Bank of America Finance Issues $3.29 Million Structured Notes Linked to Multiple Equity Index Performance

Structured Product Architecture and Contingent Coupon Mechanics

The notes represent a complex structured product designed to blend income generation with market-linked performance across three major equity benchmarks. The contingent coupon payment structure requires that all three underlying indices—the Nasdaq-100, Russell 2000, and S&P 500—maintain closing levels greater than or equal to 70% of their respective starting values on each monthly observation date for coupon payments to be made. This all-or-nothing approach means that even if two indices remain substantially above their 70% thresholds, failure of a single index to clear the barrier prevents that month's $8.50 per $1,000 principal coupon from being paid.

The starting values disclosed for each index as of the pricing date were: Nasdaq-100 at 28,592.66, Russell 2000 at 2,962.217, and S&P 500 at 7,457.69. The corresponding coupon barriers, representing 70% of each starting value, establish the performance hurdles investors must monitor throughout the approximately 11-month term. This structure creates asymmetric risk, as the coupon depends on aggregate strength across all three indices while maturity payoffs depend on the worst performer, a combination that incentivizes investors to evaluate diversified index performance patterns.

Issuer Call Option and Early Redemption Framework

Beginning October 22, 2026, approximately three months after issuance, BofA Finance retains the right to redeem all outstanding notes at par value plus any applicable contingent coupon payment if the observation criteria are satisfied. This issuer call feature introduces timing uncertainty for investors who might otherwise expect to hold the notes through their stated June 2027 maturity. The call right extends throughout the remaining term on a monthly basis, giving the issuer significant flexibility to manage its liability if market conditions shift or if the value of the underlying indices becomes favorable for early redemption economics.

The early redemption amount structure specifies that if called, investors receive $1,000 per $1,000 principal plus the relevant contingent coupon, provided all three indices remain above their coupon barriers on the applicable observation date. This provision means that even early redemption offers no return enhancement beyond the monthly coupon and principal repayment, creating a scenario where investors face limited upside capture while maintaining downside exposure through maturity if the notes are not called.

Principal Protection Thresholds and Downside Exposure Scenarios

The notes incorporate a 30% decline threshold as the key demarcation point between protected and unprotected principal scenarios. If at maturity the least-performing underlying (the index with the lowest percentage return) has declined by 30% or less from its starting value, investors receive full principal return of $1,000 per $1,000 purchased. This protection applies regardless of the actual return contributions from the other two indices, focusing the evaluation exclusively on the worst-performing index.

Conversely, if the weakest-performing index has declined by more than 30% from its starting value at the valuation date, investors face 1:1 downside exposure to losses in that index, with the redemption amount potentially declining below $700 per $1,000 principal. The filing explicitly states that under this scenario investors could lose up to 100% of their investment in the notes. Additionally, the final contingent coupon payment at maturity depends on the least-performing underlying closing at or above its coupon barrier of 70% of starting value, meaning investors could face a scenario where they receive reduced principal and no final coupon payment simultaneously.

Offering Structure, Pricing, and Dealer Compensation

The notes priced at $1,000.00 per $1,000 principal amount with a public offering price structured to yield $3.292 million in total principal across the issuance. The underwriting discount was set at $15.50 per $1,000 principal amount, equivalent to 1.55% of par value, with total underwriting fees of $41,268.52 on the $3.292 million issuance. The initial estimated value as of the pricing date was disclosed at $980.30 per $1,000 in principal amount, a $19.70 per $1,000 discount to the public offering price, reflecting the embedded costs and risk profile of the structured instrument.

The prospectus indicates that certain dealers serving fee-based advisory accounts could forgo selling concessions and offer the notes at a minimum price of $984.50 per $1,000 principal amount. Additionally, an affiliate of BofA Finance may pay referral fees up to $3.00 per $1,000 principal amount to other registered broker-dealers participating in the distribution, adding another layer to the embedded cost structure. These compensation mechanisms are typical for structured products but reflect substantial intermediary expenses that reduce the economic return available to investors after all distribution costs are netted.

Index Selection and Performance Independence

The three underlying indices selected for these notes represent distinct market segments: the Nasdaq-100 captures large-cap technology and growth stocks, the Russell 2000 focuses on small-cap equities, and the S&P 500 encompasses broad-based large-cap U.S. equity exposure. The choice of three indices with different capitalization profiles and sector characteristics creates correlation diversity but also introduces complexity in monitoring performance across genuinely different market segments. Investors must track three separate opening and closing levels across multiple observation dates to assess whether coupon conditions are satisfied in any given month.

The "least performing" methodology means that even if the S&P 500 gains 5%, the Nasdaq-100 gains 8%, and the Russell 2000 falls 25%, the Russell 2000's decline determines both the coupon qualification and the final redemption amount calculation. This feature protects the issuer by using a single weakest link as the performance metric for payoff purposes, but it also means investors cannot offset weakness in one index with strength in another when calculating final returns. The consequence is that broad market recovery across two indices provides no benefit if the third index remains depressed.

Guarantee Structure and Credit Risk Considerations

All payments on these notes are fully and unconditionally guaranteed by Bank of America Corporation, meaning BAC stands behind BofA Finance's obligations as issuer. While the guarantee provides recourse to a major financial institution with substantial balance sheet resources, the notes remain subject to the credit risk of both the issuer and guarantor. The prospectus explicitly states that payments are subject to credit risk and that the notes are not FDIC insured, not bank guaranteed, and may lose value, reflecting the unsecured nature of the obligation within BAC's capital structure.

Investors should recognize that despite BAC's investment-grade credit rating, structured note holders occupy a subordinated position relative to senior debt and deposit liabilities. In a severe financial stress scenario affecting BAC, note holders would recover only after higher-priority claims are satisfied. The guarantee does not enhance the notes beyond making them obligations of BAC itself; it does not provide additional protection beyond what BAC's financial condition can support at any given time.

Monthly Observation Schedule and Payment Mechanics

The notes establish monthly observation dates throughout their approximately 11-month term to determine whether coupon barrier conditions are satisfied for contingent coupon payments. Each monthly observation evaluates whether each of the three underlying indices closed at or above its respective coupon barrier on that specific date. The prospectus indicates that observation dates are detailed beginning on page PS-4 of the pricing supplement, though the specific calendar of dates is not reproduced in the materials provided in this disclosure.

Contingent coupon payments of $8.50 per $1,000 principal (0.85% monthly) are paid on applicable contingent payment dates, provided the barrier conditions are met. Call payment dates, which begin in October 2026, function simultaneously as contingent payment dates, meaning investors could receive both an early redemption at par plus a final contingent coupon if called when coupon barriers are satisfied. The calculation agent, designated as BofA Securities Inc., holds responsibility for determining observation values, calculating coupon payments, and managing the mechanics of early redemption or final valuation calculations.

Risk Factor Assessment and Market Dependency

The return profile of these notes depends entirely on cumulative performance of three independent equity indices over an 11-month observation period. If market volatility causes any index to decline and remain depressed, investors face potential coupon cancellation in the month following such a decline. The risk of losing 100% of principal exists if the weakest-performing index falls more than 30% and remains below its starting value through maturity, creating significant downside exposure despite the appearance of a stable 10.20% annual coupon rate.

Investors should evaluate the likelihood that all three indices simultaneously maintain positions above their 70% thresholds throughout the entire term, as failure in even one index prevents that month's coupon payment. The broad diversification of the three indices reduces the probability of simultaneous collapse but does not eliminate it during major market downturns. The embedded issuer call option also creates uncertainty about whether investors will retain exposure to potential market recovery if the issuer chooses redemption at inopportune times for holders seeking continued index participation.

Registration and Distribution Framework

These notes were filed pursuant to SEC Rule 424(b)(2) under Registration Statement Nos. 333-290665 and 333-290665-01, with a base prospectus dated December 8, 2025, a Series A Prospectus Supplement dated December 8, 2025, and Product Supplement EQUITY-1 dated December 8, 2025. The pricing supplement filed on July 17, 2026, incorporates these base documents by reference, creating a comprehensive disclosure package that extends across multiple documents. Investors should review the full prospectus documents, not merely this pricing supplement, to understand all material terms and conditions governing the notes.

BofA Securities Inc. serves as the selling agent for the distribution. The notes will not be listed on any securities exchange, meaning investors face limited liquidity options and must rely on secondary market transactions directly with counterparties or dealers should they wish to exit positions prior to maturity or early redemption. The CUSIP number 09712CJY0 provides the security identifier for market participants tracking and transacting in these notes.

Valuation Date Adjustments and Event-of-Default Procedures

The valuation date for determining the ending values of the three underlying indices is June 17, 2027, subject to postponement if certain events affecting index observation occur. Should an event of default arise prior to maturity, the redemption amount calculation methodology applies as if the acceleration date were treated as the maturity date, with the valuation date moved to the third trading day before acceleration. Any final contingent coupon payment in a default scenario would be prorated by the calculation agent to reflect the shortened contingent payment period, protecting investors from excessive time-value distortion but potentially reducing the total interest earned if default occurs late in the term.

Events of default are defined in the senior indenture relating to the notes and in the prospectus sections addressing BofA Finance debt security defaults. Investors should review these default provisions in detail, as acceleration could trigger the valuation methodology before market conditions have fully evolved relative to the originally scheduled maturity. The interaction between default procedures and the contingent coupon structure means that investors could face redemption at deflated values if both a default event occurs and the underlying indices have declined significantly from their starting values.