BofA Finance Launches Auto-Callable Yield Notes Linked to Energy, Utilities and Semiconductor ETFs

Structure and Pricing of the Contingent Income Notes

The Contingent Income Auto-Callable Yield Notes represent a structured debt product issued by BofA Finance LLC and fully guaranteed by Bank of America Corporation. According to the filing, the notes are expected to be priced on July 28, 2026 and issued on July 31, 2026, with an approximate three-year term unless called earlier. The notes will be issued in minimum denominations of $1,000.00 and in whole multiples of $1,000.00 thereafter, with a CUSIP number of 09712GVD3.

The public offering price for each $1,000.00 in principal amount is $1,000.00 per note. BofA Finance will receive proceeds before expenses of $972.00 per note after accounting for the underwriting discount of $28.00 per $1,000.00 in principal amount. The filing indicates that certain dealers who sell the notes through fee-based advisory accounts may forgo some or all of their selling concessions, potentially reducing the effective purchase price to $972.00 per $1,000.00 in principal amount. Additionally, an affiliate of BofA Finance may pay referral fees of up to $3.00 per $1,000.00 in principal amount to other registered broker-dealers involved in distribution.

Underlying ETF Performance and Contingent Coupon Mechanics

The notes are linked to the least performing of three underlying exchange-traded funds: the State Street Energy Select Sector SPDR ETF (ticker: XLE), the State Street Utilities Select Sector SPDR ETF (ticker: XLU), and the VanEck Semiconductor ETF (ticker: SMH). The starting value for each underlying is established as its closing market price on the pricing date of July 28, 2026. Investors should note that payments depend on the individual performance of each of these three distinct ETFs representing different economic sectors.

According to the disclosure, contingent coupon payments of $13.75 per $1,000.00 in principal amount (equivalent to 1.375% per month or 16.50% per annum) will be paid monthly if the observation value of each underlying is greater than or equal to 70% of its starting value on the applicable observation date, assuming the notes have not been called. This means all three underlyings must remain above their respective 70% coupon barriers for coupon payments to be made. The filing specifies that contingent coupon payments are payable on contingent payment dates beginning with the first such date following the initial observation date.

Automatic Call Features and Early Redemption Conditions

The notes incorporate an automatic call mechanism beginning with the January 28, 2027 call observation date. Under the terms disclosed in the filing, if the observation value of each underlying is greater than or equal to 100% of its starting value on any call observation date, all of the notes will be automatically called. Upon an automatic call, investors receive an early redemption amount equal to $1,000.00 in principal per note plus the applicable contingent coupon payment, with no further amounts payable after the call event.

The automatic call provision represents a significant structural feature whereby investors could exit their positions early at par value if market conditions favor the underlying ETFs. Monthly call observation dates are established throughout the life of the notes, providing multiple opportunities for the issuer to terminate the investment if all three underlyings appreciate together. The filing states that call observation dates occur on predetermined dates, with corresponding call payment dates for the delivery of redemption proceeds.

Downside Risk and Principal Protection at Maturity

The notes present material downside risk that investors must carefully consider. According to the disclosure, if any underlying declines by more than 50% from its starting value at maturity, investors will receive 1:1 downside exposure to decreases in the value of the least performing underlying, with up to 100% of the principal at risk. This means that if the weakest-performing ETF falls below 50% of its starting value by the valuation date of July 30, 2029, the redemption amount could be substantially less than the full principal amount.

Conversely, if the ending value of the least performing underlying is greater than or equal to 50% of its starting value at the valuation date, investors will receive the full principal amount of $1,000.00 per note, subject to completion of the final contingent coupon payment if applicable. The filing clarifies that a final contingent coupon payment will be made at maturity if the ending value of the least performing underlying is greater than or equal to its coupon barrier of 70%. This structure means that investors face asymmetric risk exposure dependent primarily on whichever of the three underlyings performs most poorly over the three-year term.

Valuation and Initial Note Pricing Assessment

The filing discloses that the initial estimated value of the notes as of the pricing date is expected to be between $837.90 and $937.90 per $1,000.00 in principal amount, which is less than the public offering price of $1,000.00. This valuation gap reflects the issuer's costs, margins, and the embedded option value within the structure. The company did not disclose the specific methodology or components used to derive these valuation estimates in the pricing supplement.

The filing emphasizes that the actual value of the notes at any time will reflect many factors and cannot be predicted with accuracy. The notes will not be listed on any securities exchange, limiting secondary market liquidity for investors who may wish to sell before maturity. Investors purchasing the notes should understand that secondary market prices may differ significantly from both the offering price and the initial estimated value, depending on changes in the performance of the underlying ETFs, volatility, credit spreads, and market conditions affecting structured products generally.

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 guarantor. The notes are fully and unconditionally guaranteed by Bank of America Corporation, meaning that investors depend on the creditworthiness of the Bank of America group for redemption of principal and coupon payments. The filing does not provide updated credit ratings or specific credit assessments but indicates that the guarantee structure is intended to support note obligations.

Investors should recognize that these notes are not bank deposits and are not insured by the Federal Deposit Insurance Corporation (FDIC). The notes are not bank-guaranteed in the traditional deposit sense and may lose value. Investors' exposure to the issuer and guarantor's financial condition represents a material consideration for investment decisions. The filing directs potential purchasers to review "Risk Factors" sections of the pricing supplement and related documents for comprehensive discussion of credit and other risks.

Anti-Dilution Adjustments and Calculation Agent Responsibilities

The filing indicates that the price multiplier for each underlying is set at 1, subject to adjustment for certain events relating to that underlying as described in sections on anti-dilution and discontinuance adjustments relating to ETFs. These adjustments are designed to account for corporate actions, distributions, or other events affecting the underlying ETF structures that might otherwise distort the economics of the notes. The specific adjustment provisions and triggering events are referenced as appearing on page PS-23 of the product supplement but are not detailed in the pricing supplement excerpt provided.

BofA Securities, Inc., an affiliate of BofA Finance, serves as both the calculation agent and selling agent for the notes. The calculation agent role involves determining observation values, ending values, and coupon payments based on the closing market prices of the underlying ETFs on specified dates. This dual role of BofA Securities highlights the interconnected nature of the BofA group's involvement in both structuring and administering the notes, which investors should consider when evaluating potential conflicts of interest.

Registration and Regulatory Framework

The notes are offered pursuant to a preliminary pricing supplement filed under Rule 424(b)(2) of the Securities Act of 1933. The filing references underlying registration statements numbered 333-290665 and 333-290665-01, with an effective prospectus dated December 8, 2025, a Series A prospectus supplement dated December 8, 2025, and Product Supplement EQUITY-1 dated December 8, 2025. This regulatory framework means that the notes have been registered with the Securities and Exchange Commission through an effective registration statement.

The preliminary pricing supplement carries a notation that it is not complete and may be changed before finalization. The filing contains required disclaimers that the Securities and Exchange Commission, state securities commissions, and other regulatory bodies have not approved or disapproved the securities or determined whether the disclosure documents are truthful or complete. Potential investors should understand that this preliminary supplement will be superseded by final documentation once the notes are priced and issued.

Investment Considerations for Structured Note Investors

Structured notes of this type involve complexity that distinguishes them substantially from conventional debt securities. The filing explicitly notes that there are important differences between the notes and conventional debt securities, and potential purchasers are directed to consider detailed risk factor disclosures beginning on pages 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. These risk sections address market risk, credit risk, liquidity risk, and structural risks specific to the contingent income feature and automatic call mechanism.

The tri-underlying structure means that investors are exposed to correlated sector performance across energy, utilities, and semiconductor industries. Market conditions affecting these sectors differently could result in significant performance divergence among the three ETFs. The contingent coupon structure requires all three underlyings to remain above their coupon barriers for any payment, creating a "worst-of" exposure that concentrates risk on the least performing component. This combination of features makes the notes suitable primarily for investors with sophistication in evaluating structured products and comfort with sector-specific market risks.