Bank of America Finance Launches Callable Contingent Income Securities Tied to Three Major U.S. Equity Indices

Structure and Core Investment Terms of the Callable Securities

BofA Finance LLC is offering Callable Contingent Income Securities that are structured around three major U.S. equity indices: the S&P 500 Index, the Russell 2000 Index, and the NASDAQ-100 Index. The securities carry a stated principal amount of $1,000 per security and an issue price of $1,000 per security. The maturity date is set for August 3, 2028, making this a two-year structured investment product. All payments on the securities are fully and unconditionally guaranteed by Bank of America Corporation, positioning these as senior debt securities within BofA Finance's Medium-Term Notes, Series A program.

The original issue date is scheduled for August 5, 2026, which is three business days after the pricing date of July 31, 2026. The estimated value on the pricing date falls between $920.00 and $970.00 per $1,000 in principal amount, which the disclosure notes is less than the price to public of $1,000. This valuation reflects the embedded derivative risk and the contingent nature of the coupon payments. The pricing supplement indicates that the actual value of the securities at any time will reflect numerous factors and cannot be predicted with accuracy.

Contingent Quarterly Coupon Payment Mechanism

The securities will pay a contingent quarterly coupon only if the index closing value of each of the three underlying indices on each index business day during the applicable quarterly observation period remains at or above 60% of its respective initial index value, referred to as the coupon barrier level. If the index closing value of any single underlying index falls below the coupon barrier level for that index on any index business day during an observation period, the investor will receive no contingent quarterly coupon for that entire quarterly period. This "worst of" structure means that weakness in any one index can eliminate coupon payments even if the other indices perform strongly.

The contingent quarterly coupon rate is specified as at least $22.50 per security, equal to a rate of at least 2.25% per quarter or at least 9.00% per annum, with the actual rate to be determined on the pricing date. This above-market coupon rate compensates investors for the substantial risk that they may receive few or no contingent quarterly coupons throughout the entire two-year term if any underlying index closes below the coupon barrier level during most or all of the observation periods. Investors must be willing to accept the risk of not receiving any quarterly coupon payments during the entire term of the securities.

Maturity Payment Structure and Principal-at-Risk Features

At maturity, if the securities have not previously been redeemed, the payment received depends critically on the final index values of all three underlying indices relative to the downside threshold level of 60%. If the final index value of each underlying index is greater than or equal to 60% of the respective initial index value, investors will receive the stated principal amount plus any contingent quarterly coupon otherwise due with respect to the final observation period. However, if the final index value of any underlying index is less than its downside threshold level, investors will experience losses based on the worst-performing index.

In the adverse scenario where any index closes below the downside threshold level, investors will be exposed to the decline in the worst-performing underlying index on a 1-to-1 basis. The payment at maturity will equal the stated principal amount multiplied by the index performance factor of the worst-performing index. This could result in a payment significantly less than 60% of the stated principal amount and could theoretically be zero if an index declines to zero. The disclosure explicitly states that investors must be willing to accept the risk of losing their entire initial investment based on the performance of any underlying index.

Issuer Redemption Rights and Call Feature

Beginning on November 5, 2026, BofA Finance has the right to redeem the securities at its discretion on any quarterly redemption date. The redemption payment equals the sum of the stated principal amount plus any contingent quarterly coupon otherwise due with respect to the related observation period. This call feature gives the issuer the ability to terminate the securities early if market conditions become unfavorable for the issuer, potentially limiting upside participation for investors while retaining downside risk until redemption occurs.

The issuer is required to provide notice to the trustee at least five business days but not more than 60 calendar days before the applicable redemption date. The disclosure notes that an early redemption of the securities will not automatically occur based on the performance of the underlying indices but rather occurs at the issuer's discretion. Once the securities have been redeemed, no further payments will be made on them, meaning investors lose any future opportunities for contingent coupon payments or potential recovery at maturity.

Participation and Downside Risk Characteristics

The securities are structured so that investors will not participate in any appreciation in any underlying index. The payment structure is designed to provide fixed income-like benefits through contingent coupons rather than equity appreciation. Even if all three underlying indices appreciate substantially from their initial values, investors receive only the stated principal amount at maturity plus any earned contingent coupons, with no upside participation. This asymmetry—full downside risk coupled with no upside participation—represents a key characteristic of these structured securities.

Because payments on the securities are based on the worst-performing of the three underlying indices, a decline beyond the coupon barrier level on any index business day during an observation period or beyond the downside threshold level on the final observation date of any index will result in forfeiture of contingent coupons and potentially significant loss of principal. The "worst of three" feature means that investors effectively own three short put options simultaneously, creating compounding risk exposure. Even if two of the three indices perform well, poor performance by a single index can eliminate quarterly coupon payments or trigger substantial principal losses.

Credit Risk and Guarantee Structure

All payments on the securities are subject to the credit risk of BofA Finance as the issuer and Bank of America Corporation as the guarantor. The disclosure states that if BofA Finance defaults on its obligations, investors could lose some or all of their investment. These securities are not secured obligations, meaning investors will not have any security interest in or otherwise have any access to any underlying reference asset. The credit enhancement provided by BAC's guarantee does not eliminate credit risk but rather substitutes the credit quality of Bank of America for that of the finance subsidiary.

The guarantee is described as "fully and unconditionally guaranteed by Bank of America Corporation," which means BAC's creditworthiness is essential to the security of principal and coupon payments. However, investors should recognize that the guarantee does not protect against market risk or the contingent coupon structure; it only covers the issuer's ability to make payments when they are otherwise due. In a stress scenario affecting Bank of America, investors would face both market risk and credit risk simultaneously.

Commission Structure and Pricing Economics

The price to public for each security is $1,000, with total agent commissions and fees of $15.00 per security, while BofA Finance receives net proceeds of $980.00 per security. Morgan Stanley Wealth Management and its financial advisors will receive from the agent BofAS a fixed sales commission of $15.00 for each security they sell. Additionally, a structuring fee of $5.00 per security is payable to Morgan Stanley Wealth Management by the agent or its affiliates, which is embedded within the total commission structure.

The estimated value on the pricing date of between $920.00 and $970.00 per $1,000 in principal amount is materially lower than the $1,000 issue price, reflecting the embedded cost of the derivative features and the risk characteristics of the contingent coupon structure. This valuation difference of approximately $30 to $80 per $1,000 principal represents the economic cost of the embedded options and represents a real loss of value from the investor's purchase price. The disclosure notes that the actual value will reflect many factors and cannot be predicted with accuracy, acknowledging the complexity of valuing these structured investments.

Key Risk Factors for Potential Investors

The disclosure emphasizes that there are important differences between these securities and conventional debt securities. Investors must be willing to accept the risk of losing their entire initial investment based on the performance of any underlying index. The securities do not guarantee repayment of principal and do not provide for regular payment of interest in the traditional sense; instead, they offer contingent quarterly coupons that may not be paid at all if any index breaches the coupon barrier level. The probability that investors will receive few or no contingent quarterly coupons is explicitly acknowledged as a realistic possibility.

The disclosure states that these securities are not deposits or savings accounts and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency or instrumentality. They are not obligations of or guaranteed by a bank in the deposit sense, despite the Bank of America guarantee applying only to credit risk. Investors considering these securities should carefully review the risk factors detailed in the pricing supplement and accompanying product supplement and prospectus, which outline the specific risks associated with contingent coupon structures, principal-at-risk features, and the worst-of-three index mechanics.

Regulatory Status and Investor Considerations

The securities are offered under a pricing supplement filed pursuant to Rule 424(b)(2) under the Securities Act of 1933, with underlying registration statements Nos. 333-290665 and 333-290665-01. The prospectus materials include a prospectus dated December 8, 2025, a Series A Prospectus Supplement dated December 8, 2025, and Product Supplement EQUITY-1 dated December 8, 2025. This preliminary pricing supplement is marked as subject to completion, indicating that final terms may differ from those presented in this document.

The SEC has not approved or disapproved these securities or determined whether the pricing supplement and accompanying materials are truthful or complete. Investors should approach these securities as complex financial instruments requiring thorough due diligence and understanding of the contingent coupon mechanics, principal-at-risk features, and the worst-of-three index structure. The immediate share price impact was not clear from available public information, as these are structured products rather than equity securities with traditional trading dynamics.