Bank of America Launches Callable Yield Notes Linked to China Internet, U.S. Regional Banks, and Utilities ETFs

Diversified ETF Basket Drives Investment Approach

The notes link returns to three ETFs covering major sectors: the KraneShares CSI China Internet ETF (KWEB) for Chinese internet and tech companies; the State Street SPDR S&P Regional Banking ETF (KRE) focused on U.S. regional banks; and the State Street Utilities Select Sector SPDR ETF (XLU) tracking utilities within the S&P 500. The "least performing" ETF determines overall performance, creating a basket where the weakest ETF’s returns govern outcomes.

This multi-sector exposure blends geographic and economic factors. The China internet ETF reflects tech sector volatility and Chinese regulatory risks. The regional banking ETF captures U.S. interest rate and credit dynamics impacting community banks. The utilities ETF offers defensive, dividend-paying stocks with typically lower volatility. This combination results in a complex risk profile dependent on relative sector performance rather than absolute gains.

Contingent Coupon Payment Terms

Investors receive a 12.30% annual contingent coupon, paid monthly as $10.25 per $1,000 principal, only if on each monthly observation date all three ETFs close at or above 60% of their initial prices. If any ETF falls below this threshold, no coupon is paid that month. This all-or-nothing structure means even strong performance by two ETFs does not guarantee income if the third underperforms.

Observation dates occur monthly throughout the term, with payments on corresponding contingent payment dates. The final coupon at maturity is also contingent on all three ETFs meeting the 60% barrier. This structure departs from traditional bonds by introducing payment uncertainty linked directly to ETF performance.

Principal Risk and Downside Exposure Explained

The notes feature a key 50% threshold for the lowest-performing ETF. If none drop below half their initial value by maturity, investors get full principal back. However, if any ETF declines more than 50%, redemption is based on that ETF’s ending value, exposing investors to a 1:1 loss ratio. This means principal could be reduced by up to 100% if the worst-performing ETF collapses.

This asymmetric payoff limits upside to full principal plus contingent coupons but exposes investors to significant downside if any ETF suffers a sharp drop. For example, a 60% decline in one ETF would translate to roughly a 60% principal loss. The "least performing" mechanism concentrates risk on the weakest ETF’s performance.

Issuer Guarantee and Credit Considerations

BofA Finance LLC issues the notes, with Bank of America Corporation providing an unconditional guarantee of all payments. This guarantee ties investor claims to Bank of America’s creditworthiness. The notes are not FDIC insured nor traditional bank deposits. All payments depend on the financial health of both issuer and guarantor.

The guarantee covers principal and contingent coupons but does not eliminate the risk that coupons may not be paid if performance thresholds are unmet, nor does it protect against principal loss if the 50% downside trigger occurs. It ensures only that payments will be made as structured, not that full coupons or principal will always be returned.

Offering Details, Pricing, and Distribution

Offered at $1,000 per note with a $2.50 underwriting discount, BofA Finance receives $997.50 per $1,000 principal. The estimated note value at pricing is between $920 and $980, reflecting embedded costs of contingent coupons and call features. Some dealers may offer notes at $997.50 by waiving selling concessions.

BofA Finance affiliates may pay up to $8 per $1,000 principal referral fees to broker-dealers. Notes are issued in $1,000 minimum denominations, with no disclosed total offering size. They carry CUSIP 09712CLA9 and will not be exchange-listed, so liquidity depends on broker-dealer secondary markets.

Callability and Early Redemption Features

Starting January 28, 2027, BofA Finance can redeem all notes monthly, with at least five business days’ notice. Early redemption pays $1,000 principal plus any applicable contingent coupon if all ETFs meet the 60% barrier on the observation date.

This call feature allows the issuer to limit investor upside by redeeming notes when market conditions are favorable. If coupon conditions are unmet, redemption occurs at principal only. The three-year term is contingent on notes not being called early, so investors may not receive the full term of contingent coupons.

Pricing Date and Valuation Impact

The July 24, 2026 pricing date sets the initial ETF values that determine coupon and principal thresholds. The filing is preliminary and subject to final pricing details. The July 24, 2029 valuation date is the final observation for maturity redemption and last coupon payment, with possible postponements as outlined in the product supplement.

Market conditions on pricing date affect the 60% coupon barrier and 50% downside threshold levels, influencing the likelihood and size of coupon payments and principal risk over the term.

Risks and Important Investor Considerations

Risk disclosures begin on page PS-11 of the pricing supplement, with further details in accompanying product and prospectus supplements. These notes differ from traditional debt by having contingent coupons, principal risk, and issuer call rights, all tied to the creditworthiness of BofA Finance LLC and Bank of America Corporation.

The "least performing" ETF mechanism concentrates risk on the worst-performing sector, which may be affected by sector-specific volatility, regulatory changes, or macroeconomic factors. China internet stocks face geopolitical and regulatory risks; regional banks are sensitive to interest rates and credit conditions; utilities face regulatory and energy transition challenges. Investors should evaluate whether the 12.30% coupon adequately compensates for these risks.

Anti-Dilution and Underlying Discontinuance Provisions

Anti-dilution adjustments detailed on page PS-23 of the product supplement address corporate actions like splits or recapitalizations affecting the ETFs. The price multiplier for each underlying starts at 1 but can be adjusted accordingly.

If any ETF is discontinued or terminated, BofA Finance may substitute a replacement or adjust terms per the note agreement. Investors should review these provisions as they can materially impact note performance.

Regulatory and Offering Framework

This offering complies with Rule 424(b)(2) under the Securities Act of 1933, referencing a prospectus dated December 8, 2025, Series A Prospectus Supplement, and Product Supplement EQUITY-1, with registration numbers 333-290665 and 333-290665-01. The SEC has neither approved nor disapproved these securities.

BofA Securities, Inc., an affiliate of BofA Finance LLC, acts as calculation and selling agent, responsible for determining observation values, coupon barriers, and redemption amounts, creating potential conflicts of interest. It also benefits from distribution proceeds.