Bank of America Finance Unveils Contingent Income Callable Notes Linked to Regional Banking and Semiconductor ETFs

Structured Note Design and Income Features

Issued by BofA Finance LLC and guaranteed by Bank of America Corporation, these Notes provide conditional monthly income based on the performance of two sector ETFs. Monthly contingent coupons are paid only if both ETFs’ Observation Values on each monthly Observation Date remain at or above 70% of their Starting Values. If either the Regional Banking ETF or Semiconductor ETF falls below this coupon barrier, no coupon is paid that month. When triggered, the monthly coupon equals $19.584 per $1,000 principal, representing a 1.9584% monthly rate or 23.50% annualized.

BofA Finance holds the right to call the Notes on any monthly Call Payment Date starting November 13, 2026, about three months post-issuance. Upon early redemption, investors receive $1,000 principal plus any contingent coupon if conditions are met. The issuer call feature enables Bank of America to redeem Notes early if market conditions become unfavorable or if the Notes appreciate significantly, while investors have no call rights.

Downside Risk and Potential Loss at Maturity

Investors face significant downside if either ETF declines substantially from their August 7, 2026 Starting Values. If the Ending Value of the worst-performing ETF falls below 60% of its Starting Value by the February 7, 2028 Valuation Date, investors incur 1:1 downside exposure to that ETF’s losses. This means potential principal loss can exceed any coupon payments, with the Redemption Amount possibly dropping below 60% of principal, and up to 100% loss of investment.

The Notes feature a two-tier redemption at maturity: if the worst-performing ETF’s Ending Value is at least 60% of Starting Value, investors receive full principal plus any final contingent coupon. If it falls below 60%, investors bear full losses beyond that threshold. This asymmetric risk profile—coupons paid only if both ETFs perform well, but full downside exposure to the worst performer—poses a material disadvantage during adverse market conditions.

Underlying ETFs and Sector Exposure

The Notes’ performance is linked to the State Street SPDR S&P Regional Banking ETF (ticker: KRE) and the VanEck Semiconductor ETF (ticker: SMH). The Regional Banking ETF covers U.S. regional banks, while the Semiconductor ETF tracks semiconductor manufacturers and related companies. By linking to the least performing ETF, the Notes offer some inverse correlation benefit if one sector outperforms the other, but require both to meet coupon barriers simultaneously for payments.

This dual-sector exposure introduces concentration risk. If both sectors decline simultaneously—possible during broad market downturns—monthly coupons may be eliminated and principal losses incurred. The Notes’ linkage to the worst-performing ETF means weakness in either sector determines final payoff, regardless of the other ETF’s performance.

Pricing and Distribution Economics

Offered at $1,000 per $1,000 principal, BofA Securities, Inc. receives an underwriting discount up to $2.50 per note, yielding net proceeds of $997.50 per $1,000. Additionally, a referral fee up to $6.75 per $1,000 is paid to other registered broker-dealers distributing the Notes. Dealers selling to fee-based advisory accounts may waive some selling concessions, allowing investors to purchase at full price.

The Notes’ estimated initial value at pricing is between $915 and $965 per $1,000 principal, reflecting embedded options, barriers, and issuer credit risk. The filing notes that actual Note value will vary based on many factors and cannot be precisely predicted, highlighting the complexity of valuing such structured products.

Credit Risk and Guarantee Structure

All payments, including principal and coupons, are subject to the credit risk of BofA Finance LLC as issuer and Bank of America Corporation as unconditional guarantor. The guarantee means that if BofA Finance defaults, Bank of America is responsible for payments. However, this does not eliminate credit risk but transfers it to Bank of America’s creditworthiness.

Notes are not FDIC insured nor conventionally bank guaranteed and may lose value. Investors should understand these are unsecured obligations backed by the guarantor’s commitment. In severe financial stress scenarios for Bank of America, the guarantee’s effectiveness could be questioned, affecting liquidity and pricing.

Issuance Schedule and Registration

Pricing is expected August 7, 2026, with issuance on August 12, 2026, and maturity on February 10, 2028, for an approximately 18-month term, subject to early call. The preliminary pricing supplement dated July 22, 2026, references effective Registration Statements Nos. 333-290665 and 333-290665-01, along with prospectus and product supplements dated December 8, 2025, incorporated by reference.

The Notes carry CUSIP No. 09712C2E2 and will not be listed on any exchange, limiting early exit options to secondary market sales facilitated by the issuer or affiliates. Final terms, including coupon rate and pricing, may be adjusted before the August 7, 2026 pricing date based on market conditions.

Observation, Payment, and Call Dates

The Notes feature monthly Observation Dates, Contingent Payment Dates, and Call Payment Dates throughout the term from August 12, 2026, to February 10, 2028. The final Valuation Date is February 7, 2028, subject to postponement for market disruptions. Monthly coupons depend on meeting coupon barriers each Observation Date.

Starting November 13, 2026, the issuer may redeem the Notes on any monthly Call Payment Date with 5 to 60 calendar days’ notice. This call option creates uncertainty regarding investment duration and income, as the issuer may call Notes when economically advantageous, limiting investor upside if Notes appreciate.

Calculation Agent and Governance

BofA Securities, Inc., an affiliate of BofA Finance LLC, serves as both Calculation Agent and Selling Agent. As Calculation Agent, it determines Observation Values, Ending Values, the Least Performing Underlying, and payment amounts. This dual role presents a potential conflict of interest, as the entity benefiting from underwriting also calculates investor returns.

In an Event of Default, the payable amount upon acceleration equals the Redemption Amount as if acceleration occurred on maturity and valuation was three trading days prior. Default provisions are detailed in the senior indenture and prospectus, which investors should review to understand rights in issuer distress.

Investor Risk Considerations

The filing highlights key differences from conventional debt, with detailed risk factors in the pricing supplement (page PS-9), product supplement (page PS-3), prospectus supplement (page S-7), and prospectus (page 7). Risks include conditional coupons, issuer call limiting upside, full downside exposure to the worst-performing ETF if it declines over 40%, credit risk of issuer and guarantor, and lack of liquidity due to non-exchange listing.

Additional risks include sector concentration in regional banking and semiconductors, potential total principal loss if either ETF declines significantly, and valuation complexity in secondary markets. Investors should carefully assess whether the contingent income justifies the asymmetric downside and structural limitations before investing.

Regulatory Status and Offering Conditions

The offering materials state that neither the SEC, state securities commissions, nor other regulators have approved or disapproved the Notes or confirmed the truthfulness or completeness of the pricing supplement. The offering is made under Rule 424(b)(2) of the Securities Act of 1933. The preliminary pricing supplement is "not complete and may be changed," indicating final terms may be adjusted before August 7, 2026 based on market demand and issuer discretion.

The documents clarify that the offering does not constitute a sale in any jurisdiction where prohibited. Investors should verify eligibility under local securities laws and consult legal and tax advisors regarding suitability and tax implications before investing.