BofA Finance Introduces Auto-Callable Yield Notes Tied to Regional Banking and Semiconductor ETFs

Note Structure and Contingent Coupon Details

The notes utilize a contingent coupon mechanism with a memory feature, allowing investors to accumulate monthly payments if performance thresholds are met. According to the filing, on each monthly Observation Date, if the Observation Value of each Underlying is at least 70% of its Starting Value, a Contingent Coupon Payment is made on the corresponding Contingent Payment Date. The coupon amount is calculated cumulatively: $13.75 multiplied by the number of Contingent Payment Dates elapsed minus any previously paid coupons. This memory feature ensures that missed coupon payments do not reduce future payments, provided both ETFs stay above the coupon barrier.

This contingent payment structure introduces significant variability. If either ETF falls below the 70% coupon barrier on any Observation Date, no coupon is paid that month. Since the notes are tied to the least-performing ETF, both the Regional Banking ETF and Semiconductor ETF must remain above this threshold for coupons to be issued. This exposes investors to combined sector volatility, where one underperforming ETF can halt coupon payments entirely.

Automatic Call and Early Redemption Provisions

Starting November 9, 2026, the notes may be automatically called monthly if both ETFs trade at or above their Call Values, defined as 100% of their Starting Values. If this condition is met on any Call Observation Date, all notes will be redeemed early, with no further payments due. Upon automatic call, investors receive the Early Redemption Amount, which includes $1,000 principal plus the applicable Contingent Coupon Payment per $1,000 principal.

This automatic call feature caps upside potential. While monthly coupons are available if conditions are satisfied, a strong rally in both ETFs triggers early redemption, limiting total returns. Call Observation Dates occur monthly from November 2026, offering limited windows to benefit from sustained outperformance. If one ETF outperforms significantly while the other lags, the notes remain outstanding and contingent coupons continue, provided both stay above the coupon barrier.

Principal Risk and Redemption at Maturity

The primary risk disclosed involves principal protection at maturity. Two scenarios exist: if the Ending Value of the least-performing ETF is at least 60% of its Starting Value on February 10, 2028, investors receive full principal. However, if the least-performing ETF falls below 60%, the Redemption Amount (excluding any final coupon) will be less than 60% of principal, with potential for 100% loss of investment.

This means a decline exceeding 40% in either the Regional Banking or Semiconductor ETF by the February 7, 2028 Valuation Date results in dollar-for-dollar principal losses based on the worst-performing ETF. The filing highlights "1:1 downside exposure to decreases in the value of the Least Performing Underlying, with up to 100% of principal at risk." Additionally, a final contingent coupon is payable only if the least-performing ETF remains above the 70% coupon barrier at maturity, so investors may lose both principal protection and final coupon payments if performance deteriorates.

Pricing and Valuation Discount Explained

The filing reveals a notable valuation discount between the public offering price and the estimated initial value. The public offering price is $1,000 per $1,000 principal, with a $21.75 underwriting discount, resulting in net proceeds of $978.25 to BofA Finance before expenses. However, the initial estimated value at pricing is expected between $900 and $950 per $1,000 principal, representing a 5% to 10% discount. This reflects costs embedded in the product’s features such as the automatic call cap, downside risk, and contingent coupons.

The filing notes that the notes' value will fluctuate post-issuance based on ETF prices, interest rates, and volatility, and that the notes will not be listed on any securities exchange, potentially limiting liquidity and the ability to sell before maturity or call.

Credit Risk and Guarantor Details

Payments on the notes depend on the creditworthiness of BofA Finance LLC as issuer and Bank of America Corporation as guarantor. The full and unconditional guarantee by Bank of America, a major U.S. financial institution, backs the notes. However, the filing does not provide credit spreads or ratings related to this guarantee.

Investors are exposed to both market risk from the ETFs and credit risk from the issuer and guarantor. The notes are not FDIC insured, nor are they bank deposits, and may lose value. This distinguishes them from traditional bank products and emphasizes their nature as equity-linked securities rather than direct bank debt.

Exposure to Sector-Specific ETFs

The notes are linked to two sector-focused ETFs with distinct risk profiles: the State Street SPDR S&P Regional Banking ETF (KRE), sensitive to interest rates, credit cycles, and regional economies, and the VanEck Semiconductor ETF (SMH), characterized by high volatility, cyclicality, and exposure to technology trends and geopolitical risks. Returns are based on the lesser-performing ETF over the 18-month term.

This least-performing ETF structure means that if one ETF declines 30% while the other gains 50%, returns are based on the 30% decline. Starting Values are set as the closing market prices on August 7, 2026. The Price Multiplier for each ETF is 1, subject to adjustments for corporate actions as detailed in the accompanying product supplement.

Observation and Payment Schedule

The notes feature monthly Observation Dates and Contingent Payment Dates, with the first Call Observation Date on November 9, 2026. Specific dates for these events are detailed in the pricing supplement pages PS-4 and PS-5. The Valuation Date for final redemption is February 7, 2028, with maturity on February 10, 2028, allowing time for settlement. The filing refers investors to the full product supplement for operational details such as business day adjustments.

This schedule provides approximately 18 months of exposure, with monthly opportunities for coupon payments and automatic calls starting after about three months.

Registration, Distribution, and Selling Details

These notes are issued under Registration Statement Nos. 333-290665 and 333-290665-01, with supporting documents dated December 8, 2025. The preliminary pricing supplement is filed under Rule 424(b)(2) of the Securities Act of 1933. BofA Securities, Inc., an affiliate of BofA Finance, acts as Calculation Agent and Selling Agent. The notes carry CUSIP 09712GKY9 for identification in trading systems.

Some dealers selling to fee-based advisory accounts may waive selling concessions, allowing purchases at prices as low as $978.25 per $1,000 principal, matching BofA Finance’s net proceeds. Additionally, referral fees up to $3.00 per $1,000 principal may be paid to participating broker-dealers. The filing clarifies that no regulatory body has approved or disapproved these securities or verified the completeness of this pricing supplement and related documents.

Investor Risks and Considerations

The filing underscores that these Notes differ significantly from conventional debt securities and directs investors to detailed risk disclosures in the pricing supplement and prospectus materials. Key risks include non-guaranteed contingent coupons, full principal risk if either ETF declines over 40%, capped upside due to automatic call, and limited secondary market liquidity. The notes’ value is subject to multiple unpredictable factors.

Prospective investors should assess their comfort with structured product complexity, their outlook on regional banking and semiconductor sectors over the term, and their willingness to hold to maturity if not called early. The preliminary nature of this pricing supplement means final terms may vary from those described.