Bank of America Finance Introduces Callable Contingent Income Securities Linked to S&P 500, Russell 2000, and NASDAQ-100 Indices

Overview of Callable Contingent Income Securities and Investment Terms

BofA Finance LLC is offering Callable Contingent Income Securities linked to three major U.S. equity indices: the S&P 500, Russell 2000, and NASDAQ-100. Each security carries a stated principal amount and issue price of $1,000, with maturity set for August 3, 2028, marking this as a two-year structured investment. All payments are fully and unconditionally guaranteed by Bank of America Corporation, classifying these as senior debt securities within BofA Finance's Medium-Term Notes, Series A program.

The original issue date is August 5, 2026, three business days after the pricing date of July 31, 2026. The estimated value on pricing ranges from $920.00 to $970.00 per $1,000 principal, below the $1,000 public price. This reflects embedded derivative risks and the contingent nature of coupon payments. The pricing supplement notes that the securities’ value will fluctuate based on multiple factors and cannot be precisely predicted.

Contingent Quarterly Coupon Payment Details

Quarterly coupons are payable only if, on every index business day during the relevant observation period, each underlying index closes at or above 60% of its initial value — the coupon barrier level. If any index falls below its coupon barrier on any day within the quarter, no coupon is paid for that period. This "worst of" structure means that weakness in any single index negates coupon payments, regardless of others’ performance.

The minimum contingent quarterly coupon is $22.50 per security, equating to at least 2.25% quarterly or 9.00% annually, with the exact rate set on the pricing date. This premium compensates investors for the risk of receiving few or no coupons if any index breaches the barrier during the term. Investors must accept the possibility of zero coupon payments throughout the two-year term.

Maturity Payment and Principal Risk Features

If not redeemed early, the maturity payment depends on the final values of all three indices relative to a 60% downside threshold. If each index closes at or above 60% of its initial value, investors receive the full principal plus any final period coupon. However, if any index closes below 60%, investors incur losses tied to the worst-performing index.

In such adverse cases, the maturity payment equals the stated principal multiplied by the worst-performing index’s performance factor, potentially resulting in payments significantly below 60% of principal, or even zero if an index falls to zero. The disclosure stresses investors must be prepared to lose their entire initial investment based on index performance.

Issuer’s Redemption Rights and Call Option

Starting November 5, 2026, BofA Finance may redeem the securities at its discretion on any quarterly redemption date. Redemption payments include the stated principal plus any contingent coupon due for that period. This call feature allows the issuer to terminate the securities early if market conditions become unfavorable, potentially limiting investors’ upside while retaining downside risk until redemption.

The issuer must notify the trustee at least five business days, but no more than 60 calendar days, before redemption. Early redemption is discretionary and not automatic based on index performance. Upon redemption, no further payments are made, ending any future coupon or principal recovery opportunities.

Participation Limits and Downside Exposure

These securities do not provide participation in any appreciation of the underlying indices. Investors receive fixed income-like contingent coupons without equity upside. Even if all indices rise substantially, investors only get principal plus earned coupons at maturity, with no additional gains. This asymmetry—full downside risk without upside participation—is a defining feature.

Because payments depend on the worst-performing index, any index falling below coupon barriers or the downside threshold results in coupon forfeiture and principal loss. The "worst of three" structure effectively exposes investors to three simultaneous short put options, amplifying risk. Strong performance in two indices cannot offset losses from one underperforming index.

Credit Risk and Guarantee Details

Payments depend on the creditworthiness of BofA Finance as issuer and Bank of America Corporation as guarantor. If BofA Finance defaults, investors risk losing some or all of their investment. These are unsecured obligations with no claim on underlying assets. BAC’s guarantee substitutes its credit quality for that of the finance subsidiary but does not eliminate credit risk.

The guarantee is "fully and unconditionally" provided by Bank of America Corporation, making BAC’s credit strength crucial for payment security. However, it does not protect against market or contingent coupon risks. In a stress event affecting BAC, investors face combined market and credit risks.

Commission Structure and Pricing Economics

Each security is priced at $1,000, including $15.00 in agent commissions and fees. BofA Finance nets $980.00 per security. Morgan Stanley Wealth Management and its advisors receive a fixed $15.00 sales commission per security from the agent BofAS, plus a $5.00 structuring fee embedded within total commissions.

The estimated pricing date value of $920.00 to $970.00 per $1,000 principal is materially below the issue price, reflecting derivative costs and risk. This $30 to $80 valuation gap represents the embedded options’ economic cost and a real loss relative to purchase price. The actual value varies based on multiple factors and is inherently uncertain.

Critical Risk Factors for Investors

The disclosure highlights key differences from traditional debt securities. Investors must accept the risk of losing their entire principal based on any index’s performance. The securities do not guarantee principal repayment or regular interest; coupons are contingent and may not be paid if any index breaches barriers. The likelihood of receiving few or no coupons is explicitly acknowledged.

These securities are not deposits or savings accounts and lack FDIC or government insurance. They are not bank obligations in the deposit sense, despite BAC’s credit guarantee. Prospective investors should carefully review risk factors in the pricing supplement, product supplement, and prospectus covering contingent coupons, principal risk, and the worst-of-three index structure.

Regulatory Filings and Investor Guidance

Offered under a pricing supplement filed pursuant to Rule 424(b)(2) under the Securities Act of 1933, with registration statements Nos. 333-290665 and 333-290665-01, the prospectus materials include a December 8, 2025 prospectus, Series A Prospectus Supplement, and Product Supplement EQUITY-1. This preliminary pricing supplement is subject to completion; final terms may vary.

The SEC has neither approved nor disapproved these securities nor assessed the completeness of the pricing supplement. Investors should treat these as complex instruments requiring thorough due diligence on contingent coupon mechanics, principal risk, and the worst-of-three index design. Immediate share price impact is unclear, as these are structured products rather than traditional equities.