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

Structured Product Design and Income Mechanism

The Notes represent a structured product issued by BofA Finance LLC and guaranteed by Bank of America Corporation, designed to provide investors with conditional monthly income payments based on the simultaneous performance of two sector-focused exchange-traded funds. The contingent coupon mechanism requires that the Observation Value of each Underlying on any monthly Observation Date must remain at or above 70.00% of its Starting Value for a Contingent Coupon Payment to be made. This dual-barrier structure means that if either the Regional Banking ETF or the Semiconductor ETF falls below the coupon barrier, no monthly coupon payment is made to investors during that period. The monthly coupon payment, when triggered, equals $19.584 per $1,000.00 in principal amount, representing the stated 1.9584% monthly rate or 23.50% annualized coupon.

The structure grants BofA Finance the right to call the Notes at its discretion on any monthly Call Payment Date beginning November 13, 2026, approximately three months after the expected issue date. Upon an optional early redemption, investors would receive the principal amount of $1,000.00 per note plus any applicable contingent coupon payment if the observation conditions are satisfied on the corresponding Observation Date. This issuer call feature allows the bank to terminate the Notes if market conditions become unfavorable for the issuer or if the Notes' values appreciate significantly, but investors do not have corresponding call rights.

Downside Risk and Loss Potential at Maturity

The Notes expose investors to significant downside risk if either the Regional Banking ETF or Semiconductor ETF experiences substantial declines from their Starting Values as of the August 7, 2026 pricing date. The filing specifies that if the Ending Value of the Least Performing Underlying falls below 60.00% of its Starting Value by the February 7, 2028 Valuation Date, investors will experience 1:1 downside exposure to declines in the worse-performing index. This means that investors can lose substantially more than any monthly coupon payments they may have received, with the disclosure explicitly stating that the Redemption Amount in this scenario "will be less than 60.00% of the principal amount and you could lose up to 100.00% of your investment in the Notes."

The Notes incorporate a two-tier redemption structure at maturity. If the Ending Value of the Least Performing Underlying is greater than or equal to a Threshold Value of 60.00% of its Starting Value, investors receive the full principal amount of $1,000.00 per note, along with a final contingent coupon payment if applicable. However, if the Least Performing Underlying declines by more than 40% from its Starting Value, the Note investor bears the full downside loss beyond that threshold point. The asymmetric risk profile—where investors capture coupons only when both underlyings perform adequately but face unilateral downside exposure to the worst performer—represents a material structural disadvantage for holders during adverse market environments.

Underlying Index Components and Sector Exposure

The Notes derive their performance from two major sector-focused exchange-traded products: the State Street SPDR S&P Regional Banking ETF (Bloomberg symbol: "KRE") and the VanEck Semiconductor ETF (Bloomberg symbol: "SMH"). The Regional Banking ETF provides exposure to United States regional banking institutions, while the Semiconductor ETF tracks companies engaged in semiconductor manufacturing and related semiconductor industry activities. By linking to the least performing of these two underlyings, the Notes create an inverse correlation benefit if one sector outperforms the other, but this feature is offset by the note's structural requirement that both underlyings must satisfy coupon barriers simultaneously for any payment to be made.

The use of two distinct sector ETFs introduces dual sector concentration risk into the investment profile. If both the regional banking sector and semiconductor industry experience synchronized declines—a scenario that could occur during broad equity market weakness or sector-specific downturns—both underlyings could simultaneously fall below critical thresholds, eliminating monthly coupon payments and ultimately resulting in substantial principal loss. The filing states that the Notes are "Linked to the Least Performing" of these two ETFs, meaning that even if the Regional Banking ETF maintains strong performance, any weakness in the Semiconductor ETF would determine the note's ultimate payoff at maturity.

Pricing and Underwriting Economics

The Notes are offered at a public offering price of $1,000.00 per $1,000.00 in principal amount, with BofA Securities, Inc. receiving an underwriting discount of up to $2.50 per note, resulting in net proceeds to BofA Finance of $997.50 per $1,000.00 in principal amount. In addition to this underwriting discount, an affiliate of BofA Finance will pay a referral fee of up to $6.75 per $1,000.00 in principal amount to other registered broker-dealers involved in the distribution. The filing also notes that certain dealers purchasing Notes for sale to fee-based advisory accounts may forgo some or all of their selling concessions, allowing investors in those accounts to potentially purchase the Notes at the full public offering price of $1,000.00.

The initial estimated value of the Notes as of the pricing date is expected to fall between $915.00 and $965.00 per $1,000.00 in principal amount, representing a discount to the $1,000.00 public offering price. This valuation gap reflects the embedded options and barriers within the structure, as well as the credit risk of the issuer and guarantor. The filing explicitly states that "the actual value of your Notes at any time will reflect many factors and cannot be predicted with accuracy," acknowledging the complexity and uncertainty inherent in valuing structured products with multiple embedded derivatives and conditional payment features.

Credit Risk and Guarantee Structure

All payments on the Notes, including both principal and contingent coupon payments, are subject to the credit risk of BofA Finance LLC as the issuer and Bank of America Corporation as the unconditional guarantor. The Notes are fully and unconditionally guaranteed by Bank of America Corporation, which means that if BofA Finance encounters financial difficulties or defaults on its obligations, BAC becomes the party responsible for meeting all payment commitments to investors. This guarantee structure does not eliminate credit risk; rather, it substitutes the credit risk of BofA Finance with the credit risk of its parent holding company, Bank of America Corporation.

The offering materials specify that the Notes are not FDIC insured, are not bank guaranteed in any conventional sense, and may lose value. Investors should understand that despite the Bank of America guarantee, these structured notes are unsecured obligations of BofA Finance backed by the guarantor's commitment, and both entities are subject to credit risk. In adverse scenarios where Bank of America faces significant financial stress, the guarantee could be challenged or its value could be questioned by the market, potentially affecting the liquidity and pricing of these Notes.

Issuance Timeline and Registration Details

The Notes are expected to price on August 7, 2026, and issue on August 12, 2026, based on the preliminary pricing supplement dated July 22, 2026. The maturity date is scheduled for February 10, 2028, providing an approximate 18-month investment horizon, subject to early redemption at the issuer's option. The preliminary pricing supplement references an effective Registration Statement under the Securities Act of 1933, with Registration Statement Nos. 333-290665 and 333-290665-01, along with a prospectus dated December 8, 2025, Series A Prospectus Supplement dated December 8, 2025, and Product Supplement EQUITY-1 dated December 8, 2025, all of which are incorporated by reference into the offering documents.

The Notes are assigned CUSIP No. 09712C2E2 and will not be listed on any securities exchange, meaning investors wishing to exit positions prior to maturity would be limited to selling to other investors through the secondary market facilitated by the issuer or affiliated broker-dealers. The preliminary nature of the pricing supplement indicates that final terms, including the exact coupon rate and pricing, may be subject to completion and adjustment prior to the August 7, 2026 pricing date, depending on market conditions and demand for the Notes.

Observation Dates, Payment Dates, and Call Schedule

The Notes incorporate a monthly observation schedule with multiple Observation Dates, Contingent Payment Dates, and Call Payment Dates spanning the approximately 18-month term from August 12, 2026, to February 10, 2028. The final Valuation Date is scheduled for February 7, 2028, subject to postponement under certain circumstances relating to market disruptions or other events affecting the underlyings. Monthly coupon payments depend on the satisfaction of coupon barrier conditions on each Observation Date, meaning that investors' income streams are subject to performance testing at regular intervals throughout the life of the Notes.

Beginning on November 13, 2026, the issuer gains the ability to redeem the Notes on any monthly Call Payment Date, which coincides with Contingent Payment Dates. This call provision is exercisable at the issuer's sole discretion and requires at least five business days but no more than 60 calendar days' advance notice to the trustee. The monthly call schedule creates uncertainty for investors regarding the duration of their investment and income streams, as the issuer will likely exercise the call option when it becomes economically favorable to do so, potentially limiting investors' upside participation if the Notes appreciate significantly.

Calculation Agent and Governance Provisions

BofA Securities, Inc., an affiliate of BofA Finance LLC, serves as both the Calculation Agent and the Selling Agent for the Notes. As Calculation Agent, BofA Securities is responsible for determining the Observation Values, Ending Values, Least Performing Underlying, and all amounts payable under the Notes at each scheduled date. This dual role creates a potential conflict of interest, as the same entity that benefits from the spread and underwriting discount also makes the calculations that determine investor returns. While typical for structured products, investors should be aware that the calculation entity has financial incentives that may not align with investors' interests.

In the event of an Event of Default with respect to the Notes, the amount payable upon any acceleration would be equal to the Redemption Amount calculated as if the acceleration date were the Maturity Date and as though the Valuation Date were the third Trading Day prior to the acceleration. The disclosure provisions regarding events of default are incorporated by reference to the senior indenture and the prospectus, which describe the specific circumstances that would trigger acceleration rights for note holders. Investors should review these detailed default provisions in the accompanying prospectus documents to fully understand their rights and remedies in the event of issuer financial distress.

Risk Considerations for Potential Investors

The filing emphasizes that important differences exist between these Notes and conventional debt securities, with detailed risk factors beginning on page PS-9 of the pricing supplement, page PS-3 of the product supplement, page S-7 of the prospectus supplement, and page 7 of the prospectus. Key risks include the conditional nature of coupon payments, the issuer call feature that limits upside potential, the 1:1 downside exposure to the worst-performing underlying if either ETF declines more than 40%, credit risk related to both BofA Finance and Bank of America, and the lack of liquidity due to the Notes not being listed on any exchange.

Additional considerations include the sector concentration risk inherent in linking performance to both the regional banking and semiconductor sectors, the possibility of complete loss of principal in worst-case scenarios where either underlying declines substantially, and the complexity of valuing and pricing the Notes in secondary markets. Investors should carefully review all risk factors disclosed in the accompanying documentation and consider whether the contingent income opportunity justifies the asymmetric downside risk and structural constraints of the Notes before committing capital.

Regulatory Status and Offering Conditions

The offering materials note that neither the Securities and Exchange Commission, any state securities commission, nor any other regulatory body has approved or disapproved of the Notes or determined whether the pricing supplement and accompanying documents are truthful or complete. The offering is made pursuant to Rule 424(b)(2) under the Securities Act of 1933. This preliminary pricing supplement is expressly noted as "not complete and may be changed," indicating that final terms, pricing details, and structural features may be adjusted prior to the August 7, 2026 pricing date based on market demand and issuer discretion.

The disclosure further states that this pricing supplement and the accompanying documentation do not constitute an offer to sell the Notes in any country or jurisdiction where such an offer would not be permitted under applicable securities laws. Investors should ensure they are eligible to purchase these Notes under their jurisdiction's securities regulations and should consult with their legal and tax advisors regarding the suitability and tax consequences of these structured products before making an investment decision.