BofA Finance Launches $2.6 Billion Auto-Callable Notes Tied to Three Major Equity Indices

Structure and Terms of the Multi-Index Linked Securities

The offering comprises structured notes issued by BofA Finance and fully guaranteed by Bank of America Corporation. The disclosure indicates that the notes will issue on July 20, 2026, following their pricing on July 15, 2026, and mature on October 20, 2027, providing investors with an approximate 15-month investment horizon. The notes are linked simultaneously to three major equity indices: the Nasdaq-100 Index starting at 29,502.60, the Russell 2000 Index starting at 2,976.259, and the S&P 500 Index starting at 7,572.40 as of the pricing date.

The minimum denomination for the notes is $1,000 with whole multiples of $1,000 available in excess thereof. The public offering price was set at $1,000 per note, with an underwriting discount of $2.50 per note, resulting in net proceeds of $997.50 per note to BofA Finance. For the full $2.6 billion offering, total underwriting compensation amounted to $6.5 million. The initial estimated value of the notes as of the pricing date was $991.10 per $1,000 in principal amount, which was lower than the public offering price. The disclosure states that the actual value of the notes at any time will reflect numerous factors and cannot be predicted with accuracy.

Contingent Coupon Payment Structure with Memory Feature

The notes incorporate a contingent coupon payment mechanism with a memory feature that allows investors to accumulate unpaid coupons. According to the disclosure, contingent coupon payments are payable monthly if the observation value of each underlying index on the applicable observation date is greater than or equal to 70% of its starting value, assuming the notes have not been called. The coupon barrier levels are set at 20,651.82 for the Nasdaq-100 Index (70% of starting value), 2,083.381 for the Russell 2000 Index (70% of starting value), and 5,300.68 for the S&P 500 Index (70% of starting value).

The memory feature enables investors to receive accumulated coupon payments even if certain monthly observation dates do not qualify for payment. The contingent coupon payment per $1,000 in principal amount equals the product of $10.834 times the number of contingent payment dates that have occurred up to the relevant contingent payment date (inclusive), minus the sum of all contingent coupon payments previously paid. This structure means investors can receive retroactive compensation for months when the coupon barrier condition was not met, provided the condition is satisfied at a later observation date and the notes remain outstanding. The final contingent coupon payment is due at maturity if the closing level of each underlying index on the final observation date is greater than or equal to 70% of its starting value.

Automatic Call Feature and Early Redemption Provisions

The notes feature an automatic call mechanism that begins on the January 15, 2027 call observation date and continues monthly thereafter. The disclosure indicates that all of the notes (but not less than all) will be automatically called if the observation value of each underlying index is greater than or equal to 100% of its starting value on any call observation date. This means the notes will be called if all three indices simultaneously remain at or above their original pricing-date levels on any given call observation date. The call value for each index equals 100% of its starting value: 29,502.60 for Nasdaq-100, 2,976.259 for Russell 2000, and 7,572.40 for S&P 500.

If the notes are automatically called, the early redemption amount paid to investors equals $1,000 per note in principal amount plus the applicable contingent coupon payment. The call payment date follows the applicable call observation date. Once called, no further amounts are payable on the notes. This automatic call feature means investors have no control over whether the notes remain outstanding to maturity, and any continuation of the investment depends entirely on whether all three underlying indices decline from their starting values on each successive call observation date starting January 15, 2027.

Downside Protection Limitations and Knock-In Risk

The notes contain a complex knock-in feature that significantly alters investor returns in adverse market scenarios. The disclosure defines a knock-in event as the observation value of any underlying index falling below its threshold value on any trading day during the knock-in period, which runs from the pricing date (July 15, 2026) through the valuation date (October 15, 2027). The threshold values are set at 19,176.69 for Nasdaq-100 (65% of starting value), 1,934.568 for Russell 2000 (65% of starting value), and 4,922.06 for S&P 500 (65% of starting value). This means the knock-in event is triggered if any single index declines by more than 35% from its starting value at any point during the investment period.

If a knock-in event occurs and the ending value of the least-performing underlying index falls below its starting value at maturity, investors face 1:1 downside exposure with up to 100% principal at risk. Conversely, if a knock-in event does not occur during the knock-in period, investors receive the full principal amount at maturity. Additionally, if a knock-in event occurs but the ending value of the least-performing index is greater than or equal to its starting value, investors receive the principal amount. The redemption amount at maturity also includes a final contingent coupon payment if the ending value of the least-performing underlying is greater than or equal to its coupon barrier (70% of starting value).

Credit Risk and Guarantee Provisions

All payments on the notes are subject to the credit risk of BofA Finance LLC, the issuer, and Bank of America Corporation, which serves as guarantor of the notes. The disclosure explicitly states that the notes are not FDIC insured, not bank guaranteed, and may lose value. The guarantee provided by Bank of America Corporation applies to both principal and coupon payments, meaning investors' rights depend on the creditworthiness and financial stability of Bank of America Corporation as well as BofA Finance LLC. The guarantee does not eliminate market risk or the structural risks inherent in the index-linked design of the notes.

The disclosure indicates that all amounts payable are subject to credit risk, which creates a dual layer of risk for investors. If Bank of America Corporation or BofA Finance LLC experiences financial distress or default, investors may not receive full payment of principal or contingent coupons when due. The registration statement references supporting prospectus documents dated December 8, 2025, which presumably contain additional detail regarding the guarantor and issuer's financial condition and the scope of the guarantee.

Market-Linked Index Performance Requirements

The notes' returns depend entirely on the closing levels of three distinct equity indices, each tracked separately for different payment triggers. The Nasdaq-100 Index represents primarily large-cap technology and growth stocks, the Russell 2000 Index represents small-cap U.S. equities, and the S&P 500 Index represents large-cap U.S. equities across all sectors. The use of the least-performing index to determine the final redemption amount creates an asymmetry in the notes' structure. Investors do not benefit equally from strength in all three indices; rather, the weakest-performing index determines whether the knock-in feature is triggered and what the final payment is.

The observation values used throughout the notes are defined as the closing levels of each underlying index on applicable dates. This creates daily mark-to-market exposure, meaning the notes' status relative to various barriers (coupon barrier, call value, threshold value) changes continuously throughout the investment period. The complexity of tracking three separate indices simultaneously, combined with the different performance thresholds, creates significant monitoring requirements for investors. For example, the coupon barrier (70% of starting value) is more forgiving than the threshold value (65% of starting value), meaning monthly coupon payments can still occur even after a knock-in event if the indices stabilize above the coupon barrier.

Pricing and Underwriting Compensation Details

The offering was priced at $1,000 per note on July 15, 2026, with total principal amount of $2.6 billion, representing 2,600 individual notes. The underwriting discount was set at $2.50 per note, totaling $6.5 million in aggregate underwriting compensation. This resulted in net proceeds to BofA Finance of $997.50 per note, or $2.593 billion in aggregate before expenses. The disclosure notes that certain dealers purchasing notes for resale to fee-based advisory accounts may forgo some or all of their selling concessions, fees, or commissions, and that the public offering price for investors in such accounts may be as low as $997.50 per $1,000 in principal amount.

The initial estimated value of the notes as of the pricing date was $991.10 per $1,000 in principal amount, which represents a discount of approximately $8.90 per note to the public offering price. This valuation differential reflects the issuer's estimated fair value accounting for the various embedded option features, index linkages, and embedded risks. The disclosure explicitly cautions that the actual value of the notes at any time will reflect many factors and cannot be predicted with accuracy, and directs investors to detailed risk factor disclosures beginning on page PS-13 of the pricing supplement and other accompanying documents.

Registration and Compliance Framework

The notes were issued pursuant to registration statement numbers 333-290665 and 333-290665-01 filed with the Securities and Exchange Commission. The disclosure document was filed as a pricing supplement pursuant to Securities and Exchange Commission Rule 424(b)(2) on July 15, 2026, and references a prospectus dated December 8, 2025, a Series A prospectus supplement dated December 8, 2025, and a Product Supplement EQUITY-1 also dated December 8, 2025. These accompanying documents provide comprehensive information regarding the issuer's business, the guarantee structure, risk factors, and the underwriting arrangements for the offering.

The notes have been assigned CUSIP number 09712GVP6 for identification and trading purposes. The disclosure explicitly states that the notes will not be listed on any securities exchange, meaning they will trade only in over-the-counter markets and investors may face limited liquidity. The disclosure contains the standard Securities and Exchange Commission disclaimer that no regulatory body has approved or disapproved the securities or determined if the pricing supplement and accompanying documents are truthful or complete, and that any representation to the contrary constitutes a criminal offense.

Valuation and Market Risk Considerations

The structure of these notes creates several distinct market risk scenarios that investors must evaluate. The notes benefit from rising or stable markets where all three indices remain near or above their starting values, enabling automatic call and contingent coupon payments. However, the requirement that all three indices remain above their respective barriers simultaneously is restrictive—if even one index declines significantly, the notes' payoff profile changes materially. The least-performing index methodology further concentrates risk, as investors receive protection or suffer losses based on the single weakest-performing index rather than an average or equally weighted measure of the three indices.

The knock-in threshold of 35% decline creates a significant risk boundary. If any index falls more than 35% from its starting value at any point during the 15-month investment period, the investor's downside protection is eliminated at maturity (unless that index recovers to at least its starting value by October 15, 2027). This creates a binary outcome for investors: either the knock-in event never occurs and investors receive principal plus accumulated coupons, or it occurs and investors face variable losses depending on the ending values of the indices. The memory feature for contingent coupons provides some offsetting benefit, as investors accumulate unpaid coupons that may be paid if markets stabilize, but this does not protect principal if both the knock-in event occurs and the least-performing index ends below its starting value.

Investor Suitability and Product Complexity Assessment

The disclosure emphasizes that important differences exist between these notes and conventional debt securities. The risk factors section, beginning on page PS-13 of the pricing supplement, page PS-3 of the product supplement, page S-7 of the prospectus supplement, and page 7 of the prospectus, contains detailed discussion of these distinctions. Investors must understand that the notes are primarily equity-linked investments rather than traditional fixed-income securities, despite being issued as debt obligations. The repayment of principal is contingent on index performance, and the contingent coupon structure means investors may receive reduced or no interest payments in many market scenarios.

The complexity of tracking three separate indices, each with different barrier levels and observation dates, requires investor sophistication and ongoing market monitoring. The automatic call feature means investors have no control over the investment horizon, which could be as short as approximately eight months (if all indices remain above starting values through January 2027) or extend to the full 15-month term if at least one index declines below its starting value on each call observation date. The company did not disclose any specific guidance regarding expected returns, probability of various outcomes, or management's assessment of fair value relative to the pricing. The disclosure documents reference that the initial estimated value was less than the public offering price, which is typical for complex structured products but creates an initial valuation headwind for investors.