Bank of America Finance Launches $18.9 Million Callable Yield Notes Tied to Nasdaq-100, Russell 2000, and S&P 500 Indices

Details on Structured Note Terms and Index Linkage

The structured notes from BofA Finance LLC link investor returns to the combined performance of three major U.S. equity indices. The initial index values on July 17, 2026, were 28,592.66 for Nasdaq-100, 2,962.217 for Russell 2000, and 7,457.69 for S&P 500. These serve as baselines for measuring future index levels to determine coupon eligibility and principal repayment at maturity.

The notes have a maturity of approximately three years, maturing on July 20, 2029, unless called earlier by the issuer. To receive semi-annual contingent coupons, all three indices must remain above 60% of their initial values, specifically Nasdaq-100 at 17,155.60, Russell 2000 at 1,777.330, and S&P 500 at 4,474.61. If any index falls below its barrier on an observation date, no coupon is paid for that period, regardless of other indices’ performance.

Contingent Coupon Payment Structure and Observation Schedule

Contingent coupon payments of $52.00 per $1,000 principal (5.20% semi-annually or 10.40% annually) will be made only if all three indices close at or above their coupon barriers on observation dates. These dates are January 19, 2027; July 19, 2027; January 18, 2028; July 17, 2028; January 17, 2029; and July 17, 2029, with payments following several business days later. The final observation and payment occur on July 17 and July 20, 2029, respectively.

This binary payment structure means coupons are either fully paid or not paid at all on each observation date, exposing investors to correlation risk where a single index’s underperformance can eliminate the entire coupon payment despite others performing well. Over the three-year term, investors face six such observation dates, with coupon payments potentially fluctuating accordingly.

Issuer’s Optional Call and Early Redemption Rights

Starting January 22, 2027, BofA Finance LLC may redeem all outstanding notes on any semi-annual call date at its discretion. These call dates coincide with contingent coupon payment dates, providing six possible early redemption opportunities before maturity. The issuer must notify the trustee between five business days and 60 calendar days before exercising the call.

Upon early redemption, investors receive $1,000 per note plus any contingent coupon if all indices meet their coupon barriers on the observation date. The call feature introduces uncertainty, as a rising market that triggers coupon payments may also prompt the issuer to redeem notes early, capping investor upside. This callable structure is a key consideration for investors assessing expected returns.

Principal Repayment and Downside Risk at Maturity

Final principal repayment depends on the performance of the worst-performing index at maturity, not an average of all three. If the lowest-performing index closes at or above 60% of its initial value, investors receive full principal ($1,000 per note). If it declines more than 40%, principal is reduced dollar-for-dollar based on that decline, exposing investors to full downside risk with potential loss of up to 100% of principal.

For example, if the Nasdaq-100 is the worst performer and falls 50%, investors would receive 50% of their principal back. Although a total loss requires an index to drop to zero, the maximum loss is effectively capped by the issuer’s creditworthiness.

Credit Risk and Guarantee Details

Payments on the notes, including coupons, early redemptions, and principal, are subject to the credit risk of BofA Finance LLC and guaranteed by Bank of America Corporation. The guarantee replaces the issuer’s credit risk with that of Bank of America but does not eliminate credit risk altogether. In case of default or insolvency, investors’ recovery depends on the remaining assets of the issuer or guarantor, with these notes ranking as unsecured debt.

These notes are not FDIC-insured or traditionally bank-guaranteed and carry full credit risk of the Bank of America corporate family. The offering documents clearly state the notes "May Lose Value," highlighting the combined market and credit risks investors must consider over the three-year term.

Pricing and Initial Valuation Information

Offered at $1,000 per note, the issuance totaled $18,916,000 from 18,916 notes. No underwriting discount was applied, so proceeds before distribution expenses equal the full offering price. However, an affiliate of BofA Finance may pay referral fees up to $4.50 per $1,000 principal to participating broker-dealers, representing indirect compensation within the offering’s economics.

The initial estimated value on the pricing date was $986.30 per $1,000 principal, reflecting a $13.70 discount to the offering price due to the notes’ embedded risks and features. The filing notes that future values cannot be precisely predicted and depend on index performance, volatility, time remaining, and Bank of America’s credit conditions. The notes are not exchange-listed, which may limit secondary market liquidity and complicate early sales.

Registration and Distribution Details

The notes were issued under registration statements 333-290665 and 333-290665-01, with the pricing supplement filed July 17, 2026, pursuant to Rule 424(b)(2) of the Securities Act of 1933. The offering is governed by a prospectus dated December 8, 2025, a Series A prospectus supplement dated the same day, and Product Supplement EQUITY-1 also dated December 8, 2025. BofA Securities, Inc., an affiliate, acted as both calculation agent and selling agent.

Assigned CUSIP 09712CZ30, the notes settled over five business days from pricing to issuance. The dual role of BofA Securities as calculation and selling agent presents a potential conflict of interest, as it benefits from referral fees while determining index levels that affect payment obligations, though this is disclosed in offering materials.

Risk Factors and Important Investor Considerations

The pricing supplement highlights extensive risk factors starting on page PS-9, emphasizing that these notes differ significantly from conventional debt securities. The contingent coupon structure means investors may receive no income during periods when any underlying index underperforms, unlike traditional bonds with fixed coupons.

The "worst-of" risk exposes investors to the poorest performing index, meaning a bearish outlook on one index can jeopardize full principal repayment even if the other two perform well. Additionally, the call feature caps potential gains by allowing early redemption during favorable market conditions. These complexities make the notes more suitable for sophisticated investors familiar with leverage and contingent payout structures rather than typical yield-focused investors.

Market Context and Index Reference Levels

The July 17, 2026 starting values establish the thresholds for coupon eligibility and principal repayment. For example, the Nasdaq-100 must remain above 17,155.60 (60% of 28,592.66) to avoid principal loss. Similarly, the Russell 2000’s barrier is 1,777.330, and the S&P 500’s is 4,474.61. These fixed reference points remain unchanged throughout the note term, ensuring consistent application of terms regardless of market fluctuations.

Default and Acceleration Provisions

The notes include standard default and acceleration clauses as defined in the senior indenture for BofA Finance’s debt. If a default occurs and is not remedied, notes may be accelerated, with redemption amounts calculated as if the acceleration date were maturity, based on index levels three trading days prior.

Notably, the notes do not accrue default interest post-default, meaning investors receive no additional compensation for delayed payments. Any contingent coupon due upon acceleration is prorated for the elapsed period before acceleration. This absence of default interest contrasts with conventional bonds and represents an additional risk factor.