BofA Finance Launches AMD-Linked Auto-Callable Yield Notes With Memory Feature and Contingent Coupons

Structured Note Terms and Underlying AMD Linkage

The notes filed by BofA Finance represent a complex structured product with terms specifically designed to track the performance of Advanced Micro Devices, Inc. common stock. The disclosure indicates that the notes will have an approximate three-year term unless called early, with a maturity date of July 27, 2029. The starting value for calculating returns will be established as the closing market price of AMD stock on the July 24, 2026 pricing date, which serves as the reference point for all subsequent performance measurements.

The structure incorporates a memory feature that accumulates contingent coupon payments over time. According to the filing, contingent coupon payments will be paid quarterly if the observation value of AMD stock on any observation date remains greater than or equal to 50% of its starting value. The coupon per $1,000 in principal amount will equal at least $56.875 times the number of contingent payment dates that have occurred up to that point, minus all previously paid contingent coupon amounts. The actual contingent coupon rate will be determined on the pricing date, and the issuer emphasizes that the initial estimated value of the notes—expected to fall between $920 and $970 per $1,000 principal—is less than the public offering price.

Automatic Call Mechanism and Early Redemption Features

The notes contain an automatic call feature that activates quarterly beginning with the October 26, 2026 call observation date. The disclosure states that the notes will be automatically called for an amount equal to the principal amount plus the applicable contingent coupon payment if the observation value of AMD stock is greater than or equal to 100% of its starting value on any call observation date. This mechanism means that investors face a limited upside benefit if AMD stock performs strongly, as the notes would be redeemed at par value plus accumulated coupons rather than allowing investors to participate in further gains.

If the notes are automatically called, the early redemption amount will be paid on the applicable call payment date, and no further amounts will be payable following the call. The filing indicates that this automatic call provision could limit the return potential for investors holding the notes during periods of strong AMD stock appreciation. The early redemption amount structure—combining principal with the contingent coupon payment—means investors receive compensation for the period held but do not capture additional upside beyond the call trigger point.

Downside Risk and Principal Loss Exposure at Maturity

A critical feature disclosed in the filing concerns the notes' behavior at maturity if not previously called. If AMD stock declines by more than 50% from its starting value, the filing explicitly states that investors will face 1:1 downside exposure to decreases in the underlying stock value, with up to 100% of principal at risk. This represents a significant structural risk that distinguishes these notes from conventional debt securities. The redemption amount calculation shows that if the ending value of AMD stock falls below the 50% threshold, the redemption amount could be substantially less than the original investment.

Conversely, if AMD stock remains above the 50% threshold at maturity, investors will receive the full principal amount. The filing also indicates that a final contingent coupon payment will be made at maturity if the observation value of AMD stock on the final observation date is greater than or equal to 50% of the starting value. This asymmetric payoff structure—where investors participate in downside losses once AMD stock drops below 50% but have limited upside through the automatic call feature—represents a key structural characteristic that potential investors must understand before committing capital.

Pricing, Discount Structure, and Valuation Considerations

The public offering price for the notes is set at $1,000 per $1,000 principal amount, with an underwriting discount of $20, resulting in proceeds to BofA Finance of $980 before expenses. The filing discloses that certain dealers purchasing notes for sale to fee-based advisory accounts may forgo some or all of their selling concessions, potentially allowing public offering prices as low as $980 per $1,000 principal. The underwriting discount structure provides flexibility in pricing depending on distribution channels.

The initial estimated value of the notes as of the pricing date is expected to fall between $920 and $970 per $1,000 principal amount, representing a significant discount to the $1,000 public offering price. The filing explicitly states that this estimated value is less than the public offering price and emphasizes that the actual value of the notes at any time "will reflect many factors and cannot be predicted with accuracy." This disclosure suggests that investors purchasing at the $1,000 offering price face an immediate valuation headwind, with the notes expected to trade below par value from inception.

Guarantee by Bank of America and Credit Risk Considerations

The notes carry a full and unconditional guarantee from Bank of America Corporation, the parent company of the issuer BofA Finance LLC. The filing prominently discloses that all payments on the notes are subject to the credit risk of both the issuer and the guarantor, emphasizing that the credit quality of Bank of America represents an important consideration for investors. While Bank of America's guarantee provides some assurance of payment, the filing makes clear that investors depend on the creditworthiness of both entities.

The filing notes that the notes are not FDIC insured and are not bank guaranteed in the traditional sense, despite being issued by a Bank of America subsidiary and guaranteed by the parent. This distinction is important for investors familiar with FDIC protections. The guarantee structure does provide some credit enhancement compared to unsecured corporate debt, but investors must evaluate Bank of America's credit profile and the possibility of financial stress affecting the ability to pay, particularly in scenarios where AMD stock experiences significant declines and investors face potential principal loss.

Observation Dates and Coupon Payment Schedule

The filing establishes a quarterly observation schedule for determining whether contingent coupon payments will be made and whether automatic call conditions are met. The disclosure references observation dates and contingent payment dates set forth in the pricing supplement documentation, with call observation dates beginning on October 26, 2026 and continuing quarterly thereafter. The memory feature ensures that if a coupon is missed in any quarter because AMD stock falls below the 50% barrier, that missed coupon accumulates and may be paid in subsequent quarters if the stock recovers above the barrier.

This memory mechanism creates a path-dependent return structure where the timing and sequence of AMD stock price movements matter significantly. An investor who experiences early declines in AMD stock price followed by recovery might ultimately receive full contingent coupon payments if the stock finishes above the barrier on later observation dates. Conversely, an investor experiencing immediate strong performance followed by deterioration might face missed coupon payments early and reduced returns if the stock declines below the threshold.

Anti-Dilution Adjustments and Corporate Event Provisions

The filing references anti-dilution adjustment provisions that may be triggered by certain corporate events affecting AMD stock. The price multiplier is set at 1 but is subject to adjustment for corporate events as described in the accompanying product supplement documentation. While the filing does not detail specific adjustment scenarios, it indicates that the calculation agent (BofA Securities, Inc.) will have responsibility for making these adjustments. These provisions are standard in equity-linked structured products and are designed to protect investors from dilution caused by stock splits, dividend distributions, or other corporate actions.

The disclosure of adjustment mechanisms recognizes that over a three-year holding period, AMD could implement various corporate actions that affect its stock price. The filing indicates that such adjustments would be made according to provisions detailed in the broader product supplement documentation, ensuring that investors are not disadvantaged by routine corporate actions while preserving the economic intent of the structured product.

Registration and Distribution Details

The filing is registered pursuant to Rule 424(b)(2) under the Securities Act of 1933 and relates to effective registration statements numbered 333-290665 and 333-290665-01. BofA Securities, Inc. serves as both the calculation agent and the selling agent for the notes. The notes have been assigned CUSIP number 09712GDY7 and will not be listed on any securities exchange, meaning investors will need to transact directly in the secondary market with dealers rather than through a public exchange.

The preliminary pricing supplement filed on July 23, 2026 references an accompanying product supplement dated December 8, 2025, a prospectus supplement also dated December 8, 2025, and a prospectus dated December 8, 2025. This layered disclosure structure is required for complex structured products and provides detailed information across multiple documents addressing different aspects of the offering. The filing notes that the pricing supplement is preliminary and subject to completion, indicating that certain terms and final pricing details remain to be finalized before the July 24, 2026 pricing date.

Risk Disclosures and Valuation Uncertainties

The filing emphasizes significant differences between the notes and conventional debt securities, directing potential purchasers to review extensive risk factor disclosures beginning on page PS-10 of the pricing supplement, page PS-4 of the product supplement, page S-7 of the prospectus supplement, and page 7 of the prospectus. The disclosure of these multiple risk sections indicates that the notes carry substantial complexities and risks beyond those typical of traditional fixed-income securities. The filing specifically highlights that the initial estimated value at pricing is expected to be discounted significantly from the offering price, raising questions about value creation and pricing efficiency.

The issuer cautions that the actual value of the notes at any time "will reflect many factors and cannot be predicted with accuracy," acknowledging that market conditions, volatility assumptions, interest rate changes, and other factors will continuously affect valuations. The emphasis on unpredictability suggests that investors should not assume the notes will appreciate toward par value over time and should be prepared for scenarios where secondary market valuations remain depressed throughout the holding period.

SEC Review Status and Regulatory Considerations

The filing includes standard SEC disclosure language indicating that neither the Securities and Exchange Commission, any state securities commission, nor any other regulatory body has approved or disapproved the securities or determined whether the pricing supplement and accompanying documents are truthful or complete. The filing notes that any representation to the contrary constitutes a criminal offense, establishing clear liability for any misstatements regarding regulatory approval status.

The preliminary nature of the pricing supplement means that terms, pricing, and other details remain subject to change before the July 24, 2026 pricing date. Investors interested in these notes should closely monitor final confirmations and pricing documentation to ensure they understand the actual terms under which the notes will be issued. The three-document prospectus structure (prospectus, prospectus supplement, and product supplement) creates a complex disclosure framework typical of equity-linked structured notes, requiring thorough review across multiple documents to fully understand all features and risks.