BofA Finance Launches $8.4 Million Buffered Digital Return Notes Linked to Three Major Market Indices

Structure and Underlying Indices of the Buffered Notes

The notes are structured as digital return instruments linked to the performance of three separate price return indices tracked simultaneously. The three underlying indices—the Nasdaq-100 Technology Sector Index (ticker NDXT), Russell 2000 Index (ticker RTY), and S&P 500 Index (ticker SPX)—each establish a starting value on the pricing date that serves as the benchmark against which ending values are measured at maturity. The starting values disclosed in the pricing supplement are NDXT at 16,620.54, RTY at 2,974.567, and SPX at 7,533.77. The note structure requires measurement of all three indices simultaneously, with the "least performing" index determining the ultimate payout outcome for investors.

The use of three major indices creates a diversified underlying reference, spanning large-cap equities via the S&P 500, small-cap equities via the Russell 2000, and technology-focused large-cap stocks via the Nasdaq-100 Technology Sector Index. This multi-index approach means that the final payment depends on which of the three indices performs worst relative to its starting value. Investors do not participate in the gains of the best-performing indices; only the weakest performer determines whether the digital payment is received or whether losses are incurred. This design exposes note holders to the downside risk of the worst-performing sector or market segment represented among the three indices during the 15-month term.

Digital Payment Mechanics and Upside Scenario

If the ending value of each of the three underlying indices remains at or above 80 percent of its respective starting value on the valuation date of October 18, 2027, investors will receive a digital payment of $1,160.50 per $1,000 in principal amount at maturity. This payout represents a return of 16.05 percent over the principal amount invested. The threshold value for each index—80 percent of its starting value—creates a buffer that allows modest declines without triggering downside exposure. Specifically, the threshold values disclosed are NDXT at 13,296.43, RTY at 2,379.654, and SPX at 6,027.02.

The digital payment structure is binary in the upside scenario; there is no graduated participation in index gains. Investors receive the fixed $1,160.50 payment regardless of whether the indices are at exactly 80 percent of starting values or substantially higher at maturity. This means that strong market performance above the 80 percent threshold does not increase the investor's return. The threshold rate, calculated as the starting value of the least performing underlying divided by its threshold value, equals 125 percent, meaning the weakest index must deliver returns of negative 20 percent or better for the full digital payment to be earned. Any index decline greater than 20 percent triggers the downside scenario.

Downside Exposure and Leveraged Loss Mechanics

The pricing supplement discloses that if any single underlying index declines by more than 20 percent from its starting value, investors face leveraged downside exposure on the least performing underlying beyond that 20 percent decline. In this adverse scenario, the redemption amount per $1,000 in principal will be less than the principal amount, and investors could lose up to 100 percent of their investment in the notes. The structure provides no floor or principal protection once the 20 percent threshold is breached on the worst-performing index.

This leveraged downside mechanism means that losses accelerate as the least performing index declines further below the 20 percent threshold. For example, if the Russell 2000 declines 30 percent while the other two indices remain above their 80 percent thresholds, the investor experiences losses on a leveraged basis tied to that additional 10 percent decline beyond the 20 percent buffer. The exact calculation methodology for losses beyond the threshold is inherent in the redemption amount formula, though the pricing supplement does not provide explicit leverage ratios or detailed loss scenarios beyond confirming the 100 percent maximum loss exposure. Investors in this product face binary outcomes: either they receive 16.05 percent upside, or they incur losses tied to the weakness of the worst-performing index among the three.

Pricing, Discounts, and Initial Estimated Value

Bank of America Finance priced the notes at $1,000.00 per $1,000 in principal amount, generating total proceeds of $8.4 million before expenses and dealer discounts. The underwriting discount is $3.00 per $1,000 in principal amount, resulting in net proceeds to BofA Finance of $997.00 per $1,000 before other costs. Total underwriting compensation disclosed is $25,200, with total net proceeds before expenses of $8,374,800. The pricing supplement notes that certain dealers purchasing notes for sale to fee-based advisory accounts may forgo some or all of their selling concessions, potentially offering the notes to those investors at a lower price as low as $997.00 per $1,000 in principal amount.

The initial estimated value of the notes as of the pricing date is disclosed as $992.80 per $1,000 in principal amount, which is materially less than the $1,000 public offering price. This gap reflects the impact of Bank of America's internal funding rate—the rate at which the company would borrow through issuance of market-linked notes, typically lower than its conventional debt issuance rate—combined with hedging-related charges. The pricing supplement explicitly states that the difference between Bank of America's internal funding rate and the rate it would pay for conventional fixed or floating rate debt, along with the underwriting discount and hedging charges, reduced the economic terms and initial estimated value of the notes. This structural cost is borne by investors, as they pay $1,000 but the issuer values the notes at approximately $992.80 at inception, representing a $7.20-per-$1,000 valuation gap attributable to these internal funding and hedging economics.

Credit Risk and Guarantor Strength

All payments on the notes, whether the digital payment in the upside scenario or any redemption amount in the downside scenario, are subject to the credit risk of BofA Finance LLC as issuer and Bank of America Corporation as guarantor. Bank of America Corporation provides a full and unconditional guarantee of the notes. Investors are therefore exposed not only to the performance of the three underlying indices but also to the creditworthiness and solvency of both BofA Finance and its parent, Bank of America Corporation, throughout the 15-month term. The notes are not FDIC insured and are not bank guaranteed, despite the parent company guarantee.

The notes are issued pursuant to BofA Finance's senior indenture, with Bank of America Corporation as guarantor. In the event of an event of default under the senior indenture, the amount payable upon acceleration would be calculated as though the date of acceleration were the maturity date and the valuation date were the third trading day prior to acceleration. The pricing supplement specifies that in case of default in payment of the notes, whether at maturity or upon acceleration, the notes will not bear a default interest rate. Investors should evaluate Bank of America Corporation's financial condition and credit rating as part of their investment decision, since the notes provide no principal protection independent of the guarantor's ability to pay.

Market-Linked Structure and Calculation Mechanics

The underlying return for each index is calculated as the quotient of its ending value minus its starting value, divided by its starting value, expressed as a percentage. The ending value for each underlying is its closing level on the valuation date of October 18, 2027, subject to postponement as described in the accompanying product supplement under "Events Relating to Calculation Days." The least performing underlying is identified as the underlying with the lowest underlying return among the three indices. This determination occurs on the valuation date and establishes which index's performance will govern the final redemption amount.

BofA Securities, Inc., an affiliate of BofA Finance LLC, serves as both the calculation agent and the selling agent for the notes. The calculation agent is responsible for computing the underlying returns, identifying the least performing underlying, and calculating the redemption amount. The notes will not be listed on any securities exchange and carry a CUSIP number of 09712G4S0. The minimum denomination is $1,000, with notes issued in whole multiples of $1,000 thereafter. The notes represent obligations of BofA Finance backed by Bank of America's guarantee, not direct obligations of Bank of America Corporation itself.

Registration and Regulatory Filing Context

The pricing supplement for the notes was filed pursuant to Securities and Exchange Commission Rule 424(b)(2) on July 16, 2026, the pricing date. The notes are issued under existing registration statements numbered 333-290665 and 333-290665-01, with a prospectus dated December 8, 2025, a Series A Prospectus Supplement dated December 8, 2025, and a Product Supplement EQUITY-1 dated December 8, 2025. This regulatory framework establishes the terms and risk factors associated with the notes, which investors are directed to review in full, particularly the "Risk Factors" section beginning on page PS-6 of the pricing supplement and earlier pages of the accompanying product supplement and prospectus.

The SEC regulatory disclaimer states that no regulatory body, including the SEC, any state securities commission, or any other regulatory agency, has approved or disapproved the securities or determined whether the pricing supplement and related documents are truthful or complete. The notes are offered on the basis of the complete disclosure contained across all these documents. Potential investors are advised that there are important differences between the notes and conventional debt securities and should carefully review all risk factor disclosures before making an investment decision.

Economic Terms and Hedging Cost Impact

The pricing supplement discloses that the economic terms of the notes are based on Bank of America's internal funding rate and the economic terms of related hedging arrangements entered into by Bank of America's affiliates. The internal funding rate represents the cost at which Bank of America would borrow funds through the issuance of market-linked notes, and this rate is typically lower than the rate the company would pay to issue conventional fixed or floating rate debt securities. The difference between the internal funding rate and conventional debt rates, combined with hedging costs, reduced both the economic value of the notes and the initial estimated value at inception.

The underwriting discount of $3.00 per $1,000 in principal, combined with hedging-related charges assessed by Bank of America's affiliates, further reduced the economic attractiveness of the notes to investors. These structural costs mean that investors purchasing at the $1,000 public offering price are paying a premium relative to the $992.80 initial estimated value. The pricing supplement explicitly notes that the public offering price paid by investors is greater than the initial estimated value of the notes as of the pricing date, with the variance attributable to these internal funding and hedging economics. Investors should understand that a portion of their capital is being allocated to cover Bank of America's internal financing advantage and hedging costs rather than representing pure economic value in the structured note itself.

Investment Considerations and Valuation Dynamics

The pricing supplement warns that the actual value of the notes at any time will reflect many factors and cannot be predicted with accuracy. Unlike conventional bonds or notes that typically trade at values close to par between issuance and maturity, structured notes like these may experience significant value fluctuations as the underlying indices move and as the probability of receiving the digital payment or incurring losses changes. The secondary market value of the notes, if any secondary market develops, will be influenced by the current levels of the three underlying indices, the time remaining to maturity, interest rate movements, volatility, and Bank of America's credit spread.

The notes will not be listed on any securities exchange, meaning that investors seeking liquidity before maturity would need to arrange sales through a broker-dealer rather than through an exchange. The availability and pricing of secondary market transactions are uncertain. Bank of America Securities, as the selling agent, may make a secondary market but is not obligated to do so. Investors should consider their liquidity needs and time horizon carefully, as the notes are most appropriately held to maturity by investors who do not anticipate needing to sell before October 21, 2027. The 15-month maturity is intermediate-term, spanning approximately three quarters of a year plus six months, requiring investors to commit capital for an extended period without interim cash flows, as no periodic interest payments are made.

Comparison to Conventional Debt and Risk Profile Summary

Unlike conventional debt securities issued by Bank of America or BofA Finance, these notes offer no coupon or periodic interest payments. Investors receive a single cash payment at maturity that depends entirely on index performance. This absence of interim cash flow distinguishes the notes from traditional bonds and creates reinvestment risk considerations. The upside is capped at 16.05 percent regardless of how much the three indices appreciate, while downside exposure is potentially unlimited (up to 100 percent loss) if the weakest index falls more than 20 percent from its starting level. This asymmetric payoff structure—limited upside, leveraged downside—is fundamentally different from buying the underlying indices directly or purchasing conventional fixed-income securities from Bank of America.

Investors considering these notes should evaluate their risk tolerance, time horizon, and market outlook for the three underlying indices over the 15-month period. The product requires an accurate forecast that all three indices will not decline more than 20 percent from their July 2026 levels to achieve the digital payment. Given that the Russell 2000, Nasdaq-100 Technology Index, and S&P 500 can each experience volatility and sector-specific downturns, the probability of all three remaining above their thresholds should be weighed against the fixed 16.05 percent upside return. Investors should also account for the $7.20-per-$1,000 valuation gap representing hedging and funding costs embedded in the pricing, and they should consider whether alternative investments or direct index exposure might better serve their objectives.