Bank of America-Backed Structured Notes Launch With 23% Contingent Coupon Linked to Three Market Indices

Structured Note Design and Multi-Index Linkage Framework

BofA Finance LLC has structured these notes to provide exposure to three distinct market benchmarks: the Dow Jones Industrial Average, the Russell 2000 Index, and the VanEck Semiconductor ETF. The notes employ a "least performing underlying" mechanism, meaning that the worst-performing of the three indices determines both the coupon payment eligibility and potential principal loss at maturity. This structure creates a barrier-based investment where investors benefit from the coupon payments only if all three underlyings simultaneously remain above their respective coupon barriers throughout the holding period. The pricing date is scheduled for July 30, 2026, with settlement on August 4, 2026, establishing an approximate 23-month term until maturity on July 6, 2028, barring an earlier call by the issuer.

The use of three distinct underlyings—a large-cap equity index, a small-cap equity index, and a semiconductor sector exchange-traded fund—introduces diversified market exposure while simultaneously creating complexity around performance tracking and coupon eligibility. Each underlying's performance is measured independently on monthly observation dates, with the least performing index determining both coupon eligibility and final redemption outcomes. This approach represents a shift from simpler structured notes tied to single indices or currencies, incorporating sector-specific and size-based equity market dynamics into one security.

Contingent Coupon Mechanics and Monthly Payment Structure

The disclosure states that the contingent coupon payment equals $19.167 per $1,000 principal amount, representing a 1.9167% monthly coupon or an annualized rate of 23.00%, provided all three underlyings trade at or above 70% of their starting values on each monthly observation date. This coupon is contingent, meaning payments are not guaranteed and depend entirely on the performance barrier being maintained across all three indices simultaneously. If any single underlying falls below its 70% coupon barrier on a given observation date, no coupon payment is made for that month. The notes will make contingent coupon payments monthly on specified contingent payment dates, with the first payment opportunity occurring after the issue date, assuming performance conditions are met.

The high nominal coupon rate of 23% per annum reflects compensation for the embedded risks investors assume, including the conditional nature of payments and principal exposure at maturity. Investors receive the coupon only when strict performance conditions are satisfied across all three indices, creating a scenario where investors might miss coupon payments despite favorable performance in one or two of the three underlyings if the least performing index falls below the barrier. A final contingent coupon payment would also be paid at maturity if the ending values of all three underlyings remain at or above their coupon barriers on the valuation date.

Principal Protection Features and Downside Loss Exposure

The disclosure indicates that at maturity, investors receive full principal repayment of $1,000 per note if the least performing underlying's ending value remains at or above 60% of its starting value. However, if any underlying declines more than 40% from its starting value, investors face 1:1 downside exposure to the performance of the worst-performing index, with potential loss of up to 100% of principal. This asymmetric payoff structure means that while the coupon barrier is set at 70% of starting value, the threshold for principal protection is lower at 60%, creating a "dead zone" between 60% and 70% performance where investors lose the coupon but retain principal.

The redemption amount at maturity depends entirely on the ending value of the least performing underlying on the valuation date (June 30, 2028). If that underlying has declined below 60% of its starting value, the redemption amount will be less than 60% of the original principal, meaning investors could lose substantial portions or all of their initial investment. This structure exposes investors to significant market risk during the approximate 23-month holding period, particularly if any of the three underlying indices experiences a sharp decline. The filing does not specify a floor price or principal guarantee below the 60% threshold, indicating that losses could theoretically reach the full invested amount.

Optional Call Provisions and Early Redemption Terms

Beginning on November 4, 2026, BofA Finance LLC retains the option to call all (but not less than all) of the outstanding notes on any monthly call payment date. The early redemption amount equals $1,000 per note plus any applicable contingent coupon payment if the observation value of each underlying remains at or above its coupon barrier. The issuer must provide notice to the trustee between five business days and 60 calendar days before the applicable call payment date. This call feature gives the issuer significant flexibility to manage the structured products portfolio and potentially cap investors' upside exposure if market conditions become unfavorable to the issuer.

The call provision effectively creates a structured product with defined maturity terms of approximately 23 months, though actual holding periods could be significantly shorter if the notes are called. From the issuer's perspective, the call option provides a mechanism to manage liability exposure if the underlying indices appreciate substantially, limiting the issuer's cost to deliver the contingent coupons. Investors should understand that early call redemption would terminate all future coupon payments and return principal plus any final contingent payment due, preventing investors from capturing additional coupon income if markets remain favorable through the scheduled maturity date.

Pricing, Costs, and Initial Estimated Value

The public offering price is $1,000.00 per note, with an underwriting discount of $6.75 per note, resulting in net proceeds to BofA Finance of $993.25 per note before offering expenses. Certain dealers may forgo selling concessions for investors in fee-based advisory accounts, offering those investors a purchase price of $993.25, which represents a lower effective cost. Additionally, an affiliate of BofA Finance may pay a referral fee of up to $3.00 per $1,000 principal amount of notes to other registered broker-dealers participating in distribution. These layered fees and compensation structures are typical for structured products but represent meaningful costs that reduce the investor's effective capital deployment.

The disclosure indicates that the initial estimated value of the notes as of the pricing date is expected to be between $920.00 and $970.00 per $1,000 principal amount, which is less than the $1,000 public offering price. This valuation gap reflects the embedded optionality and structured complexity built into the notes, suggesting that the fair value of the instrument incorporates the value of the issuer's embedded call option, the downside risk exposure, and the contingent nature of coupon payments. Investors purchasing at the $1,000 offering price would be paying a premium over the preliminary estimated fair value, a consideration important in evaluating the economic terms relative to publicly traded alternatives.

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 unconditional guarantor. Bank of America's guarantee provides a layer of credit enhancement, though investors should understand that both the issuer and guarantor are subject to the credit dynamics of the Bank of America group. The disclosure explicitly states that the notes are not FDIC insured and not bank guaranteed in the deposit insurance sense, despite originating from Bank of America entities. This credit structure means investors are ultimately exposed to Bank of America's creditworthiness and willingness to honor its guarantee obligations.

The guarantee by Bank of America Corporation provides some assurance that structured coupon payments and principal repayment obligations will be honored, given the parent company's role as one of the largest U.S. financial institutions. However, investors should recognize that in scenarios of systemic financial stress, even major financial institutions may face challenges honoring guarantee obligations. The disclosure does not specify any subordination terms or priority claims relating to these notes, suggesting they would rank as senior unsecured obligations of BofA Finance, with BAC's guarantee supported by the parent company's capital structure.

Registration and Distribution Framework

The notes are being offered pursuant to a Registration Statement filed under the Securities Act of 1933 (Registration Statement Nos. 333-290665 and 333-290665-01), with the pricing supplement filed pursuant to Rule 424(b)(2). The offering documentation includes 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. These comprehensive regulatory filings establish the legal framework for the offering and provide detailed risk disclosures and structural terms. BofA Securities, Inc., an affiliate of BofA Finance, serves as both the calculation agent and selling agent for the offering.

The CUSIP number for the notes is 09712GTM6, enabling investors to track and trade these securities on secondary markets. The disclosure notes that the notes will not be listed on any securities exchange, meaning trading would occur in over-the-counter markets through authorized dealers. The multi-layer documentation structure, including pricing supplements, product supplements, prospectus supplements, and base prospectuses, reflects the complexity and customized nature of structured products, requiring investors to review extensive disclosure documents to fully understand the terms, risks, and mechanics of these notes.

Calculation Methodology and Observation Date Mechanics

The calculation agent, BofA Securities, Inc., is responsible for determining observation values on specified monthly observation dates throughout the life of the notes. The starting value for each underlying is established as its closing level or closing market price on the pricing date (July 30, 2026), establishing the baseline against which all subsequent performance is measured. Observation values are determined monthly by reference to the closing level (for the INDU and RTY indices) or the Closing Market Price (for the SMH ETF), with the SMH observation value adjusted by a price multiplier that may be subject to adjustments for certain corporate actions or events affecting the ETF.

The valuation date is June 30, 2028, subject to postponement if certain events relating to observation dates occur. The ending value of each underlying on the valuation date determines the final coupon payment and principal redemption amount at maturity. Investors depend on BofA Securities' accurate calculation of these values, and the disclosure does not specify appeal or dispute resolution mechanisms if investors believe calculation errors have occurred. This places significant reliance on the calculation agent's operational infrastructure and integrity, a consideration investors should evaluate when assessing counterparty risk.

Risk Factors and Market-Dependent Return Profile

The disclosure emphasizes that the actual value of the notes at any time will reflect many factors and cannot be predicted with accuracy, explicitly directing investors to review the Risk Factors section beginning on page PS-9 of the pricing supplement. The notes' value depends on the performance of three distinct underlyings, creating multidimensional market risk exposure. If any underlying experiences significant decline, investors could forfeit monthly coupon payments (if the decline takes the underlying below 70% of starting value) or lose principal (if the decline exceeds 40% from starting value). The structure does not provide protection against prolonged equity market weakness or sector-specific downturns affecting the semiconductor ETF.

The disclosure notes important differences between these notes and conventional debt securities, positioning the investment as a hybrid instrument combining equity market exposure with fixed-income-like coupon payments. Investors accept equity market downside risk while receiving contractually specified coupon payments (assuming performance conditions are met), a trade-off that may not be attractive relative to traditional equity or debt investments depending on individual risk preferences and market outlook. The preliminary nature of the pricing supplement indicates that final pricing and terms may change between the announcement and the July 30, 2026 pricing date.

Disclosure Status and Investor Considerations

This pricing supplement is preliminary and subject to completion, meaning certain specific terms, pricing levels, and final disclosure language may be refined before the actual pricing on July 30, 2026. The document explicitly states that the pricing supplement and related prospectus materials are not an offer to sell in countries or jurisdictions where such an offer would not be permitted, limiting the geographic scope of the offering. The SEC, state securities commissions, and other regulatory bodies have not approved or disapproved the securities or determined whether the offering disclosure is truthful and complete, consistent with statutory disclaimers required for securities offerings.

Investors reviewing this opportunity should consider that structured products represent customized investment vehicles with embedded optionality that typically trade below par value due to inherent complexity and issuer costs. The high contingent coupon rate of 23% per annum reflects compensation for the risks assumed, including principal loss exposure, contingent payment mechanics, and credit risk. Prospective investors should carefully review all disclosure documents, including the risk factors sections, and evaluate whether the risk-return profile aligns with their investment objectives, risk tolerance, and portfolio construction strategy before committing capital.