Bank of America Launches Enhanced Return Notes Linked to Multiple Equity Indices Through July 2030

Structured Note Design and Payoff Mechanics

The Enhanced Return Notes represent a structured investment vehicle designed to provide investors with leveraged upside exposure to a basket of three equity indices and exchange-traded funds while capping downside protection at a specific threshold. According to the disclosure, if the ending value of the least-performing underlying exceeds its starting value on the valuation date, investors will receive 154.50 percent upside participation on increases in that benchmark. This structure means that for every one percent increase in the best-performing of the three underlyings, note holders capture 1.545 percent of the gain.

The note's redemption mechanics introduce several outcome scenarios depending on performance across all three linked assets. If the least-performing underlying closes between its starting value and 70 percent of that starting value, investors receive their full principal amount of $1,000.00 per note. However, if any underlying declines more than 30 percent from its starting value—meaning the least-performing underlying falls below 70 percent of its starting level—note holders face 1:1 downside exposure with potential loss of up to 100 percent of principal. This asymmetric payoff structure illustrates the fundamental risk-return tradeoff inherent in the product.

Underlying Assets and Performance Tracking

The notes track three distinct yet related equity benchmarks, each serving a different investment objective within the broader US equity market. The S&P 500 Equal Weight Index (Bloomberg symbol SPW) represents large-cap stocks with equal weighting across all constituents, creating exposure that differs from capitalization-weighted methodologies. The S&P 500 Index (Bloomberg symbol SPX), the most widely referenced US equity benchmark, maintains its traditional market-capitalization weighting. The iShares S&P 500 Growth ETF (Bloomberg symbol IVW) provides concentrated exposure to growth-oriented companies within the S&P 500 universe.

Performance measurement begins on the pricing date, July 23, 2026, when the starting value for each underlying is established using the closing level for the indices and closing market price for the ETF. The valuation date is set for July 23, 2030, subject to postponement under certain circumstances as described in the accompanying product supplement. Starting values capture the baseline against which all subsequent performance is measured, with the ending value determining which underlying performed least favorably. This multi-underlying structure introduces significant complexity into the note's return profile, as investors benefit from the strongest performer while their capital protection depends entirely on the weakest performer.

Issuance Terms and Pricing Structure

BofA Finance LLC is issuing the Enhanced Return Notes with a public offering price of $1,000.00 per note in minimum denominations of $1,000.00 with whole multiples above that threshold. The notes carry an underwriting discount of $2.00 per $1,000.00 in principal amount, resulting in proceeds to the issuer of $998.00 before expenses. For investors purchasing through fee-based advisory accounts, certain dealers may forgo selling concessions, potentially reducing the effective price paid to as low as $998.00 per note, though this represents the same net result after discount reduction.

The initial estimated value of the notes as of the pricing date is expected to fall between $935.00 and $985.00 per $1,000.00 in principal amount, representing a discount to the public offering price. This valuation gap reflects the company's internal funding rate, underwriting discounts, and hedging-related charges that reduce the economic value delivered to investors relative to the purchase price paid. The disclosure document notes that the actual value of the notes will reflect numerous factors and cannot be predicted with accuracy, indicating the complexity and forward-looking uncertainty embedded in these structured products.

Credit Support and Guarantee Structure

Bank of America Corporation provides a full and unconditional guarantee backing all payment obligations on the Enhanced Return Notes issued by BofA Finance LLC. This guarantee structure means that investors depend on the creditworthiness of Bank of America for ultimate repayment, linking the security of the investment directly to the credit risk of one of the world's largest financial institutions. The disclosure states that any payment on the notes is subject to the credit risk of both BofA Finance as issuer and Bank of America as guarantor, making credit quality assessment a critical component of investor due diligence.

The guarantee does not alter the economic performance characteristics of the notes; rather, it addresses counterparty risk in the event of issuer default. Under the terms outlined in the disclosure, if an event of default occurs and is continuing, the redemption amount payable would be calculated as though the acceleration date were the maturity date, with the valuation date moved to the third trading day prior to acceleration. The notes carry no default interest rate in the event of delayed payment at maturity or upon acceleration, meaning investors receive only the calculated redemption amount without additional compensation for timing delays.

Risk Factors and Capital Loss Exposure

The notes explicitly carry risks that conventional debt securities do not present, with the disclosure document dedicating substantial space to detailing these differences. The primary risk stems from the performance-dependent redemption mechanism: if the least-performing underlying declines by more than 30 percent from its starting value, investors absorb losses dollar-for-dollar with no floor protection. This downside structure creates scenarios where the entire $1,000.00 principal investment could be lost entirely, representing a 100 percent capital loss exposure that exceeds typical bond investments.

Secondary risks include the illiquidity of these notes, which will not be listed on any securities exchange. Investors holding these instruments until maturity in 2030 must be comfortable with the four-year holding period and the inability to readily exit positions in secondary markets. Additionally, the notes carry the full credit risk of Bank of America Corporation; any material deterioration in the guarantor's financial condition would directly impact the value and repayment certainty of these instruments. The disclosure emphasizes that the notes are not FDIC insured and are not bank guaranteed, distinguishing them from traditional bank deposits.

Economic Structure and Pricing Considerations

The economic foundation of these notes relies on Bank of America's internal funding rate—the rate at which the institution itself can borrow through market-linked note issuance. According to the disclosure, this internal funding rate is typically lower than the rate Bank of America would pay when issuing conventional fixed or floating rate debt securities. This funding rate advantage, combined with underwriting discounts and hedging charges, creates the gap between the public offering price of $1,000.00 and the initial estimated value range of $935.00 to $985.00.

Investors purchasing the Enhanced Return Notes effectively pay this valuation premium, accepting a reduction in initial asset value in exchange for structured upside participation and downside protection features. The disclosure notes that this premium reflects the costs embedded in hedging arrangements that Bank of America's affiliates undertake to manage the issuer's risk exposure. Sophisticated investors evaluating these notes must account for this built-in cost structure when assessing whether the 154.50 percent upside participation adequately compensates for the downside exposure and embedded charges.

Calculation Agent Role and Administrative Framework

BofA Securities, Inc., an affiliate of BofA Finance LLC, serves as both the calculation agent and selling agent for the Enhanced Return Notes. The calculation agent's responsibilities include determining starting values and ending values for each underlying on the specified dates, calculating the performance of the least-performing underlying, and computing the final redemption amount payable at maturity or upon acceleration. The role of calculation agent introduces a potential conflict of interest, as the entity performing calculations is affiliated with the issuer whose economic interests may diverge from those of note holders in edge cases or disputed valuations.

The disclosure provides specific mechanics for value determination: starting values are established using closing levels on the pricing date, while ending values use closing levels or closing market prices on the valuation date of July 23, 2030. For the iShares S&P 500 Growth ETF, ending values are multiplied by a price multiplier set at 1, subject to adjustment for certain corporate events affecting the ETF as described in anti-dilution provisions. These administrative details establish the framework within which note holders' returns are ultimately calculated and paid out at maturity.

Registration and Regulatory Compliance Status

The Enhanced Return Notes are registered under Securities Act of 1933 registration statement numbers 333-290665 and 333-290665-01, with the pricing supplement filed pursuant to Rule 424(b)(2) on July 22, 2026. This regulatory structure places the offering within the standard registration process for structured notes and derivative securities. The disclosure document notes that the Securities and Exchange Commission, state securities commissions, and other regulatory bodies have not approved or disapproved these securities, and no determination has been made regarding the truthfulness or completeness of the offering materials, a standard disclaimer that applies to all registered securities offerings.

The pricing supplement is labeled as preliminary and subject to completion, indicating that certain terms and conditions remain to be finalized in the definitive pricing supplement upon completion of the offering. The CUSIP number 09712G6Q2 provides the permanent identifier for these securities across financial systems and databases. Investors should expect the final prospectus materials to contain additional specific information regarding final pricing, exact starting values established on July 23, 2026, and other operational details that cannot be confirmed until the note pricing process concludes.

Timeline and Operational Milestones

The disclosure establishes several critical dates for investors to track regarding the lifecycle of these Enhanced Return Notes. The pricing date is scheduled for July 23, 2026, when the starting values for all three underlyings will be fixed based on market closing levels. The issue date follows on July 28, 2026, marking when investors' capital is deployed and the note holders' exposure to market movements begins. From this point, the notes will accrue value or depreciate based on the performance of the three linked underlyings relative to their starting values established on the pricing date.

The valuation date is set for July 23, 2030, exactly four years after pricing, at which point the ending values for all underlyings will be determined using closing prices on that date. The maturity date of July 26, 2030 follows three business days later, when redemption amounts are calculated and payments are made to note holders. The disclosure notes that all these dates are subject to change, indicating that postponement provisions exist under certain circumstances, particularly if market disruptions or calculation issues arise that prevent accurate determination of index or ETF values on the scheduled dates.

Suitability Considerations and Investor Implications

The Enhanced Return Notes represent a complex structured product requiring investors to understand multiple layers of risk and return dynamics. The 154.50 percent upside participation provides meaningful leverage to equity market gains, but only if all three underlyings finish above their starting values simultaneously. The more likely scenario involves at least one underlying declining, shifting the focus entirely to the least-performing benchmark for return determination. Investors must be comfortable with this best-of-three performance dynamic and the asymmetry it creates in how upside gains versus downside losses are calculated.

The four-year locked holding period, combined with the absence of periodic interest payments and no secondary market liquidity, makes these notes suitable only for investors with extended investment horizons and no anticipated need to access capital before July 2030. The potential for 100 percent principal loss if the least-performing underlying declines more than 30 percent introduces meaningful downside risk that conservative portfolios typically avoid. Investors considering these notes should ensure they understand the payoff structure completely and can afford the possibility of total capital loss without jeopardizing their overall financial security.