BofA Finance Launches Three-Year Callable Yield Notes Tied to Nasdaq-100, Russell 2000, and S&P 500 Indices

Coupon Structure and Monthly Payment Details

The notes provide a contingent coupon payment of $9.375 per $1,000 principal monthly, equating to an 11.25% annualized rate. This payment depends on all three underlying indices—the Nasdaq-100, Russell 2000, and S&P 500—closing at or above 75% of their initial values on each monthly Observation Date.

If any index falls below the 75% threshold on an observation date, no contingent coupon is paid for that period. Payments occur monthly on designated Contingent Payment Dates, provided the notes have not been called earlier. The final contingent coupon, if earned, will be paid at maturity on August 2, 2029, subject to the same 75% barrier evaluation.

Issuer’s Early Redemption Rights and Call Features

BofA Finance may redeem all notes monthly starting February 4, 2027, at $1,000 principal plus any contingent coupon if the coupon barrier is met. This issuer call feature limits upside potential for investors during strong market performance. Notice to the trustee must be given between five business days and 60 calendar days before any Call Payment Date.

Once called, no further payments beyond redemption and final contingent coupon are made. This structure benefits the issuer by enabling early termination during market rallies, while investors retain downside exposure if markets decline. The call option starts roughly seven months post-issuance, restricting investors’ opportunity to capitalize on strong index gains before potential early redemption.

Principal Repayment and Downside Risk Thresholds

At maturity, principal repayment depends on the worst-performing index relative to a 60% threshold. If this index’s ending value is at or above 60% of its start, investors receive full $1,000 principal. If any index drops more than 40%, pushing the worst performer below 60%, investors face dollar-for-dollar losses on principal.

In severe downturns, investors may recover significantly less than their initial investment. The disclosure warns that "the Redemption Amount (excluding any final Contingent Coupon Payment) will be less than 60.00% of the principal amount and you could lose up to 100.00% of your investment in the Notes." This risk applies to the single weakest index, not an average, concentrating exposure to the poorest performing underlying.

Multi-Index Exposure and Worst Performer Methodology

The notes track three major U.S. equity indices simultaneously: Nasdaq-100 (large-cap tech and growth stocks), Russell 2000 (small-cap stocks), and S&P 500 (broad large-cap stocks). Returns are calculated on a price return basis without dividends. The "least performing underlying" is the index with the lowest percentage change from its start on valuation dates.

This multi-index design exposes investors to performance disparities across market segments. Strong Nasdaq-100 returns do not offset losses if Russell 2000 declines sharply, as payout depends on the weakest index. This asymmetry biases outcomes toward negative scenarios linked to the worst-performing index.

Pricing and Initial Valuation Insights

The public offering price is $1,000 per $1,000 principal, with an $8 underwriting discount, yielding $992 net proceeds before expenses for BofA Finance. The initial estimated value at pricing (July 30, 2026) is expected between $930 and $980 per $1,000 principal.

The gap between offering price and estimated intrinsic value reflects embedded costs, including the issuer’s call option and hedging expenses. Investors buying at $1,000 face an immediate estimated loss of $20 to $70 per $1,000 invested based on midpoint estimates. The disclosure notes that "the actual value of your Notes at any time will reflect many factors and cannot be predicted with accuracy," highlighting valuation complexities post-issuance.

Credit Guarantee and Issuer Details

Bank of America Corporation fully and unconditionally guarantees the notes, backing BofA Finance LLC’s payment obligations. This guarantee substitutes the issuer’s credit risk with that of Bank of America Corporation but does not eliminate credit risk entirely.

All payments—including coupons, early redemptions, and final principal—are subject to credit risk of both issuer and guarantor. The notes are not FDIC insured nor backed by any bank deposit insurance. In case of a credit event affecting Bank of America Corporation, payments may be delayed or reduced depending on bankruptcy or regulatory outcomes.

Terms, Registration, and Non-Exchange Trading Status

The notes are filed under Rule 424(b)(2) of the Securities Act of 1933, linked to Registration Statements Nos. 333-290665 and 333-290665-01. Documentation includes 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. The notes carry CUSIP number 09712GDB7.

These notes will not be listed on any securities exchange, resulting in no centralized secondary market. Investors seeking liquidity before maturity may face challenges selling holdings. BofA Securities, Inc., an affiliate, acts as calculation and selling agent. The non-listed status limits price transparency and may widen bid-ask spreads, potentially disadvantaging investors needing early liquidity before the August 2, 2029 maturity.

Default and Acceleration Provisions

In the event of default and permitted acceleration under the senior indenture, redemption amounts will be calculated as if the acceleration date were maturity and valuation date three trading days prior. The calculation agent will determine any final contingent coupon based on index levels at the deemed valuation date, prorated for the final payment period.

The disclosure specifies that "in case of a default in the payment of the Notes, whether at their maturity or upon acceleration, the Notes will not bear a default interest rate." This means unpaid amounts during default do not accrue additional interest, potentially disadvantaging noteholders compared to typical default protections in debt securities.

Risk Factors and Structural Complexity

Significant differences exist between these notes and traditional debt securities. Investors are advised to review risk factors starting on page PS-11 of the pricing supplement, page PS-3 of the product supplement, page S-7 of the prospectus supplement, and page 7 of the prospectus. Risks include market exposure to three equity indices, credit risk from issuer and guarantor, liquidity risk from non-exchange listing, and structural risks from contingent coupons and call features.

The initial estimated value’s unpredictability underscores the complexity and uncertainty in valuing derivative-based structured products with multiple underlying indices and conditional payments. Prospective investors should thoroughly examine all documentation to understand risks before investing.