BofA Finance Issues Three-Year Callable Yield Notes Linked to Nasdaq-100, Russell 2000, and S&P 500 Indices

Coupon Structure and Monthly Payment Mechanics

The notes feature a contingent coupon payment mechanism that delivers $9.375 per $1,000 principal amount monthly, equivalent to an 11.25% annualized rate. However, this payment is conditional on a specific performance criterion: the closing level of each of the three underlying indices—the Nasdaq-100 Index, Russell 2000 Index, and S&P 500 Index—must each be greater than or equal to 75% of its respective starting value on each monthly Observation Date.

The contingent nature of coupon payments introduces volatility and uncertainty into investor returns. If any single underlying index falls below its 75% coupon barrier on an observation date, no contingent coupon payment will be made for that period. Payments are scheduled monthly on designated Contingent Payment Dates, provided the Notes have not been called prior to that date. The final contingent coupon payment, if earned, will be paid at maturity on August 2, 2029, subject to the same 75% barrier test applied on the final valuation date.

Issuer Redemption Rights and Early Call Features

BofA Finance retains the right to redeem all Notes on a monthly basis beginning February 4, 2027, at the early redemption amount equal to the principal amount of $1,000 per note plus any applicable contingent coupon payment if the coupon barrier is satisfied. This issuer call feature effectively caps the upside potential for investors if the underlying indices perform strongly. The issuer must provide notice to the trustee between five business days and 60 calendar days before any designated Call Payment Date.

Once the Notes are called, no further amounts are payable to investors beyond the redemption amount and final contingent coupon. This structural feature gives the issuer asymmetric advantage: if markets rally significantly, the issuer will likely exercise its redemption option to limit its payment obligations, while investors in a declining market would continue holding the Notes through maturity and bear downside exposure. The call feature begins just over seven months after issuance, meaning investors have only a limited window to benefit from strong market performance before the issuer can terminate the investment.

Principal Repayment and Downside Protection Thresholds

The redemption amount at maturity depends on the performance of the least performing underlying index relative to a 60% threshold value. If the ending value of the worst-performing index is at or above 60% of its starting value, investors receive full principal repayment of $1,000 per note. However, if any underlying index declines more than 40% from its starting value, causing the least performing underlying to fall below the 60% threshold, investors face direct dollar-for-dollar downside exposure to the decline.

In severe market declines, investors could recover substantially less than their initial principal investment. The disclosure states that in this scenario, "the Redemption Amount (excluding any final Contingent Coupon Payment) will be less than 60.00% of the principal amount and you could lose up to 100.00% of your investment in the Notes." This means that if the least performing underlying index declines by 100%, investors could theoretically lose their entire principal investment. The exposure applies to whichever of the three indices performs most poorly, not to an equally weighted basket, concentrating risk on the weakest performer.

Multi-Index Linkage and Least Performing Underlying Methodology

The Notes are structured to track three major U.S. equity indices simultaneously: the Nasdaq-100 Index (technology and growth-focused large-cap stocks), the Russell 2000 Index (small-cap stocks), and the S&P 500 Index (broad-based large-cap stocks). The underlying return for each index is calculated on a price return basis without dividend reinvestment. The "least performing underlying" is simply whichever index has experienced the lowest percentage change from its starting value on the valuation date.

This multi-index approach exposes investors to the performance dispersion across market segments. If the Nasdaq-100 Index performs strongly but the Russell 2000 Index declines significantly, investors face the downside of the small-cap index decline rather than the large-cap technology gains. Similarly, if large-cap stocks are resilient but mid-cap or small-cap performance deteriorates, the Notes will be linked to the weakest performer. This structure mathematically guarantees that investors receive exposure to whichever index has performed worst relative to the others, creating an asymmetric outcome bias toward negative scenarios.

Pricing and Initial Estimated Value Considerations

The public offering price for the Notes has been set at $1,000 per $1,000 principal amount, with an underwriting discount of $8 per note, resulting in proceeds to BofA Finance of $992 per note before expenses. However, the disclosure indicates that the initial estimated value of the Notes as of the pricing date (July 30, 2026) is expected to fall between $930 and $980 per $1,000 principal amount.

This substantial valuation gap between the $1,000 offering price and the estimated $930 to $980 intrinsic value reflects the costs embedded in the structured product, including the cost of the embedded call option retained by the issuer and other hedging costs. Investors purchasing at the public offering price would immediately experience an estimated loss of $20 to $70 per $1,000 invested, assuming the midpoint valuation estimates prove accurate. The disclosure states that "the actual value of your Notes at any time will reflect many factors and cannot be predicted with accuracy," acknowledging the difficulty in valuing these complex instruments after issuance.

Credit Guarantee and Issuer Information

The Notes are fully and unconditionally guaranteed by Bank of America Corporation, the parent company of BofA Finance LLC. This guarantee means that if BofA Finance defaults on its payment obligations, Bank of America Corporation has committed to satisfy all amounts owed to noteholders. However, this guarantee does not eliminate credit risk; it merely substitutes the credit quality of Bank of America Corporation for that of the subsidiary issuer.

All payments on the Notes—including coupon payments, early redemption amounts, and the final redemption amount—remain subject to the credit risk of both the issuer and guarantor. The Notes are not FDIC insured and are not guaranteed by any bank deposit insurance mechanism. In the event of a credit event affecting Bank of America Corporation, noteholders could face delays in payment or recovery of reduced amounts depending on the entity's resolution under applicable bankruptcy and banking regulations.

Terms, Registration, and Non-Exchange Trading Status

The Notes have been filed pursuant to Rule 424(b)(2) under the Securities Act of 1933 and relate to Registration Statement Nos. 333-290665 and 333-290665-01. The accompanying documentation includes a prospectus dated December 8, 2025, a Series A Prospectus Supplement dated December 8, 2025, and Product Supplement EQUITY-1 dated December 8, 2025. The Notes are assigned CUSIP number 09712GDB7 for identification and trading purposes.

A significant characteristic of these Notes is that they will not be listed on any securities exchange. This means there will be no centralized, transparent secondary market for the Notes, and investors seeking liquidity may face difficulty in selling their holdings before maturity. BofA Securities, Inc., an affiliate of the issuer, serves as both the calculation agent and selling agent. The non-listed status limits price discovery and may result in wider bid-ask spreads if any secondary market develops, potentially disadvantaging investors who need to liquidate positions prior to the August 2, 2029 maturity date.

Default Provisions and Acceleration Mechanics

The disclosure describes default and acceleration provisions applicable if an Event of Default occurs. If such an event is triggered and permitted acceleration occurs under the senior indenture, the redemption amount payable would be calculated as though the acceleration date were the maturity date and as though the valuation date were the third trading day prior to acceleration. Additionally, the calculation agent would determine whether a final contingent coupon payment is owing based on the index levels on the deemed valuation date, and any such payment would be prorated to reflect the length of the final contingent payment period.

Notably, the disclosure states that "in case of a default in the payment of the Notes, whether at their maturity or upon acceleration, the Notes will not bear a default interest rate." This means that if BofA Finance or Bank of America Corporation fail to make scheduled payments, noteholders will not accrue additional interest on unpaid amounts during the default period. This feature potentially disadvantages noteholders by removing a common protection mechanism available for defaulted debt securities.

Risk Factor Disclosure and Structural Complexity

The disclosure emphasizes that there are significant differences between these Notes and conventional debt securities. Potential purchasers are directed to review risk factors beginning on page PS-11 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 combine multiple layers of risk: market risk from exposure to three equity indices, credit risk from the issuer and guarantor, liquidity risk from the non-listed status, and structural risk from the contingent coupon and call features.

The disclosure also cautions that the initial estimated value of the Notes cannot be predicted with accuracy and that actual values at any future time will reflect numerous factors. This acknowledgment underscores the complexity and uncertainty inherent in valuing derivative-based structured products, particularly those with multiple underlying indices and conditional payment features. Investors should carefully review all provided documentation to fully understand the risks before committing capital.