BofA Finance Launches Four-Year Auto-Callable Notes Linked to Three Major Stock Indices

Structure of the Multi-Index Linked Notes

The notes represent a structured product offering that ties investor returns to the combined performance of three distinct equity market indices. Each underlying index—the Dow Jones Industrial Average, the Nasdaq-100 Index, and the Russell 2000 Index—serves as a separate performance benchmark, with the "least performing" index determining final outcomes. This multi-index approach means that the worst-performing of the three indices controls whether investors receive full principal protection, partial recovery, or full downside exposure at maturity.

The disclosure indicates that the notes will be issued in minimum denominations of $1,000.00 with whole multiples thereafter. The structure eliminates periodic interest payments, instead relying entirely on the final redemption amount based on the combined performance outcomes of all three underlying indices. The notes will not be listed on any securities exchange, positioning them as over-the-counter instruments available directly through BofA Securities, Inc., which serves as the calculation agent and selling agent.

Automatic Call Feature and Semi-Annual Observation Dates

Beginning with the August 4, 2027 call observation date, the notes incorporate an automatic call mechanism that provides potential early redemption opportunities for investors. The disclosure states that all of the notes will be automatically called at a specified call amount if, on any call observation date, the observation value of each underlying index is greater than or equal to its call value (defined as 100 percent of its starting value on the pricing date). This feature means that if all three indices maintain or exceed their starting levels on any scheduled observation date, noteholders will receive a predetermined redemption payment and the investment terminates.

The filing indicates six scheduled call observation dates spanning from August 2027 through January 2030, occurring semi-annually. The call amounts increase progressively with each observation date, ranging from $1,158.50 per $1,000.00 principal at the first call date to $1,554.75 per $1,000.00 principal at the final call date in February 2030. These increasing call amounts are designed to reflect the time value and the declining probability of early termination as the note approaches maturity. If called, the applicable call amount will be paid on the corresponding call payment date, and no further amounts become payable.

Maturity Payoff Scenarios and Downside Protection Limits

The redemption structure at maturity reveals three distinct payoff scenarios depending on how the least performing underlying index performs relative to its starting value. If the ending value of the least performing underlying is greater than or equal to 100 percent of its starting value, investors will receive $1,634.00 per $1,000.00 in principal amount, representing a 63.4 percent total return over the approximately four-year term. This scenario requires that all three indices maintain their starting levels.

A second scenario applies if the least performing underlying declines but remains above 70 percent of its starting value. In this case, investors receive the full $1,000.00 principal amount with no additional gains. However, if any underlying index declines more than 30 percent from its starting value, the filing indicates that investors face "1:1 downside exposure to decreases in the value of the Least Performing Underlying, with up to 100% of the principal at risk." This means losses accelerate below the 70 percent threshold, creating potential for substantial capital loss if market conditions deteriorate significantly.

Valuation Framework and Index-Specific Terms

The disclosure establishes specific valuation dates and methodology for determining index performance throughout the note's life. The starting value for each underlying index is defined as its closing level on the pricing date of July 31, 2026. The observation value is the closing level on each call observation date, while the ending value is the closing level on the valuation date of July 31, 2030, subject to postponement provisions described in the accompanying product supplement. These reference points create the baseline against which all performance calculations are measured.

Each index has a call value set at 100 percent of its starting value and a redemption barrier also at 100 percent of starting value, establishing the threshold for full principal protection at maturity. A separate threshold value of 70 percent of starting value marks the boundary between principal protection and downside exposure. The filing does not specify the precise closing levels of these indices on the pricing date, stating only that actual values would be established on July 31, 2026.

Credit Quality and Bank Guarantee Structure

Bank of America Corporation provides an unconditional guarantee covering both the notes and the related guarantee obligations. This guarantee structure means that noteholders have recourse to BAC's credit standing if BofA Finance LLC, the note issuer, fails to meet its payment obligations. The filing clearly states that "Any payment on the Notes is subject to the credit risk of BofA Finance LLC as issuer of the Notes, and Bank of America Corporation as guarantor of the Notes," emphasizing that despite the guarantee, investors retain exposure to the creditworthiness of both entities.

The guarantee does not alter the investment risk associated with index performance—it only addresses counterparty credit risk. The disclosure notes that the notes are "not FDIC insured" and "not bank guaranteed" in the conventional sense, meaning they lack the standard protections afforded to bank deposits. The structure relies on Bank of America's commitment to honor obligations rather than regulatory deposit insurance protection.

Pricing and Initial Valuation Metrics

The disclosure indicates that the notes will be offered to the public at $1,000.00 per $1,000.00 in principal amount with no underwriting discount. However, the filing notes that the initial estimated value of the notes as of the pricing date is expected to fall between $933.60 and $983.60 per $1,000.00 in principal amount, which is materially lower than the public offering price. This discrepancy reflects the cost of the embedded derivatives—the automatic call options and downside exposure features—that are priced into the note structure.

The filing explains that "The actual value of your Notes at any time will reflect many factors and cannot be predicted with accuracy," acknowledging the complexity of valuing structured products with multiple embedded components. The secondary market value of the notes will fluctuate based on changes in the underlying indices, interest rate movements, volatility conditions, and credit spreads, making accurate price forecasting difficult for investors considering these instruments.

Risk Factors and Investment Considerations

The disclosure identifies several categories of risks that distinguish these notes from conventional fixed-income securities. The notes incorporate substantial structured product risks, including index performance risk, volatility risk, liquidity risk, and counterparty credit risk. The filing directs readers to detailed risk factor discussions beginning on page PS-9 of the pricing supplement and additional materials in the product supplement and prospectus, indicating that comprehensive risk analysis is available but not fully summarized in this document.

The notes lack periodic interest payments, meaning investors receive no coupon income during the holding period and depend entirely on the final redemption amount for returns. This structure creates reinvestment challenges if investors need current income and concentrates all compensation at maturity or upon an early call. Additionally, the notes will not be listed on any securities exchange, potentially creating liquidity constraints if investors need to exit positions before maturity or an automatic call event occurs.

Events of Default and Acceleration Provisions

The filing describes how payment calculations would be modified if an event of default occurs prior to maturity. If default occurs and accelerates the notes, the amount payable would be calculated as though the acceleration date were the maturity date and the valuation date were the third trading day prior to acceleration. This methodology attempts to provide consistent treatment while recognizing that index performance cannot be evaluated at the original maturity date if acceleration occurs earlier due to an issuer default.

For defaults occurring prior to the originally scheduled valuation date, the payment determination uses the call amount methodology, with the calculation agent prorating the applicable call amount based on the time elapsed from issuance to the acceleration date. The disclosure specifies that if a default occurs in payment of the notes at maturity or upon acceleration, the notes will not accrue a default interest rate, meaning investors do not receive additional compensation for late payment. This represents a departure from some conventional debt securities that continue accruing interest after default.

Distribution Arrangements and Referral Compensation

BofA Securities, Inc., an affiliate of the note issuer, functions as both the calculation agent and the primary selling agent for the distribution. The filing discloses that while there is no underwriting discount on the public offering price, an affiliate of BofA Finance will pay a referral fee of up to $6.50 per $1,000.00 in principal amount of notes to other registered broker-dealers participating in the distribution. This fee structure creates incentives for other financial institutions to market and distribute the notes to their client bases.

The use of affiliate entities in dual roles—calculation agent and selling agent—creates potential conflicts of interest that investors should evaluate carefully. BofA Securities will determine the index closing levels that trigger call provisions and calculate final redemption amounts, while also having commercial incentives to promote note sales. The filing indicates the CUSIP number for these notes is 09712C5T6, enabling investors to track the specific securities in secondary markets if any trading occurs.

Regulatory Status and Investor Due Diligence Requirements

The disclosure contains explicit language confirming that no regulatory body, including the Securities and Exchange Commission or any state securities commission, has approved or disapproved the notes or determined whether the pricing supplement and accompanying documents are truthful or complete. This language, required by securities regulations, reflects the role of disclosure documents in allowing investors to make informed decisions rather than relying on regulatory endorsement. Potential purchasers must conduct their own analysis based on provided materials.

The filing directs investors to comprehensive risk factor discussions and structural analyses contained in the accompanying product supplement, prospectus supplement, and base prospectus. The pricing supplement itself remains preliminary as of the July 14, 2026 filing date, with actual terms potentially subject to change before the July 31, 2026 pricing date. Investors considering these notes should review all provided documentation and consult with financial professionals regarding suitability for their individual circumstances and investment objectives.