIDERATIONS S-40 UNDERWRITING (Conflicts of Interest) S-42 NOTICE TO INVESTORS S-45 LEGAL MATTERS S-46 EXPERTS S-46 PROSPECTUS ABOUT THIS PROSPECTUS 1 FORWARD-LOOKING STATEMENTS 1 WHERE YOU CAN FIND MORE INFORMATION 2 THE CHARLES SCHWAB CORPORATION 4 CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS 5 USE OF PROCEEDS 5 ERISA MATTERS 5 DESCRIPTION OF DEBT SECURITIES 7 DESCRIPTION OF PREFERRED STOCK 16 DESCRIPTION OF DEPOSITARY SHARES 19 DESCRIPTION OF COMMON STOCK 21 DESCRIPTION OF PURCHASE CONTRACTS 23 DESCRIPTION OF WARRANTS 24 DESCRIPTION OF UNITS 26 GLOBAL SECURITIES 27 PLAN OF DISTRIBUTION (Conflicts of Interest) 31 VALIDITY OF SECURITIES 33 EXPERTS 33 We have not authorized anyone to provide any information other than that contained or incorporated by reference in this prospectus supplement or the accompanying prospectus. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are not, and the underwriters are not, offering to sell the depositary shares, and are not seeking offers to buy the depositary shares, in any jurisdiction where offers and sales are not permitted. The distribution of this prospectus supplement and the accompanying prospectus and the offering of the depositary shares in certain jurisdictions may be restricted by law. Persons outside the United States who come into possession of this prospectus supplement and the accompanying prospectus must inform themselves about and observe any restrictions relating to the offering of the depositary shares and the distribution of this prospectus supplement and the accompanying prospectus outside the United States. This prospectus supplement and the accompanying prospectus do not constitute, and may not be used in connection with, an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. EFTA01198070  ABOUT THIS PROSPECTUS SUPPLEMENT This prospectus supplement and the accompanying prospectus are part of a registration statement that we filed with the Securities and Exchange Commission, or SEC, utilizing a "shelf" registration process. In this prospectus supplement, we provide you with specific information about the depositary shares that we are selling in this offering, the Series C Preferred Stock represented by the depositary shares, and about the offering itself. Both this prospectus supplement and the accompanying prospectus include or incorporate by reference important information about us, our depositary shares, our Series C Preferred Stock and other information you should know before investing in our depositary shares. This prospectus supplement also adds, updates and changes information contained or incorporated by reference in the accompanying prospectus. To the extent that any statement that we make in this prospectus supplement is inconsistent with the statements made in the accompanying prospectus, the statements made in the accompanying prospectus are deemed modified or superseded by the statements made in this prospectus supplement. You should read both this prospectus supplement and the accompanying prospectus as well as additional information described in "Where you can find more information" before investing in our depositary shares. References in this prospectus supplement to "we," "us," "our" and "CSC" mean The Charles Schwab Corporation. References in this prospectus supplement to the "Company" means CSC and its majority- owned subsidiaries. Unless otherwise specifically indicated, all information in this prospectus supplement assumes the underwriters' option to purchase additional depositary shares is not exercised. Currency amounts in this prospectus supplement and the accompanying prospectus are stated in U.S. dollars. The representations, warranties and covenants made by CSC in any agreement that is filed as an exhibit to any document that is incorporated by reference in this prospectus supplement and the accompanying prospectus were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of CSC's affairs. You should assume that the information contained or incorporated by reference in this prospectus supplement and any document incorporated by reference herein and in the accompanying prospectus is accurate only as of their respective dates. Our business, financial condition, results of operations and prospects may have changed since those dates. WHERE YOU CAN FIND MORE INFORMATION CSC files annual, quarterly and current reports, proxy statements and other information with the SEC. CSC's SEC filings are available to the public over the Internet at the SEC's website at http://www.sec.gov. Copies of certain information filed by CSC with the SEC are also available on CSC's corporate website at http://www.aboutschwab.com. The website addresses of the SEC and CSC are included as inactive textual references only, and the information contained on those websites is not a part of this prospectus supplement or the accompanying prospectus. You may also read and copy any document that CSC files at the SEC's Public Reference Room, 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC allows CSC to "incorporate by reference" information CSC has filed with the SEC, which means that CSC can disclose important information to you by referring you to other documents. The information incorporated by reference is considered to be a part of this prospectus supplement. This prospectus supplement incorporates by reference the documents listed below: • Annual Report on Form 10-K for the fiscal year ended December 31, 2014; • Quarterly Report on Form 10-Q for the quarter ended March 31, 2015; and S-ii EFTA01198071  • Current Reports on Form 8-K filed on February 3, 2015, March 10, 2015 and May 19, 2015. Any statement contained in a document incorporated by reference, or deemed to be incorporated by reference, in this prospectus supplement or the accompanying prospectus shall be deemed to be modified or superseded for purposes of this prospectus supplement or the accompanying prospectus to the extent that a statement contained in this prospectus supplement or the accompanying prospectus or in any other subsequently filed document which also is incorporated by reference in this prospectus supplement or the accompanying prospectus modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus supplement or the accompanying prospectus. Statements contained in this prospectus supplement or the accompanying prospectus as to the contents of any contract or other document referred to in this prospectus supplement or the accompanying prospectus do not purport to be complete, and where reference is made to the particular provisions of such contract or other document, such provisions are qualified in all respects by reference to all of the provisions of such contract or other document. In reviewing any agreements incorporated by reference, please remember they are included to provide you with information regarding the terms of such agreements and are not intended to provide any other factual or disclosure information about CSC. The agreements may contain representations and warranties by CSC or other parties, which should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate. The representations and warranties were made only as of the date of the relevant agreement or such other date or dates as may be specified in such agreement and are subject to more recent developments. Accordingly, these representations and warranties alone may not describe the actual state of affairs as of the date they were made or at any other time. You may request a copy of these filings at no cost, by writing, telephoning or sending an email to the following address: The Charles Schwab Corporation 211 Main Street San Francisco, California 94105 Attention: C Telephone: FORWARD-LOOKING STATEMENTS This prospectus supplement and the accompanying prospectus, including the documents incorporated by reference, contain not only historical information but also "forward-looking statements" within the meaning of 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'). Forward-looking statements are identified by words such as "believe," "anticipate," "expect," "intend," "plan," "will," "may," "estimate," "appear," "aim," "target," "could" and other similar expressions. These statements, which may be expressed in a variety of ways, including the use of future or present tense language, refer to future events. In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements, which reflect management's beliefs, objectives, and expectations as of the date hereof, or in the case of any documents incorporated by reference, as of the date of those documents, are necessarily estimates based on the best judgment of CSC's senior management. These statements relate to, among other things: • the use of proceeds from this offering; • the ratings for the depositary shares; a trading market for the depositary shares; S-hi EFTA01198072  • the Company's ability to pursue its business strategy and maintain its market leadership position; • the expected impact of the new regulatory capital and liquidity coverage ratio ("LCR") rules; • the impact of legal proceedings and regulatory matters; • the impact of current market conditions on the Company's results of operations; • sources of liquidity, capital, and level of dividends; • target capital and debt ratios; • capital expenditures; • the impact of changes in management's estimates on the Company's results of operations; • the impact of changes in the likelihood of indemnification and guarantee payment obligations on the Company's results of operations; • the impact on the Company's results of operations of recording stock option expense; • the impact of the revised underwriting criteria on the credit quality of the Company's mortgage portfolio; and • the other risks and uncertainties described in this prospectus supplement, including the documents incorporated by reference herein. Achievement of the expressed beliefs, objectives and expectations described in these statements is subject to certain risks and uncertainties that could cause actual results to differ materially. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this prospectus supplement or, in the case of documents incorporated by reference, as of the date of those documents. Important factors that may cause actual results to differ include, but are not limited to: • changes in general economic and financial market conditions; • changes in revenues and profit margin due to changes in interest rates; • adverse developments in litigation or regulatory matters; • the extent of any charges associated with litigation and regulatory matters; • amounts recovered on insurance policies; • the Company's ability to attract and retain clients and grow client assets and relationships; the Company's ability to develop and launch new products, services and capabilities in a timely and successful manner, including Intelligent Portfolios'; fluctuations in client asset values due to changes in equity valuations; • the Company's ability to monetize client assets; • the performance or valuation of securities available for sale and securities held to maturity; • trading activity; • the level of interest rates, including yields available on money market mutual fund eligible instruments; • the adverse impact of financial reform legislation and related regulations; investment, structural and capital adjustments made by the Company in connection with the new LCR rule; the amount of loans to the Company's brokerage and banking clients; S-iv EFTA01198073  • the extent to which past performance of the Company's mortgage portfolio is indicative of future performance; • the level of the Company's stock repurchase activity; • the level of brokerage client cash balances and deposits from banking clients; • the availability and terms of external financing; • capital needs and management; • timing and amount of severance and other costs related to reducing the Company's San Francisco footprint; • the Company's ability to manage expense; • regulatory guidance; • the level of client assets, including cash balance; • competitive pressure on rates and fees; • acquisition integration costs; • the timing and impact of changes in the Company's level of investments in buildings, land, leasehold improvements and software and equipment relating to its information technology systems; • potential breaches of contractual terms for which the Company has indemnification and guarantee obligations; • client use of the Company's investment advisory services and other products and services; and • CSC's ability to maintain favorable ratings from rating agencies. You should refer to the "Risk Factors" section of this prospectus supplement and to CSC's periodic and current reports filed with the SEC for specific risks which could cause actual results to be significantly different from those expressed or implied by these forward-looking statements. In particular, certain of these factors, as well as general risk factors affecting CSC and its subsidiaries, are discussed in greater detail in "Item 1A.—Risk Factors" in CSC's Annual Report on Form 10-K for the year ended December 31, 2014, as such discussion may be amended or updated in other reports filed by us with the SEC, which reports are incorporated by reference into this prospectus supplement and accompanying prospectus. S-v EFTA01198074 [THIS PAGE INTENTIONALLY LEFT BLANK] EFTA01198075  SUMMARY This summary highlights selected information contained elsewhere, or incorporated by reference, in this prospectus supplement. As a result, it does not contain all of the information that may be important to you or that you should consider before investing in the depositary shares. You should read this entire prospectus supplement and the accompanying prospectus, including the documents incorporated by reference, especially the risks relevant to investing in the depositary shares discussed under "Risk factors" contained herein and under "Item IA. —Risk Factors" beginning on page 7 of CSC's Annual Report on Form 10-K for the year ended December 31, 2014, as such discussion may be amended or updated in other reports filed by us with the SEC, as well as the consolidated financial statements and notes to those consolidated financial statements incorporated by reference herein. In addition, certain statements include forward-looking information that involves risks and uncertainties. See "Forward-looking statements." The Charles Schwab Corporation The Charles Schwab Corporation, headquartered in San Francisco, California, was incorporated in 1986 and engages, through its subsidiaries (together referred to as the Company, and located in San Francisco except as indicated), in wealth management, securities brokerage, banking, money management, and financial advisory services. At March 31, 2015, the Company had $2.52 trillion in client assets, 9.5 million active brokerage accounts®, 1.5 million corporate retirement plan participants, and 986,000 banking accounts. CSC is a savings and loan holding company. Significant business subsidiaries of CSC include: Charles Schwab & Co., Inc. ("Schwab", which was incorporated in 1971, is a securities broker-dealer with over 325 domestic branch offices in 45 states, as well as a branch in each of the Commonwealth of Puerto Rico and London, England, and serves clients in Hong Kong through one of CSC's subsidiaries; Charles Schwab Bank ("Schwab Bank", which commenced operations in 2003, is a federal savings bank located in Reno, Nevada; and Charles Schwab Investment Management, Inc. is the investment advisor for Schwab's proprietary mutual funds, referred to as the Schwab Funds", and Schwab's exchange-traded funds, referred to as the Schwab ETFs"'. The Company offers a broad range of products to address individuals varying investment and financial needs. Examples of these product offerings include: Brokerage — an array of full-feature brokerage accounts; individual retirement accounts; retiremen: plans for small to large businesses; 529 college savings accounts; designated brokerage accounts; equity incentive plan accounts; and margin loans, as well as access to fixed income securities, equity and debt offerings, options, and futures; • Mutual funds — third-party mutual funds through Mutual Fund Marketplace', including no-load mutual funds through the Mutual Fund OneSource service, proprietary mutual funds from two fund families — Schwab Funds" and Laudus Funds', other third-party mutual funds, and mutual fund trading and clearing services to broker-dealers; • Exchange-traded funds (ETFs) — third-party and proprietary ETFs, including Schwab ETFs, Schwab ETF OneSource"., and separately managed portfolios of ETFs; • Advice solutions — separately managed accounts, customized personal advice for tailored portfolios, and specialized planning and full-time portfolio management; ® Accounts with balances or activity within the preceding eight months. S-1 EFTA01198076  • Banking — checking accounts linked to brokerage accounts, savings accounts, certificates of deposit, demand deposit accounts, first lien residential real estate mortgage loans (First Mortgages), home equity loans and lines of credit (HELOCs), personal loans and entity lending collateralized by securities; and • Trust — trust custody services, personal trust reporting services, and administrative trustee services. These products, and the Company's full array of investing services, are made available through its two segments — Investor Services and Advisor Services. Investor Services Through the Investor Services segment, the Company provides retail brokerage and banking services to individual investors. The Company offers research, analysis tools, performance reports, market analysis, and educational material to all clients. Clients looking for more guidance have access to online portfolio planning tools, professional advice from Schwab's portfolio consultants who can help develop an investment strategy and carry out investment and portfolio management decisions, as well as a range of fully delegated managed solutions that provide ongoing portfolio management. The Investor Services segment also includes the Retirement Plan Services, Corporate Brokerage Services, Stock Plan Services, and Compliance Solutions business units. Retirement Plan Services offers a bundled 40100 retirement plan product that provides plan sponsors a wide array of investment options, trustee or custodial services, and participant-level recordkeeping. Corporate Brokerage Services provides specialty brokerage-related services to corporate clients through its Corporate Brokerage Retirement Services business and mutual fund clearing services to banks, brokerage firms and trust companies, and also offers proprietary mutual funds, ETFs, collective trust funds, and investment management outside the Company to institutional channels. Stock Plan Services offers equity compensation plan sponsors full- service recordkeeping for stock plans: stock options, restricted stock, performance shares and stock appreciation rights. Compliance Solutions provides solutions for compliance departments of regulated companies and firms with special requirements to monitor employee personal trading, including trail' surveillance technology. Advisor Services Through the Advisor Services segment, the Company provides custodial, trading, and support services to independent investment advisors. The Advisor Services segment also includes the Retirement Business Services business unit. Retirement Business Services provides trust, custody, and retirement business services to independent retirement plan advisors and independent recordkeepers. Plan assets are held at the Business Trust division of Schwab Bank. Recent Developments On June 5, 2015, CSC replaced its $800 million committed, unsecured credit facility, which expired on that date. The new credit facility is for $750 million and contains substantially similar terms as the previous credit facility with customary covenant adjustments, including adjustments to reflect changes in CSC's stockholders' equity as of December 31, 2014. There were no funds drawn under this facility at June 30, 2015. S-2 EFTA01198077  The following financial information for the three and six months ended June 30, 2015 is consistent with the information provided in the Company's press release dated July 16, 2015 and furnished to the SEC on CSC's Current Report on Form 8-K. The information is subject to change for subsequent events occurring prior to the date of the filing of CSC's Quarterly Report on Form 10-Q for the quarter ended June 30. 2015, if and to the extent such change is required under generally accepted accounting principles. Consolidated Statements of Income (In millions, except per share amounts) (Unaudited) Three Months Six Months Ended June 30, Ended June 30, 2015 2014 2015 2014 Net Revenues Asset management and administration fees $ 670 $ 632 $1,314 $1,243 Interest revenue 645 588 1,262 1,167 Interest expense (33) (26) (62) (52) Net interest revenue 612 562 1,200 1,115 Trading revenue 203 212 430 459 Other 79 65 142 133 Provision for loan losses 2 7 6 6 Total net revenues 1,566 1,478 3,092 2,956 Expenses Excluding Interest Compensation and benefits 540 520 1,121 1,048 Professional services 112 112 226 218 Occupancy and equipment 85 80 168 160 Advertising and market development 62 65 131 128 Communications 59 57 117 113 Depreciation and amortization 55 48 109 96 Other 86 75 169 150 Total expenses excluding interest 999 957 2,041 1,913 Income before taxes on income 567 521 1,051 1,043 Taxes on income 214 197 396 393 Net Income 353 324 655 650 Preferred stock dividends and other 23 22 34 30 Net Income Available to Common Stockholders $ 330 $ 302 $ 621 $ 620 Weighted-Average Common Shares Outstanding — Diluted 1,326 1,313 1,325 1,312 Earnings Per Common Share — Basic $ .25 $ .23 $ .47 $ .47 Earnings Per Common Share — Diluted $ .25 $ .23 $ .47 $ .47 S-3 EFTA01198078  Financial and Operating Highlights (Unaudited) Q2-15% 2015 2014 (In millions, except per share vs. vs. Second First Fourth Third Second amounts and as noted) Q2-14 Q1-15 Quarter Quarter Quarter Quarter Quarter Net Revenues Asset management and administration fees 6% 4% $ 670 $ 644 $ 641 $ 649 $ 632 Net interest revenue 9% 4% 612 588 584 573 562 Trading revenue (4%) (11%) 203 227 239 209 212 Other(1) 22% 25% 79 63 90 119 65 Provision for loan losses (71%) (50%) 2 4 (3) 1 7 Total net revenues 6% 3% 1,566 1,526 1,551 1,551 1,478 Expenses Excluding Interest Compensation and benefits 4% (7%) 540 581 543 593 520 Professional services — (2%) 112 114 122 117 112 Occupancy and equipment 6% 2% 85 83 82 82 80 Advertising and market development (5%) (10%) 62 69 58 59 65 Communications 4% 2% 59 58 55 55 57 Depreciation and amortization 15% 2% 55 54 54 49 48 Other 15% 4% 86 83 83 78 75 Total expenses excluding interest 4% (4%) 999 1,042 997 1,033 957 Income before taxes on income 9% 17% 567 484 554 518 521 Taxes on income 9% 18% 214 182 204 197 197 Net Income 9% 17% $ 353 $ 302 $ 350 $ 321 $ 324 Preferred stock dividends and other 5% 109% 23 11 21 9 22 Net Income Available to Common Stockholders 9% 13% $ 330 $ 291 $ 329 $ 312 $ 302 Basic earnings per common share 9% 14% $ 0.25 $ 0.22 $ 0.25 $ 0.24 $ 0.23 Diluted earnings per common share 9% 14% $ 0.25 $ 0.22 $ 0.25 $ 0.24 $ 0.23 Dividends declared per common share — — $ 0.06 $ 0.06 $ 0.06 $ 0.06 $ 0.06 Weighted-average common shares outstanding —diluted 1% — 1,326 1,323 1,320 1,316 1,313 Performance Measures Pre-tax profit margin 36.2% 31.7% 35.7% 33.4% 35.3% Return on average common stockholders' equity (annualized)(2) 12% 10% 12% 12% 12% Financial Condition (at quarter end, in billions) Cash and investments segregated (6%) (8%) $ 17.9 $ 19.4 $ 20.8 $ 19.9 $ 19.1 Receivables from brokerage clients 13% 4% $ 16.6 $ 16.0 $ 15.7 $ 15.4 $ 14.7 Bank loans 9% 3% $ 14.0 $ 13.6 $ 13.4 $ 13.1 $ 12.9 Total assets 14% 2% $163.6 $160.2 $154.6 $147.4 $143.4 Bank deposits 18% 3% $112.9 $109.5 $102.8 $ 97.3 $ 95.7 Payables to brokerage clients — — $ 31.5 $ 31.6 $ 34.3 $ 33.1 $ 31.5 Long-term debt 53% — $ 2.9 $ 2.9 $ 1.9 $ 1.9 $ 1.9 Stockholders' equity 11% 2% $ 12.4 $ 12.2 $ 11.8 $ 11.5 $ 11.2 S-4 EFTA01198079  Q2-15% 2015 2014 (In millions, except per share vs. vs. Second First Fourth Third Second amounts and as noted) Q2-14 Q1-15 Quarter Quarter Quarter Quarter Quarter Other Full-time equivalent employees (at quarter end, in thousands) 6% — 14.9 14.9 14.6 14.3 141 Capital expenditures — purchases of equipment, office facilities, and property, net (in millions) (24%) 26% $ 77 $ 61 $ 90 $ 146 $ 10: Expenses excluding interest as a percentage of average client assets (annualized) 0.16% 0.17% 0.17% 0.18% 0.16% Clients' Daily Average Trades (in thousands) Revenue trades(3) (3%) (15t) 267 313 315 269 274 Asset-based trades(4) 4% (11%) 78 88 80 64 75 Other trades(5) 11% (18%) 149 181 169 136 134 Total 2% (15%) 494 582 564 469 483 Average Revenue Per Revenue Trade(3) (2%) — $11.97 $11.98 $12.04 $12.24 $12.26 Note: Certain prior-period amounts have been reclassified to conform to the 2015 presentation. (1) Includes net impairment losses on securities of $(1) million in the third quarter of 2014. (2) Return on average common stockholders' equity is calculated using net income available to common stockholders divided by average common stockholders' equity. (3) Includes all client trades that generate either commission revenue or revenue from principal markups (i.e., fixed income); also known as DART. (4) Includes eligible trades executed by clients who participate in one or more of the Company's asset- based pricing relationships. (5) Includes all commission-free trades, including Schwab Mutual Fund OneSource' funds and ETFs, and other proprietary products. CSC's common stock is listed and traded on The New York Stock Exchange under the symbol "SCHW". CSC's principal executive office is located at 211 Main Street, San Francisco, California 94105 and CSC's telephone number is (415) 667-7000. CSC's corporate Internet website is www.aboutschwab.com. CSC's website address is included as an inactive textual reference only, and the information contained on CSC's website is not incorporated by reference and does not form a part of this prospectus supplement or the accompanying prospectus. S-5 EFTA01198080  THE OFFERING The following description contains basic information about the depositary shares, the Series C Preferred Stock represented thereby and this offering. This description is not complete and does not contain all of the information that you should consider before investing in the depositary shares. For a more complete understanding of the depositary shares and the Series C Preferred Stock represented thereby, you should read "Description of Series C Preferred Stock" and "Description of Depositary Shares" in this prospectus supplement as well as "Description of Preferred Stock" and "Description of Depositary Shares" in the accompanying prospectus. To the extent the following information is inconsistent with the information in the accompanying prospectus, you should rely on the following information. Issuer The Charles Schwab Corporation, a Delaware corporation ("CSC"). Securities offered depositary shares (or depositary shares if the underwriters exercise their over-allotment option in full), each representing a 1/40th ownership interes: in a share of % Non-Cumulative Perpetual Preferred Stock, Series C, $0.01 par value, with a liquidation preference of $1,000 per share (equivalent to $25 per depositary share), of CSC (the "Series C Preferred Stock"). Each holder of a depositary share will be entitled, through the depositary, in proportion to the applicable fraction of a share of Series C Preferred Stock represented by such depositary share, to all the rights and preferences of the Series C Preferred Stock represented thereby (including dividend, voting, redemption and liquidation rights). We may in the future from time to time, without notice to or consent of the holders of the Series C Preferred Stock or the holders of the depositary shares, issue additional shares of the Series C Preferred Stock; provided, that any such additional shares of Series C Preferred Stock are not treated as "disqualified preferred stock" within the meaning of Section 1059(0(2) of the Internal Revenue Code and such additional shares of Series C Preferred Stock are otherwise treated as fungible with the