Bank of America Finance Issues $18.9 Million Contingent Income Callable Yield Notes Linked to Multiple Stock Market Indices

Structured Note Terms and Underlying Index Linkage

The notes issued by BofA Finance LLC represent a structured investment product that ties investor returns to the simultaneous performance of three major U.S. equity indices. The Nasdaq-100 Index began at 28,592.66, the Russell 2000 Index at 2,962.217, and the S&P 500 Index at 7,457.69 as of the July 17, 2026 pricing date. These starting values establish the baseline against which future index levels will be measured to determine whether contingent coupon payments are triggered and what principal repayment investors receive at maturity.

The notes carry an approximate three-year maturity with a stated maturity date of July 20, 2029, unless the issuer exercises its optional redemption right. The structure requires all three underlying indices to remain above specified coupon barriers for investors to receive semi-annual contingent coupon payments. Each barrier is set at precisely 60% of the respective index's starting value: the Nasdaq-100 barrier at 17,155.60, the Russell 2000 barrier at 1,777.330, and the S&P 500 barrier at 4,474.61. This means that if any single index falls below its barrier on an observation date, no contingent coupon payment will be made for that period, regardless of the performance of the other two indices.

Contingent Coupon Payment Mechanics and Observation Dates

The filing discloses that contingent coupon payments of $52.00 per $1,000 in principal amount (representing 5.20% semi-annually or 10.40% annualized) will be paid on semi-annual observation dates only if the closing level of each underlying index on that date equals or exceeds its coupon barrier. Observation dates scheduled in the pricing supplement occur on January 19, 2027, July 19, 2027, January 18, 2028, July 17, 2028, January 17, 2029, and July 17, 2029. Corresponding contingent payment dates follow several business days later, with the final observation and payment occurring on the July 17, 2029 valuation date and July 20, 2029 maturity date respectively.

The contingent structure creates a binary outcome on each observation date: either all three indices remain above their barriers and the coupon is paid, or at least one index falls below its barrier and no payment is made that period. This all-or-nothing approach exposes investors to what is known as correlation risk—the possibility that while one or two indices perform adequately, weakness in a single index eliminates the entire semi-annual coupon payment. Over the approximately three-year term, investors face six scheduled observation dates, meaning the coupon payment can be canceled or reinstated multiple times depending on relative index performance.

Optional Call Feature and Early Redemption Rights

Beginning January 22, 2027, BofA Finance LLC retains the right to redeem all notes (but not partial amounts) at its sole discretion on any semi-annual call payment date. Call payment dates align with the contingent payment dates, giving the issuer the opportunity to terminate the notes at six potential redemption windows before the stated maturity date of July 20, 2029. When exercising the call option, the issuer must provide notice to the trustee at least five business days but not more than 60 calendar days prior to the applicable call payment date.

Upon optional early redemption, investors receive the early redemption amount, which equals $1,000 per note plus any applicable contingent coupon payment if the observation value of each underlying on the corresponding observation date meets or exceeds its coupon barrier. The issuer's call right creates timing uncertainty for investors, as a favorable market environment that would typically benefit note holders—rising index levels generating coupon payments—may also incentivize the issuer to call the notes and terminate investor participation in further upside. This asymmetry is characteristic of callable structured products and represents a material consideration for prospective purchasers evaluating expected returns.

Principal Repayment at Maturity and Downside Exposure

The final redemption amount depends critically on the performance of the least-performing (worst-performing) of the three underlying indices, rather than the average or equally-weighted performance. If the least-performing underlying index closes on the valuation date at or above 60% of its starting value (its threshold value), investors receive full principal repayment of $1,000 per note. Specifically, the filing states that if the ending value of the least-performing underlying is greater than or equal to its threshold value, the redemption amount equals the full principal amount.

Conversely, if the least-performing underlying declines by more than 40% from its starting value, the redemption amount will be less than $1,000 per note, and investors face direct 1:1 downside exposure to losses in that worst-performing index, with up to 100% of principal at risk. For example, if the Nasdaq-100 Index serves as the least-performing underlying and declines 50% from its starting level, investors would receive redemption proceeds equal to 50% of the principal amount, representing a complete loss of 50% of their initial investment. This structure creates a maximum loss scenario where investors could lose their entire principal amount if the worst-performing index declines by more than 100% (an event requiring an index to reach zero), though the practical risk is capped at the issuer's credit quality.

Credit Risk and Guarantee Structure

All payments on the notes, including contingent coupons, early redemption amounts, and final principal repayment, are subject to the credit risk of both BofA Finance LLC as the direct issuer and Bank of America Corporation as the guarantor. The notes are fully and unconditionally guaranteed by Bank of America Corporation, meaning that if BofA Finance fails to meet its obligations, Bank of America guarantees payment. However, this guarantee does not eliminate the credit risk inherent in the investment; rather, it substitutes the credit quality of Bank of America for that of the subsidiary issuer. In the event of either entity's insolvency or default, investors' recovery would be limited to the entity's remaining assets available to creditors, with structured notes typically ranking as unsecured debt.

The notes are explicitly not FDIC-insured, not bank-guaranteed in the traditional sense, and are subject to the full credit risk of the Bank of America corporate family. Unlike traditional bank deposits, there is no government insurance protecting investors from principal loss in the event of issuer default. The pricing supplement notes state clearly that the notes "May Lose Value," and this credit risk layer applies in addition to the market risk tied to index performance. Investors evaluating these notes must consider not only the probability that underlying indices will perform as required to generate coupons and preserve principal, but also the ongoing creditworthiness of Bank of America Corporation throughout the three-year term.

Pricing and Initial Valuation Details

The notes were offered at a public offering price of $1,000.00 per note, with total proceeds of $18,916,000 from the issuance of 18,916 notes. The filing discloses that no underwriting discount was charged, meaning the full public offering price of $1,000 per note represents the proceeds to BofA Finance before distribution expenses. However, an affiliate of BofA Finance may pay a referral fee of up to $4.50 per $1,000 in principal amount to other registered broker-dealers participating in distribution of the notes, representing a form of indirect compensation built into the economics of the offering.

The initial estimated value of the notes as of the pricing date was $986.30 per $1,000 principal amount, representing a $13.70 per note discount to the public offering price. This valuation gap indicates that the embedded features of the notes—specifically the contingent coupon structure, the downside risk at maturity, and the issuer's call option—collectively reduced the theoretical value below the offering price. The filing explicitly states that actual note values at any subsequent time "cannot be predicted with accuracy" and will reflect many factors including changes in index levels, volatility, time to maturity, and credit conditions affecting Bank of America. The notes are not listed on any securities exchange, meaning secondary market liquidity may be limited or absent, potentially making it difficult for investors to sell before maturity.

Registration and Distribution Information

The notes were issued pursuant to registration statements numbered 333-290665 and 333-290665-01, with the pricing supplement filed on July 17, 2026 under Rule 424(b)(2) of the Securities Act of 1933. The offering was made under a prospectus dated December 8, 2025, a Series A prospectus supplement dated December 8, 2025, and Product Supplement EQUITY-1 also dated December 8, 2025. These documents collectively establish the legal framework and disclosure requirements governing the notes. BofA Securities, Inc., an affiliate of the issuer, served as both the calculation agent responsible for determining index levels and contingent coupon payments, and as the selling agent distributing the notes to investors.

The notes were assigned CUSIP number 09712CZ30, enabling standardized identification and tracking in securities clearance and settlement systems. The pricing date of July 17, 2026 and issue date of July 22, 2026 represent a five-business-day settlement period, during which investors' funds were held in escrow pending final issuance of the notes. The use of BofA Securities as both calculation agent and selling agent creates a potential conflict of interest, as the firm benefits from the referral fees paid by the issuer while simultaneously determining the index levels that trigger payment obligations, though this arrangement is disclosed in the offering documents.

Risk Factors and Investor Considerations

The pricing supplement directs investors to comprehensive risk factor discussions beginning on page PS-9 of the pricing supplement itself, as well as related risk sections in the accompanying product supplement, prospectus supplement, and base prospectus. The filing emphasizes that "there are important differences between the Notes and a conventional debt security," highlighting that these are not straightforward bonds but rather complex derivative instruments with multiple embedded optionality features and performance conditions. The contingent coupon structure means investors face the risk of receiving no income during periods when any underlying index underperforms, despite potentially making semi-annual coupon payments on conventional bonds with similar maturity.

The downside exposure structure creates what is sometimes called "worst-of" risk, where investors must monitor all three indices and are affected by the worst performer. If investors were bullish on the Nasdaq-100 and Russell 2000 but bearish on the S&P 500, they would still receive full principal repayment only if the S&P 500 avoids a 40% decline, despite their positive outlook on the other two indices. Additionally, the call feature means investors' potential returns are capped—the issuer will redeem the notes if markets rally and index levels surge, forcing investors to reinvest proceeds in presumably lower-yielding environments. These structural features collectively position the notes as intermediate-to-advanced products more suitable for sophisticated investors comfortable with complex leverage and contingency terms rather than traditional yield-seeking investors.

Market Context and Index Performance Baseline

The starting values recorded on the July 17, 2026 pricing date provide context for understanding how much movement in each underlying index is required to breach the coupon barriers and threshold values. The Nasdaq-100 Index began at 28,592.66, meaning it must remain above 17,155.60 (a 40% decline threshold) to avoid triggering the worst-case redemption scenario. For reference, a 40% decline from 28,592.66 would bring the Nasdaq-100 to approximately 17,155.60, demonstrating the precise correlation between the stated barrier levels and the percentage declines specified in the terms.

The Russell 2000 Index's starting value of 2,962.217 creates a 60% barrier at 1,777.330, while the S&P 500 Index at 7,457.69 establishes its 60% barrier at 4,474.61. These specific index levels as of mid-July 2026 serve as the permanent reference point for all future calculations throughout the approximately three-year note term. Even if indices subsequently experience major rallies or declines, the starting values remain fixed and do not adjust, ensuring that the mathematical relationship between coupon barriers and principal repayment thresholds remains constant and predetermined from issuance through maturity.

Event of Default and Acceleration Provisions

The notes include standard event of default and acceleration provisions, with the specific triggers defined in the senior indenture governing BofA Finance's debt securities. Should an event of default occur and remain uncured, the notes may be accelerated, and noteholders would receive redemption amounts calculated as though the acceleration date were the maturity date and a valuation date were the third trading day prior to acceleration. This provision allows for early termination in scenarios where the issuer faces financial distress, though the redemption amount calculation methodology ensures consistency—investors receive the same formula-based payment they would receive at maturity, applied to index values as of the deemed valuation date.

Notably, the filing states that in the event of default, "the Notes will not bear a default interest rate." This means investors receive no compensation for the extended period during which the issuer failed to pay, and no additional interest accrues post-default. Any contingent coupon payment triggered upon acceleration would be prorated to reflect only the portion of the contingent payment period that elapsed before the acceleration date, further limiting investor compensation in stress scenarios. The absence of default interest represents an additional disadvantage compared to conventional bonds, where default interest typically continues accruing to incentivize timely cure or provide noteholders with compensation for extended delay.