BofA Finance Launches $3.29 Million Structured Notes Tied to Nasdaq-100, Russell 2000 & S&P 500 Performance

Structure and Contingent Coupon Details

These notes are a sophisticated structured product combining income generation with market-linked exposure across three major equity benchmarks. The contingent coupon payments require the Nasdaq-100, Russell 2000, and S&P 500 indices to close at or above 70% of their respective starting values on each monthly observation date to qualify for coupon payments. If even one index fails to meet this threshold, the monthly coupon of $8.50 per $1,000 principal is not paid.

At pricing, the starting values were Nasdaq-100 at 28,592.66, Russell 2000 at 2,962.217, and S&P 500 at 7,457.69. The 70% barrier levels set the performance hurdles investors must track during the 11-month term. This design creates asymmetric risk, as coupon payments depend on all three indices, while final maturity payoffs hinge on the worst-performing index, encouraging investors to assess diversified index performance.

Issuer Call Option and Early Redemption Terms

Starting October 22, 2026, about three months post-issuance, BofA Finance may redeem all outstanding notes at par plus any applicable contingent coupon if observation criteria are met. This call option introduces uncertainty for investors expecting to hold the notes until June 2027 maturity. The issuer can exercise this call monthly, allowing flexibility to manage liabilities if market conditions favor early redemption.

If called, investors receive $1,000 per $1,000 principal plus the contingent coupon, provided all indices exceed coupon barriers on the observation date. Early redemption offers no additional return beyond the coupon and principal, limiting upside while maintaining downside risk if notes are not called.

Principal Protection and Downside Risk

The notes feature a 30% decline threshold determining principal protection. If the weakest index declines 30% or less at maturity, investors receive full principal back. This protection focuses solely on the lowest-performing index, regardless of other indices' returns.

If the lowest-performing index falls more than 30%, investors incur losses 1:1 with that index’s decline, potentially receiving less than $700 per $1,000 principal. The filing warns investors could lose their entire investment. Additionally, the final contingent coupon depends on the weakest index closing at or above 70% of its starting value, meaning investors might receive reduced principal and no final coupon simultaneously.

Offering Details, Pricing, and Dealer Fees

Priced at $1,000 per $1,000 principal, the issuance totals $3.292 million. The underwriting discount is $15.50 per $1,000 (1.55% of par), totaling $41,268.52 in fees. The initial estimated value at pricing was $980.30 per $1,000, reflecting a $19.70 discount due to embedded costs and risk.

The prospectus notes some dealers for fee-based advisory accounts may waive selling concessions, offering notes at a minimum price of $984.50 per $1,000. BofA Finance affiliates may pay referral fees up to $3.00 per $1,000 to participating broker-dealers. These fees add to the embedded costs, reducing net investor returns.

Index Selection and Performance Impact

The three indices represent diverse market segments: Nasdaq-100 covers large-cap tech and growth stocks, Russell 2000 targets small-cap equities, and S&P 500 offers broad large-cap U.S. equity exposure. This diversity introduces correlation benefits but requires monitoring three distinct indices across multiple observation dates.

The "least performing" index methodology means the weakest index determines coupon eligibility and final redemption, regardless of gains in others. For example, if S&P 500 gains 5%, Nasdaq-100 gains 8%, but Russell 2000 falls 25%, the Russell 2000’s performance governs payouts. This structure protects the issuer and limits investors’ ability to offset weakness in one index with strength in others.

Guarantee and Credit Risk Considerations

Bank of America Corporation fully and unconditionally guarantees payments on these notes, backing BofA Finance’s obligations. Despite this, investors bear credit risk of both issuer and guarantor. The notes are not FDIC insured or bank guaranteed and may lose value, reflecting their unsecured status within BAC’s capital structure.

Note holders rank below senior debt and deposits in BAC’s capital hierarchy. In severe financial distress, recovery would only occur after higher-priority claims are met. The guarantee ensures BAC’s obligation but does not provide additional protection beyond BAC’s financial health.

Monthly Observations and Coupon Payments

Monthly observation dates throughout the 11-month term determine coupon eligibility based on indices closing at or above 70% barriers. Observation dates are detailed on page PS-4 of the pricing supplement. Contingent coupons of $8.50 per $1,000 (0.85% monthly) are paid when conditions are met.

Call payment dates beginning October 2026 coincide with contingent coupon dates, allowing investors to receive early redemption at par plus a final coupon if called when barriers are satisfied. BofA Securities Inc. serves as calculation agent, managing observations, coupon calculations, and redemption mechanics.

Risk Profile and Market Exposure

Returns depend on cumulative performance of three independent equity indices over 11 months. Market volatility causing any index to fall below thresholds can cancel monthly coupons. Investors risk losing 100% principal if the weakest index declines beyond 30% and remains depressed through maturity, despite the 10.20% annual coupon appearance.

Investors should assess the likelihood all three indices stay above 70% thresholds simultaneously. Although diversification reduces simultaneous collapse risk, it does not eliminate it during major downturns. The issuer call option adds uncertainty about holding through potential market recoveries.

Registration and Distribution Details

These notes were filed under SEC Rule 424(b)(2) with Registration Statement Nos. 333-290665 and 333-290665-01, including a base prospectus dated December 8, 2025, Series A Prospectus Supplement, and Product Supplement EQUITY-1. The July 17, 2026 pricing supplement incorporates these documents, providing full disclosure. Investors should review all related prospectus materials.

BofA Securities Inc. acts as selling agent. The notes are not exchange-listed, limiting liquidity options to secondary market transactions with dealers or counterparties. The CUSIP number 09712CJY0 identifies these notes for market tracking.

Valuation Date Adjustments and Default Provisions

The valuation date for final index levels is June 17, 2027, subject to postponement if index observation events occur. In case of default before maturity, redemption calculations treat the acceleration date as maturity, moving valuation to three trading days prior. Final coupon payments are prorated accordingly.

Default events are defined in the senior indenture and prospectus sections on BofA Finance debt defaults. Acceleration could trigger valuation before market conditions fully evolve, potentially resulting in redemption at reduced values if indices have declined. The interaction of default procedures with the contingent coupon structure means investors could face early redemption at depressed values if defaults coincide with index weakness.