BofA Finance Launches Auto-Callable Yield Notes Linked to Regional Banking and Semiconductor ETFs

Structure and Contingent Payment Mechanics

The notes employ a contingent coupon mechanism with memory features, meaning investors accumulate monthly payments if performance conditions are met. The filing states that on any monthly Observation Date, if the Observation Value of each Underlying is greater than or equal to 70.00% of its Starting Value, a Contingent Coupon Payment will be paid on the applicable Contingent Payment Date. The coupon calculation uses a cumulative formula: the payment equals $13.75 multiplied by the number of Contingent Payment Dates that have occurred up to the relevant date, minus the sum of all Contingent Coupon Payments previously paid. This memory feature means that missed coupon payments in prior months do not reduce future payment amounts, provided both underlyings remain above the coupon barrier.

The contingent nature of these payments introduces significant variability for investors. The filing discloses that if either Underlying falls below its Coupon Barrier of 70.00% of its Starting Value on any Observation Date, no payment will be made that month. Because the notes are linked to the least-performing of the two ETFs, investors face a dual barrier: both the Regional Banking ETF and the Semiconductor ETF must remain above the barrier for coupon payments to be made. This structure exposes investors to the combined volatility of both sectors, with a single underperformer potentially eliminating coupon payments entirely.

Automatic Call Feature and Early Redemption Terms

Beginning with the November 9, 2026 Call Observation Date, the notes are subject to automatic monthly calls if both underlyings reach or exceed their Call Values, defined as 100.00% of their respective Starting Values. The filing states that if the Observation Value of each Underlying is greater than or equal to its Call Value on any Call Observation Date, all notes will be automatically called, with no further amounts payable following such a call. Upon automatic call, investors receive the Early Redemption Amount, which equals $1,000.00 in principal plus the applicable Contingent Coupon Payment for each $1,000.00 in principal amount of Notes.

This automatic call feature creates a capped upside scenario for investors. While the notes offer monthly coupon payments if conditions are met, any substantial rally in both underlyings will trigger early redemption, limiting total returns. The filing indicates that Call Observation Dates occur monthly beginning in November 2026, meaning investors have limited windows during which they can benefit from sustained outperformance of both ETFs. The disclosure suggests that if either underlying significantly outperforms while the other stagnates, the notes will not be called early, and investors will continue receiving contingent coupons, provided both remain above the coupon barrier.

Principal Risk and Maturity Redemption Scenarios

The most significant risk factor disclosed in the filing relates to principal protection at maturity. The redemption structure contains two primary scenarios. If the Ending Value of the Least Performing Underlying is greater than or equal to its Threshold Value of 60.00% of its Starting Value at maturity on February 10, 2028, investors will receive full principal. However, if the Ending Value of the Least Performing Underlying falls below the Threshold Value of 60.00%, the filing states that "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 either the Regional Banking ETF or the Semiconductor ETF declines by more than 40% from its Starting Value by the Valuation Date of February 7, 2028, investors will absorb losses dollar-for-dollar based on the performance of the worst-performing fund. The filing emphasizes that investors face "1:1 downside exposure to decreases in the value of the Least Performing Underlying, with up to 100% of the principal at risk." Additionally, at maturity, a final Contingent Coupon Payment will be made only if the Ending Value of the Least Performing Underlying is greater than or equal to its Coupon Barrier of 70.00% of its Starting Value, meaning investors can miss both principal protection and final coupon payments simultaneously if performance deteriorates sufficiently.

Pricing and Valuation Discount

The filing discloses a significant valuation discount between the public offering price and the expected initial value of the notes. The public offering price is $1,000.00 per $1,000.00 in principal amount, with an underwriting discount of $21.75 per note, resulting in proceeds to BofA Finance of $978.25 before expenses. However, the filing states that "the initial estimated value of the Notes as of the pricing date is expected to be between $900.00 and $950.00 per $1,000.00 in principal amount of Notes, which is less than the public offering price listed below." This discount of $50.00 to $100.00 per $1,000 principal, or 5% to 10%, reflects the embedded cost of the structured product features, including the automatic call cap, the downside exposure, and the contingent coupon payments.

The filing notes that "the actual value of your Notes at any time will reflect many factors and cannot be predicted with accuracy." This valuation guidance applies only as of the expected pricing date of August 7, 2026. After issuance on August 12, 2026, the market value of the notes will fluctuate based on changes in the underlying ETF prices, interest rates, and implied volatility. The filing does not disclose any secondary market liquidity expectations, and states that "the Notes will not be listed on any securities exchange," which may limit the ability of investors to sell the notes prior to maturity or automatic call.

Credit Risk and Guarantor Protection

All payments on the notes are subject to the credit risk of both BofA Finance LLC as issuer and Bank of America Corporation as guarantor. The filing states that "all payments on the Notes are subject to the credit risk of BofA Finance LLC ('BofA Finance' or the 'Issuer'), as issuer of the Notes, and Bank of America Corporation ('BAC' or the 'Guarantor'), as guarantor of the Notes." Bank of America's full and unconditional guarantee provides recourse to BAC, one of the largest financial institutions in the United States. However, the filing does not provide credit spreads, ratings, or other details regarding the cost of this guarantee relative to unguaranteed comparable instruments.

The guarantee structure means that investors in these notes are exposed to bank credit risk rather than just market risk on the underlying ETFs. While Bank of America's financial strength has historically been substantial, any deterioration in BAC's credit profile could affect the value of the notes. The filing contains a standard risk disclosure that notes "are not FDIC insured," are "not bank guaranteed" in the deposit insurance sense, and "may lose value." This language differentiates the notes from traditional bank deposits and highlights that the notes are equity-linked securities, not debt obligations of the bank itself.

Underlying ETF Exposure and Sector Concentration

The notes are linked to two sector-specific exchange-traded funds with distinct risk profiles. The State Street SPDR S&P Regional Banking ETF (KRE) provides exposure to regional banks, a sub-sector of the financial industry that is sensitive to interest rate changes, credit cycles, and regional economic conditions. The VanEck Semiconductor ETF (SMH) provides exposure to semiconductor manufacturers and equipment suppliers, a sector known for high volatility, cyclicality, and exposure to technology trends, supply chain disruptions, and geopolitical risks. The filing discloses that returns on the notes are based on the performance of "the Least Performing of" these two underlyings, meaning investors effectively receive returns corresponding to whichever fund performs worse over the 18-month term.

This least-performing structure creates an asymmetry in risk and return. If the Regional Banking ETF declines 30% while the Semiconductor ETF rises 50%, investors receive returns based on the 30% decline. The filing indicates that the Starting Value for each Underlying is "its Closing Market Price on the pricing date," meaning values are set on August 7, 2026. The filing also discloses that the Price Multiplier for each Underlying is 1, "subject to adjustment for certain events relating to that Underlying as described in 'Description of the Notes — Anti-Dilution and Discontinuance Adjustments Relating to ETFs' beginning on page PS-28 of the accompanying product supplement," though the specific adjustment mechanisms are not detailed in the pricing supplement itself.

Observation Dates and Payment Schedule

The notes feature monthly Observation Dates and Contingent Payment Dates, with the first Call Observation Date beginning November 9, 2026. The filing states that specific dates for Observation Dates, Contingent Payment Dates, Call Observation Dates, and Call Payment Dates "are set forth beginning on page PS-4" and "PS-5" of the pricing supplement, but the excerpt provided does not include these specific dates. The Valuation Date, which determines final redemption values at maturity, is listed as February 7, 2028, "subject to postponement as described under 'Description of the Notes—Certain Terms of the Notes—Events Relating to Observation Dates' in the accompanying product supplement." The Maturity Date is February 10, 2028, three days after the Valuation Date.

This schedule creates approximately 18 months of exposure to the underlying ETFs, with monthly opportunities for coupon payments (if conditions are met) and monthly opportunities for automatic call (beginning after approximately three months). The three-day gap between Valuation Date and Maturity Date is standard for structured notes and allows time for calculation and settlement processing. The filing does not disclose the specific times at which prices are observed or whether any business day adjustments apply to Observation Dates or Valuation Dates, referring investors to the fuller product supplement for these operational details.

Registration and Distribution Information

The notes are being issued pursuant to Registration Statement Nos. 333-290665 and 333-290665-01, with supporting documents dated December 8, 2025. The filing is a preliminary pricing supplement filed pursuant to Rule 424(b)(2) under the Securities Act of 1933. BofA Securities, Inc., an affiliate of BofA Finance, serves as both the Calculation Agent and the Selling Agent for the notes. The CUSIP number assigned to the notes is 09712GKY9, which investors can use to identify and track the security in market data systems and broker platforms.

The filing notes that certain dealers who purchase notes for sale to fee-based advisory accounts may forgo some or all of their selling concessions, with the potential for investors in these accounts to purchase at prices as low as $978.25 per $1,000 in principal, matching the proceeds to BofA Finance before expenses. Additionally, an affiliate of BofA Finance may pay a referral fee of up to $3.00 per $1,000 in principal to other registered broker-dealers involved in distribution. The filing's disclaimers emphasize that "the SEC, any state securities commission, or any other regulatory body" has not "approved or disapproved of these securities or determined if this pricing supplement and the accompanying product supplement, prospectus supplement and prospectus is truthful or complete."

Key Risks and Investor Considerations

The filing explicitly states that "there are important differences between the Notes and a conventional debt security" and directs potential purchasers to risk factors beginning on page PS-10 of the pricing supplement, page PS-3 of the product supplement, page S-7 of the prospectus supplement, and page 7 of the prospectus. While the specific risk disclosures are not reproduced in the excerpt provided, the core risks implicit in the structure are clear: contingent coupon payments are not guaranteed, principal is fully at risk if either underlying declines more than 40%, upside is capped by the automatic call feature, and the notes lack secondary market liquidity. The filing also notes that "the actual value of your Notes at any time will reflect many factors and cannot be predicted with accuracy."

Investors considering these notes should evaluate their tolerance for structured product complexity, their views on the relative performance of the regional banking and semiconductor sectors over the 18-month term, and their ability to hold the notes to maturity if they are not called early. The filing indicates that investors should consult the full prospectus materials and consider their individual circumstances before investing. The preliminary nature of this pricing supplement means that final terms may differ from those disclosed in this document.