BofA Finance Launches Contingent Income Buffered Notes Linked to Three Major Stock Indices

Product Structure and Index Linkage

The Contingent Income Buffered Issuer Callable Yield Notes are structured to track three equity indices simultaneously: the Dow Jones Industrial Average, the Russell 2000 Index, and the S&P 500 Index. Each index serves as an underlying, with individual performance measured from the pricing date through monthly observation dates and a final valuation date. The notes employ a least-performing mechanism, meaning the redemption amount at maturity will be determined by whichever of the three indices experiences the weakest performance, measured as a percentage decline from its starting value on the pricing date.

The disclosure document identifies the Calculation Agent as BofA Securities, Inc., an affiliate of the issuer, responsible for determining observation values and payment amounts throughout the note's life. Monthly observation dates occur on the 24th of each calendar month, starting August 24, 2026, through July 24, 2028. This structure requires continuous monitoring of three major equity benchmarks to determine whether contingent coupon payments will be made and ultimately what amount investors receive at maturity or upon early redemption.

Monthly Contingent Coupon Mechanism and Payment Conditions

Investors in these notes will receive a contingent coupon payment of $7.209 per $1,000.00 in principal amount each month, equivalent to 0.7209% monthly or 8.65% annualized, but only if a specific condition is satisfied on each observation date. The condition requires that the closing level of each of the three underlying indices be greater than or equal to 70% of its starting value on that observation date. The filing states that if this threshold is breached by even one of the three indices in any given month, no contingent coupon payment will be made for that month, though the notes themselves remain outstanding.

The contingent payment dates run monthly from September 24, 2026, through July 27, 2028, providing investors with 23 potential monthly payments if all payment conditions are satisfied throughout the note's life. A final contingent coupon payment is also potentially due on the maturity date if all three indices close above their respective 70% coupon barriers on the final valuation date. This all-or-nothing structure for each monthly observation means that all three indices must remain above the 70% threshold simultaneously for each payment to occur, introducing correlation risk across multiple market segments.

Early Redemption Rights and Issuer Call Feature

Beginning January 28, 2027, BofA Finance retains the right to call the notes on any monthly call payment date at an Early Redemption Amount equal to $1,000.00 per $1,000.00 principal amount of notes, plus any applicable contingent coupon payment if the coupon barrier condition is satisfied on that observation date. The issuer must provide at least five business days but no more than 60 calendar days' notice before exercising this redemption right. Once the notes are called, no further payments are due to investors, meaning the contingent coupon streams and any potential downside exposure end immediately.

The call feature effectively limits the upside capture potential for investors if equity markets rally strongly. While investors benefit from the contingent coupon if markets remain stable or decline moderately, they cannot participate in significant market gains beyond the call dates, as the issuer will likely exercise its redemption option when market conditions make it economically favorable to do so. The preliminary documentation anticipates an approximate two-year holding period if not called, though the actual maturity depends entirely on the issuer's discretionary redemption decision beginning seven months after issuance.

Principal Protection Buffer and Downside Risk Profile

The notes incorporate a 15% decline buffer, meaning investors receive their full principal back at maturity if the least performing underlying index declines by 15% or less from its starting value. This buffer is expressed in the disclosure as a Threshold Value of 85% of the starting value for each underlying. However, if any of the three indices declines more than 15%, investors are exposed to 1:1 downside exposure on the least performing index beyond the 15% threshold, with the filing disclosing that investors could lose up to 85% of their principal investment in this scenario.

This structure creates asymmetric risk for note holders. Investors receive moderate coupon payments during the note's life if conditions are met, but face significant downside exposure if market conditions deteriorate substantially. The document explicitly warns that the notes are not FDIC insured, are not bank guaranteed, and may lose value. The cushion protection is limited to 15%, so a 20% decline in the least performing index would result in a 5% principal loss, while a 50% decline would result in a 35% principal loss, demonstrating how quickly principal erosion accelerates once the buffer is breached.

Pricing and Value Assessment

The public offering price for the notes is set at $1,000.00 per $1,000.00 principal amount. BofA Finance receives $992.50 per note after the underwriting discount of $7.50, with certain dealers eligible to forgo some or all of their selling concessions for investors in fee-based advisory accounts, resulting in a purchase price as low as $992.50. The preliminary pricing supplement discloses that the initial estimated value of the notes as of the pricing date is expected to be between $924.80 and $974.80 per $1,000.00 principal amount, representing a significant discount to the public offering price.

The disparity between the public offering price of $1,000.00 and the estimated intrinsic value of $924.80 to $974.80 reflects the embedded costs of the structured product, including the guarantor's credit spread, the costs of the underlying index options, and the issuer's profit margin. Investors should note that the disclosure explicitly states the actual value of the notes cannot be predicted with accuracy and will reflect many factors throughout their life. The value will fluctuate based on changes in underlying index levels, implied volatility, interest rates, and the credit quality of Bank of America Corporation, which fully and unconditionally guarantees the notes.

Credit Risk and Guarantee Structure

All payments on the notes are subject to the credit risk of BofA Finance LLC as the issuer and Bank of America Corporation as the guarantor. Bank of America Corporation provides a full and unconditional guarantee of the notes, meaning that if BofA Finance fails to meet its obligations, investors may look to Bank of America Corporation for payment. The disclosure document specifies that neither the SEC, any state securities commission, nor any other regulatory body has approved or disapproved these securities or determined whether the pricing supplement and related documents are truthful or complete.

The guarantee structure does not eliminate credit risk but rather substitutes Bank of America's credit quality for that of the special purpose finance subsidiary. Investors are exposed to the consolidated credit quality and financial condition of Bank of America Corporation throughout the approximately two-year holding period or until early redemption. In the event of default by the issuer, the guarantor's ability to meet its obligations would depend on its financial condition and regulatory capital requirements at that time. The notes rank as senior unsecured obligations of BofA Finance and are guaranteed on a senior unsecured basis by the guarantor.

Registration and Trading Status

The notes are registered under Securities Act of 1933 Registration Statement Nos. 333-290665 and 333-290665-01. The pricing supplement is filed pursuant to Rule 424(b)(2), indicating that this represents an updated pricing document for a previously registered shelf offering by BofA Finance. The accompanying prospectus is dated December 8, 2025, the Series A Prospectus Supplement is dated December 8, 2025, and the Product Supplement EQUITY-1 is dated December 8, 2025, establishing the regulatory framework within which these notes are offered.

The disclosure states that the notes will not be listed on any securities exchange, meaning investors cannot easily trade these instruments on a public market. Secondary market trading may be available through BofA Securities as the selling agent, but investors should not assume they can quickly convert these notes to cash if their circumstances change. The CUSIP number 09712CTA1 identifies the security for trading and clearing purposes, and minimum purchase denominations are $1,000.00 with whole multiples in excess thereof, limiting access to smaller retail investors who may lack the capital to meet this threshold.

Events of Default and Acceleration Provisions

The notes are subject to events of default as defined in the senior indenture relating to the notes and described in the accompanying prospectus. If an event of default occurs and is continuing, the amount payable to note holders upon acceleration will be calculated as though the date of acceleration were the maturity date and as though the valuation date were the third trading day prior to the acceleration date. The calculation agent will determine the redemption amount and whether a final contingent coupon payment is due based on the underlying index levels on the deemed valuation date, with any contingent coupon payment being prorated to reflect the length of the final contingent payment period.

The disclosure notes that in case of default in the payment of the notes, whether at maturity or upon acceleration, the notes will not bear a default interest rate. This means investors will not receive additional compensation for delayed payment in a default scenario. The specific events of default are referenced but not detailed in the pricing supplement itself, with investors directed to page 51 of the accompanying prospectus for the complete definition of events of default and rights of acceleration under the senior indenture.

Term and Observation Schedule

The notes have an approximate two-year term from the expected issuance date of July 29, 2026, to the maturity date of July 27, 2028, unless the issuer exercises its call right to redeem the notes early. The exact term depends on when, if at all, BofA Finance decides to redeem the notes beginning January 28, 2027. The valuation date for determining the final redemption amount is July 24, 2028, subject to postponement in certain circumstances related to market disruptions or other events affecting the ability to determine index values, as described in the accompanying product supplement.

Monthly observation dates are scheduled to occur on the 24th calendar day of each month, beginning August 24, 2026, and continuing through July 24, 2028. Contingent payment dates follow a similar schedule, with the initial payment date expected September 24, 2026. Call payment dates begin on January 28, 2027, and occur monthly thereafter, providing the issuer with regular opportunities to exercise its redemption option. This regular schedule creates predictable intervals for investors to track whether coupon conditions are satisfied and to monitor the issuer's potential early redemption decisions.

Investment Considerations and Risk Factors

The pricing supplement identifies important differences between these notes and conventional debt securities, explicitly directing potential investors to review risk factors beginning on page PS-9 of the pricing supplement, page PS-3 of the product supplement, page S-7 of the prospectus supplement, and page 7 of the prospectus. The notes represent a complex product combining equity exposure with credit risk and embedded options, making them suitable primarily for sophisticated investors who understand structured products and have access to professional financial advice.

Key risks include the all-or-nothing nature of monthly coupon payments, which depend on all three indices remaining above their respective 70% coupon barriers simultaneously; the potential loss of principal if the least performing index declines more than 15%; the issuer's right to call the notes and terminate the investment; credit risk of Bank of America Corporation; the illiquid nature of the notes since they are not exchange-listed; and the complexity of valuing and managing the positions. Investors should carefully review the complete risk factor sections in the accompanying disclosure documents before committing capital.