BofA Finance Launches Abbott Laboratories-Linked Auto-Callable Notes with 10.46% Contingent Coupon

Pricing Structure and Investment Terms

The notes are being offered at a public offering price of $1,000.00 per $1,000.00 in principal amount, with an underwriting discount of $15.00 per note. The issuer, BofA Finance LLC, will retain net proceeds of $985.00 per $1,000.00 in principal amount before expenses, according to the disclosure. The initial estimated value of the notes as of the pricing date is expected to range between $898.10 and $968.10 per $1,000.00 in principal amount, which falls below the public offering price and reflects the built-in structuring costs and embedded derivative components of the product.

Dealers participating in fee-based advisory accounts may reduce or eliminate their selling concessions, potentially offering the notes to certain investors at prices as low as $985.00 per $1,000.00 in principal amount. Additionally, broker-dealer affiliates of BofA Finance may receive referral fees of up to $7.50 per $1,000.00 in principal amount for distributing the notes to other registered firms. The minimum denomination is $1,000.00 with whole-number multiples thereafter. The notes will not be listed on any securities exchange and carry CUSIP number 09712GUW2.

Contingent Coupon Payment Mechanics

The notes feature a contingent coupon structure that distinguishes them from conventional fixed-income securities. Investors receive a monthly contingent coupon payment of $8.717 per $1,000.00 in principal amount (equivalent to 0.8717% monthly or 10.46% annualized) only if the observation value of Abbott Laboratories common shares on the applicable observation date exceeds or equals 71% of its starting value. The starting value is defined as the closing market price of Abbott stock on the pricing date of July 30, 2026. This coupon barrier means that if Abbott's stock price falls below 71% of its starting value on any monthly observation date, investors receive no coupon payment for that month.

The disclosure indicates that coupon payments, including a final contingent coupon on the maturity date, depend entirely on Abbott stock remaining above the 71% threshold. Investors should note that the issuer calculates observation values by multiplying the closing market price by a price multiplier of 1 (subject to adjustment for certain corporate events affecting Abbott shares). The contingent nature of these payments creates a yield profile that differs substantially from traditional bonds, where coupon payment is unconditional and independent of underlying asset performance.

Automatic Call Features and Early Redemption

Beginning with the February 1, 2027 call observation date, the notes become subject to automatic monthly call provisions. If the observation value of Abbott stock reaches or exceeds 100% of its starting value on any call observation date, all outstanding notes will be automatically redeemed. Upon automatic call, investors receive an early redemption amount equal to $1,000.00 per $1,000.00 in principal amount plus the applicable contingent coupon payment for that period, and no further amounts become payable. This automatic call feature caps the investor's upside participation and effectively shortens the investment horizon if Abbott shares appreciate during the approximately 15-month term.

The early redemption mechanics create an asymmetric payoff profile. Investors benefit from coupon payments during the holding period but forfeit any price appreciation beyond the call threshold. The disclosure states that if notes are called, the call payment date also functions as a contingent payment date, meaning investors receive both principal and the monthly coupon in a single payment. This structure allows BofA Finance to limit its economic exposure to Abbott stock appreciation while maintaining the issuer's ability to manage its hedging obligations efficiently.

Principal-At-Risk Scenarios at Maturity

The redemption amount at maturity depends critically on Abbott's stock performance relative to the starting value. If the ending value of Abbott shares (as measured on the valuation date of November 1, 2027) equals or exceeds 71% of the starting value, investors receive full principal repayment of $1,000.00 per $1,000.00 in principal amount. However, if the ending value falls below the 71% threshold, investors face direct proportional losses on their principal investment. The disclosure explicitly states that in this scenario, the redemption amount excluding any final coupon payment could be less than 71% of principal, meaning investors could lose up to 100% of their entire investment.

The notes incorporate what the disclosure describes as 1:1 downside exposure to decreases in Abbott stock value. This means that if Abbott's stock price declines more than 29% from the starting value by maturity, investors absorb losses dollar-for-dollar on that decline. Unlike equity investments where investors maintain ownership of the underlying company, or traditional bonds where principal is protected, these notes create a hybrid structure where capital preservation depends entirely on Abbott's stock performance at a single point in time (the valuation date). Additionally, investors receive a final contingent coupon payment at maturity only if Abbott stock remains at or above 71% of its starting value.

Credit Risk and Guarantee Structure

Bank of America Corporation provides a full and unconditional guarantee of the notes issued by BofA Finance LLC. This guarantee covers all payment obligations, including contingent coupon payments and redemption amounts. However, the guarantee does not enhance the notes beyond BAC's own creditworthiness. Investors are entirely dependent on the financial condition and ability to perform of both BofA Finance as the issuer and Bank of America Corporation as the guarantor. The disclosure emphasizes that all payments remain subject to the credit risk of both entities, meaning that a deterioration in BAC's credit quality directly affects the notes' credit profile.

The notes are neither FDIC insured nor bank guaranteed, and the disclosure warns that notes may lose value. Unlike deposits at FDIC-insured institutions, these securities carry full credit risk and are subject to the claims of BofA Finance's and Bank of America's other creditors. The senior indenture governing the notes defines specific events of default that could trigger acceleration. In an event of default, the calculation agent determines the redemption amount as if the acceleration date were the maturity date, calculating the value based on Abbott's stock price on the third trading day before acceleration, with any final coupon payment prorated to reflect the actual holding period.

Anti-Dilution Adjustments and Corporate Actions

The disclosure indicates that the price multiplier applied to Abbott stock prices is subject to adjustment for certain corporate events affecting the underlying company. While the default price multiplier equals 1, the product supplement referenced in the filing (beginning on page PS-20) contains detailed provisions governing how the notes' terms adjust in response to stock splits, dividends, mergers, spin-offs, and other corporate transactions. These anti-dilution mechanics ensure that Abbott shareholders' economic rights are preserved if the company undertakes capital structure modifications that would otherwise affect the notes' valuation.

The specific adjustment formulas and triggers are described in the accompanying product supplement document, which investors should review carefully. These adjustments are critical to understanding the true economic exposure the notes provide to Abbott Laboratories and may significantly affect the value of the investment if Abbott undergoes substantial corporate restructuring during the approximately 15-month term. The calculation agent, BofA Securities Inc., bears responsibility for determining whether any adjustments apply and calculating their impact on observation values and call values.

Observation Dates and Payment Calendar

The notes establish a regular schedule of monthly observation dates on which the calculation agent measures Abbott's stock price to determine whether contingent coupon payments are made and whether automatic call conditions are satisfied. The disclosure indicates that specific observation dates, contingent payment dates, call observation dates, and call payment dates are set forth beginning on pages PS-4 and PS-5 of the pricing supplement. These dates establish the regular cadence of investor communications and payment determinations throughout the approximately 15-month holding period.

The valuation date of November 1, 2027 is subject to postponement if certain market disruptions or extraordinary events occur, as described in the product supplement section titled "Events Relating to Observation Dates." This flexibility protects investors from having their redemption amount determined on a date when Abbott's stock market may be impaired or distorted. The maturity date of November 4, 2027 follows the valuation date, allowing three business days for final calculations and payment processing.

Comparable Market Position and Structuring Costs

The substantial gap between the $1,000.00 public offering price and the initial estimated value of $898.10 to $968.10 per note reflects the costs embedded in the structured product. These costs include the underwriting discount of $15.00 per note, potential referral fees paid to broker-dealer affiliates, the issuer's structuring and hedging costs, and the economic value of the derivatives embedded within the notes. The notes' contingent coupon, automatic call feature, and principal-at-risk mechanics all represent derivatives that must be hedged, funded, and compensated by the issuer. Investors should understand that the initial estimated value represents an economic assessment of what these embedded components are worth at issuance, distinct from the price paid.

The disclosure identifies BofA Securities Inc. as both the calculation agent responsible for determining coupon payments and redemption amounts, and as the selling agent distributing the notes to investors. This dual role creates potential conflicts of interest inherent in structured products, though the calculation agent's determinations are governed by the notes' terms and subject to audit and verification procedures specified in the indenture. Investors purchasing the notes accept the calculation agent's role and methodology as the binding determinant of all economic outcomes throughout the notes' life.

Risk Factors Specific to This Investment Structure

The disclosure emphasizes that the notes differ fundamentally from conventional debt securities and directs investors to risk factor sections beginning on page PS-9 of the pricing supplement, page PS-4 of the product supplement, page S-7 of the prospectus supplement, and page 7 of the prospectus. Key risks include the contingent nature of coupon payments, the principal-at-risk structure that exposes investors to full loss if Abbott stock declines substantially, the automatic call feature that caps upside participation, and the illiquidity of the notes (they will not be listed on any securities exchange). Additionally, investors face correlation risk if Abbott's business performance deteriorates at the same time broader market conditions make it difficult to sell the notes.

The notes also carry interest rate risk, volatility risk inherent in the embedded options, and counterparty risk concentrated in Bank of America. The contingent coupon structure introduces reinvestment uncertainty, as investors cannot predict monthly income with certainty. The automatic call feature means that if Abbott stock appreciates significantly, investors lose the opportunity to participate in further gains. Conversely, the lack of a floor on losses below 71% of starting value means that sharp declines in Abbott stock can result in substantial principal erosion. These risks are not typical of traditional bonds and require sophisticated investors to understand the full range of potential outcomes under various Abbott stock price scenarios.

Distribution Channels and Fee Arrangements

BofA Securities Inc. serves as the selling agent for the notes and will distribute them through its established dealer network and directly to institutional and retail investors. The disclosure permits certain dealers to reduce or waive their selling concessions in fee-based advisory accounts, potentially offering the notes at net pricing of $985.00 per note rather than the standard $1,000.00 public offering price. This flexibility recognizes that advisory fee arrangements may better align incentives in certain client relationships compared to commission-based sales structures. Investors in fee-based advisory accounts should specifically inquire whether their advisor has negotiated the lower pricing available under this provision.

BofA Securities' affiliate may also pay referral fees of up to $7.50 per note in connection with distribution to other registered broker-dealers. These referral arrangements ensure that smaller firms and independent advisors can participate in the distribution without serving as primary distributors themselves. The various fee arrangements create potential complexity in pricing across different distribution channels and investor account types, reinforcing the importance of investors understanding exactly what price they are paying and what fees are embedded in that price.

Registration and Regulatory Status

The notes are being offered pursuant to a preliminary pricing supplement filed under Securities Act Rule 424(b)(2), with an effective registration statement under Registration Statement Nos. 333-290665 and 333-290665-01. The pricing supplement, product supplement, prospectus supplement, and base prospectus together constitute the complete offering documents required by federal securities law. The SEC has not approved or disapproved the notes, nor has the SEC determined whether the offering documents are truthful and complete. Any representation that the SEC has done so constitutes a criminal offense. The preliminary pricing supplement is subject to completion, meaning that final terms including final pricing, exact observation dates, and other details may change before the July 30, 2026 pricing date.

Investors should note that structured products of this type are complex securities whose valuation and risk profile depend on factors beyond the issuer's control, particularly the path and level of Abbott Laboratories stock prices throughout the holding period. The disclosure's repeated references to various risk factor sections signal that prospective investors have substantial obligations to conduct due diligence and review supplementary materials before committing capital. The preliminary nature of this filing means that final offering documents will include additional disclosures, and investors should carefully review all final materials when they become available.