Bank of America Finance Launches $1.516 Billion Callable Yield Notes Linked to Nasdaq-100, Russell 2000, and S&P 500 Performance

Note Structure and Contingent Coupon Payment Details

These Contingent Income Issuer Callable Yield Notes, issued by BofA Finance LLC and fully guaranteed by Bank of America Corporation, are linked to three major equity indices: Nasdaq-100, Russell 2000, and S&P 500. The notes require all three indices to meet performance conditions for coupon payments. Starting values set on July 15, 2026, were 29,502.60 for Nasdaq-100, 2,976.259 for Russell 2000, and 7,572.40 for S&P 500.

Coupon payments are made monthly at $10.625 per $1,000 principal (1.0625% monthly, 12.75% annualized) if each index closes at or above 70% of its start value. The 70% barriers correspond to 20,651.82 (Nasdaq-100), 2,083.381 (Russell 2000), and 5,300.68 (S&P 500). If any index closes below its barrier on an observation date, no coupon is paid that month, regardless of other indices' performance.

Issuer’s Monthly Callable Feature and Early Redemption Terms

Starting October 22, 2026, BofA Finance LLC can call the notes monthly at par plus any contingent coupon due on the call date. Notices must be given between five business days and 60 calendar days before the call date. This embedded call option benefits the issuer by allowing early redemption if market conditions make the 12.75% coupon less favorable or if index performance adversely affects hedging. Early redemption pays $1,000 per $1,000 principal plus the contingent coupon if applicable.

For investors, the callable feature poses reinvestment risk, as early calls during lower interest rate environments may force reinvestment at reduced yields. It also limits upside potential since the issuer is likely to call notes during strong market rallies to reduce funding costs, leaving investors exposed to downside risk without full market appreciation.

Downside Exposure and Maturity Payoff Scenarios

If not called, at maturity on July 20, 2029, investor returns depend on the worst-performing index. If the lowest index remains at or above 70% of its start value, investors receive $1,000 per $1,000 principal plus any final coupon. If it declines more than 30%, investors incur a 1:1 loss relative to that decline, potentially losing the entire principal.

For example, if the Russell 2000 falls to 2,083.381 (70% of 2,976.259), investors get full principal back. But a drop to 1,983.38 (66.67%) results in a $333.30 loss per $1,000 invested. The filing warns that losses could reach 100% if the worst-performing index falls sufficiently below the 30% decline threshold.

Pricing and Initial Valuation Discount

Priced at $1,000 per note on July 17, 2026, with a $1.50 underwriting discount, BofA Finance netted $998.50 per note before expenses. Total issuance was $1.516 billion, with $2.274 million underwriting fees and net proceeds of approximately $1.5137 billion. The initial estimated value was $993.40 per $1,000 note, below the offering price, reflecting the cost of embedded call options and contingent coupon features.

Investors buying at par pay a premium over estimated fair value. Some dealers waive selling concessions for fee-based advisory accounts, allowing purchases closer to $998.50, aligning more closely with estimated value.

Index Selection and Performance Measurement Methodology

The notes apply a "least performing underlying" approach, meaning the final payoff depends on the single worst-performing index among Nasdaq-100, Russell 2000, and S&P 500. This disadvantages investors by reducing the chance of strong returns while maintaining full downside exposure. The strike date was July 15, 2026, with starting values above the pricing date closing levels (July 17, 2026), requiring indices to rally from pricing levels to reach strike values.

Monthly observations occur on the 17th of each month from August 2026 through July 2029, with the final valuation on July 17, 2029. Index closing levels on these dates determine coupon eligibility and maturity payoffs.

Bank of America Corporation Guarantee and Credit Risk

Payments are subject to credit risk of BofA Finance LLC as issuer and Bank of America Corporation as guarantor. The full, unconditional guarantee means Bank of America Corporation must fulfill obligations if BofA Finance defaults. The guarantee extends credit exposure to the parent but does not eliminate credit risk. A deterioration in Bank of America’s credit quality would likely widen credit spreads and reduce secondary market value.

The guarantee is senior and unsecured, with no collateral backing. The notes are not FDIC insured or bank guaranteed in a deposit insurance sense, so investors risk principal loss despite the corporate guarantee.

Registration and Secondary Market Liquidity Limitations

Issued under SEC registration numbers 333-290665 and 333-290665-01, the offering is a Rule 424(b)(2) prospectus supplement dated December 8, 2025, with CUSIP 09712GZS6. The notes are not listed on any exchange, including Nasdaq or NYSE.

Absence of exchange listing limits liquidity. BofA Securities, Inc. acts as selling and calculation agent but does not guarantee secondary market liquidity. Investors seeking early sale must find buyers at negotiated prices, which may be affected by credit spreads, volatility, and index performance. Investors should plan to hold notes to maturity unless accepting potential liquidity challenges.

Timeline and Important Dates

The strike date was July 15, 2026, setting starting index values. Pricing occurred July 17, 2026, establishing the $1,000 public offering price and $993.40 estimated value. Issue date is July 22, 2026, marking investment start. The notes mature on July 20, 2029, if not called earlier.

Monthly observation dates fall on the 17th from August 2026 to July 2029, determining monthly coupon payments. Call dates begin October 22, 2026, and continue monthly. The final valuation date is July 17, 2029, subject to postponement per product terms. Investors should monitor these dates for coupon eligibility and issuer call decisions.

Investment Considerations and Comparative Analysis

These Contingent Income Issuer Callable Yield Notes offer higher yields than conventional Bank of America debt but carry significant structural risks uncommon in traditional bonds. The 12.75% contingent coupon compensates for risks including coupon uncertainty, downside exposure, call risk, and limited liquidity. Investors should assess if the yield adequately offsets these asymmetric risks.

The least-performing underlying structure reduces return potential by tying payoffs to the worst index, increasing risk compared to average or best-performing index-linked notes. Investors seeking equity exposure without downside risk may prefer index or diversified equity funds over these complex structured notes. The callable feature further caps upside, as issuer calls during strong markets limit investor gains.