BofA Finance Issues Contingent Income Callable Yield Notes Linked to Russell 2000, S&P 500, and Technology ETF

Contingent Income Structure and Monthly Coupon Mechanics

The notes feature a contingent coupon payment structure that ties investor income directly to the ongoing performance of three separate underlyings tracked simultaneously. Under the disclosed terms, BofA Finance will pay a monthly Contingent Coupon Payment of $12.334 per $1,000 in principal amount—equivalent to 1.2334% per month or 14.80% per annum—but only if the Observation Value of each of the three underlyings (Russell 2000 Index, S&P 500 Index, and State Street Technology Select Sector SPDR ETF) remains at or above 70% of its respective Starting Value on the applicable Observation Date, assuming the notes have not been called prior to that date.

This structure creates a barrier-based income mechanism where investors receive the full monthly payment only when all three underlyings meet the coupon barrier simultaneously. The filing indicates that Observation Dates occur monthly throughout the note's two-year term, with Contingent Payment Dates occurring on the same schedule. If any single underlying falls below its 70% coupon barrier on any observation date, investors would not receive the contingent coupon payment for that month, regardless of the performance of the other two underlyings. This all-or-nothing feature distinguishes the notes from conventional income-bearing securities and introduces performance dependency across multiple asset classes.

Downside Protection Threshold and Principal-at-Risk Mechanics

The pricing supplement discloses that the notes incorporate a threshold value set at 70% of each underlying's Starting Value, determining whether principal is returned at maturity or subject to downside exposure. If, at maturity on July 27, 2028, the Ending Value of the Least Performing Underlying (whichever of the three underlyings has declined the most) remains at or above its 70% Threshold Value, investors will receive their full principal amount of $1,000 per note plus any final Contingent Coupon Payment if applicable.

However, if the Ending Value of the Least Performing Underlying falls below 70% of its Starting Value, the Redemption Amount will be reduced accordingly, with investors facing 1:1 downside exposure to decreases in that underperforming index or ETF. The filing explicitly states that in this scenario, the Redemption Amount could fall below 70% of principal, and investors could lose up to 100% of their principal investment. This feature means that an investor's total return at maturity depends not on the average performance of the three underlyings, but on whichever single underlying performs worst—creating asymmetric risk exposure concentrated on the weakest performer.

Optional Early Redemption Rights and Call Mechanism

Beginning on October 27, 2026, the disclosure indicates that BofA Finance retains the right to redeem all (but not less than all) of the Notes at its sole option on any monthly Call Payment Date. The Early Redemption Amount per $1,000 in principal will equal the principal amount plus the applicable Contingent Coupon Payment if the Observation Value of each Underlying on the corresponding Observation Date is greater than or equal to its Coupon Barrier. The issuer must provide notice to the trustee at least five business days but not more than 60 calendar days before any intended Call Payment Date.

This embedded call option gives BofA Finance the ability to terminate the notes early, which typically occurs when the issuer's financing costs decline or when the notes trade above par value. Investors should note that once the notes are called, no further coupon payments or principal will be due, and the note position will be closed at the Early Redemption Amount. This feature essentially caps the upside return available to investors while preserving the issuer's option to exit the position when conditions are favorable to the issuer. The timing of the call window—beginning approximately three months after issuance—suggests the issuer may have optionality to manage its liabilities if market conditions warrant early termination.

Underlyings: Russell 2000, S&P 500, and XLK Technology ETF

The notes are linked to three distinct equity market benchmarks: the Russell 2000 Index (Bloomberg symbol RTY), a price return index reflecting small-cap U.S. equity performance; the S&P 500 Index (Bloomberg symbol SPX), a price return index tracking large-cap U.S. equity performance; and the State Street Technology Select Sector SPDR ETF (Bloomberg symbol XLK), an exchange-traded fund representing technology sector exposure within the broader market. Each underlying's Starting Value will be established as its closing level (or Closing Market Price for the XLK ETF) on the pricing date of July 22, 2026.

The filing specifies that the XLK undergoes a Price Multiplier adjustment of 1, subject to further adjustment for certain anti-dilution events relating to that ETF as detailed in the accompanying product supplement. The use of three distinct underlyings with different market segments—small-cap, large-cap, and technology sector—creates a diversified but complex performance dependency structure. The "Least Performing Underlying" determination at maturity means that even if two of the three underlyings perform well, the worst performer will determine the investor's principal repayment and exposure to downside risk, introducing concentration risk at the point of maturity redemption.

Pricing and Estimated Initial Valuation

The pricing supplement discloses that the Notes are expected to price on July 22, 2026, and issue on July 27, 2026, with a public offering price of $1,000.00 per $1,000.00 in principal amount. The underwriting discount is listed at $2.50 per note, resulting in proceeds before expenses to BofA Finance of $997.50 per $1,000 in principal amount. Certain dealers purchasing notes for sale to fee-based advisory accounts may forgo some or all of their selling concessions, with the public offering price potentially as low as $997.50 in these accounts.

The filing notes that the initial estimated value of the Notes as of the pricing date is expected to be between $940.00 and $990.00 per $1,000.00 in principal amount, which is less than the public offering price of $1,000.00. This valuation gap reflects the embedded optionality, contingency features, and credit risk incorporated into the notes. The disclosure further warns that the actual value of the notes at any time will reflect many factors and cannot be predicted with accuracy. Additionally, an affiliate of BofA Finance will pay a referral fee of up to $5.50 per $1,000 in principal amount in connection with distribution to other registered broker-dealers, adding to the total cost structure of the offering.

Credit Risk and Guarantee Structure

All payments on the notes, including contingent coupon payments, early redemption amounts, and maturity redemption amounts, are subject to the credit risk of BofA Finance LLC as the issuer of the notes. The notes are fully and unconditionally guaranteed by Bank of America Corporation (BAC), the parent company. This guarantee means that if BofA Finance fails to pay amounts due on the notes, investors would have recourse to BAC's creditworthiness and assets. However, the guarantee does not eliminate the credit risk—it transfers it to BAC, which itself is subject to systemic financial risk and regulatory supervision.

The filing clearly discloses that the Notes are not FDIC insured, not bank guaranteed in the traditional sense, and may lose value. This language indicates that despite BAC's guarantee, investors do not have the protections typically afforded to bank deposits. The credit risk component is particularly significant for structured notes because it means that even if the underlying indices perform favorably, if BAC's creditworthiness deteriorates materially, the value of the notes could decline or the issuer could default on its payment obligations. Investors are exposed to both market risk (via the underlying indices) and credit risk (via BAC's guarantee obligation).

Term, Maturity Timeline, and Observation Schedule

The notes have an approximate two-year term, with an Issue Date of July 27, 2026, and a Maturity Date of July 27, 2028. The Valuation Date—the date on which the Ending Values of the three underlyings are determined for purposes of calculating the final maturity redemption—is July 24, 2028, subject to postponement as described in the accompanying product supplement under "Events Relating to Observation Dates." The preliminary nature of the pricing supplement means that exact observation dates, contingent payment dates, and call payment dates are referenced as "as set forth beginning on page PS-4" and "as set forth beginning on page PS-5," indicating these schedules will be finalized in the complete pricing supplement.

The monthly Observation Date structure means that investors' coupon eligibility and the issuer's call optionality depend on index levels being measured 24 times over the two-year period, creating numerous decision and valuation points. Any postponement events relating to observation dates, as mentioned in the product supplement, could extend the timeline for determining final payouts. The Valuation Date falling three days before the Maturity Date allows for processing of final index values before redemption payments are calculated and disbursed.

Registration, Distribution, and Trading Restrictions

The notes are issued pursuant to Registration Statement Nos. 333-290665 and 333-290665-01 filed with the Securities and Exchange Commission under the Securities Act of 1933. The preliminary pricing supplement was filed on July 16, 2026, pursuant to Rule 424(b)(2), indicating that this is a preliminary offering document subject to completion and amendment before the notes are finalized and sold. The disclaimer language makes clear that the SEC, state securities commissions, or any other regulatory body have not approved or disapproved the securities, nor have they determined whether the documentation is truthful or complete.

The filing states that the Notes will not be listed on any securities exchange, meaning they will trade in over-the-counter secondary markets if at all. The CUSIP number 09712CA37 has been assigned for identification and settlement purposes. BofA Securities, Inc., an affiliate of BofA Finance, is named as both the Calculation Agent (responsible for computing observation values and payments) and the Selling Agent (responsible for distributing and marketing the notes). This dual role of affiliates in both calculation and sales creates potential conflicts of interest, though such arrangements are common in structured note offerings and are subject to the firm's internal governance and compliance controls.

Risk Factors and Structural Complexity

The disclosure references 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, indicating that comprehensive risk disclosures accompany this preliminary offering. The filing explicitly notes that there are important differences between the Notes and a conventional debt security, and potential purchasers should carefully review the risk section materials. Key structural risks include the contingent coupon mechanism (where investors receive zero coupon payments in months when any underlying falls below 70% of starting value), the "least performing underlying" feature (which concentrates downside risk on the worst-performing index), and the embedded call option (which allows the issuer to terminate the notes when conditions favor early redemption).

The structure also involves anti-dilution and discontinuance adjustment provisions relating to the XLK ETF, as referenced in the accompanying product supplement beginning on page PS-28. These provisions address situations where corporate actions, stock splits, or other events affecting the ETF might occur during the note's term. The notes' dependence on three separate market segments—small-cap equities, large-cap equities, and technology sector equities—creates correlation and diversification considerations that potential investors must evaluate. The possibility of losing up to 100% of principal investment if the least performing underlying declines more than 30% represents a significant tail risk that distinguishes these notes from conventional bonds or equity investments.