BofA Finance Issues Five-Year Contingent Income Notes Linked to Three Sector ETFs

Pricing and Offering Structure of the Five-Year Notes

The disclosure outlines the preliminary pricing details for the Contingent Income Notes, which are scheduled to price on July 24, 2026 and issue on July 29, 2026. The public offering price per note is $1,000.00 with an underwriting discount of $41.25 per note, yielding proceeds to BofA Finance before expenses of $958.75 per note. The disclosure states that the initial estimated value of the notes as of the pricing date is expected to be between $850.00 and $920.00 per $1,000.00 in principal amount, which the filing notes is less than the public offering price. This valuation differential reflects the market conditions and structural features of the contingent coupon mechanism at the time of pricing.

The notes will be issued in minimum denominations of $1,000.00 and whole multiples of $1,000.00 in excess thereof, making them accessible to institutional and qualified retail investors. The disclosure includes references to potential adjustments in pricing for certain fee-based advisory accounts, where dealers may forgo selling concessions and offer notes to investors at prices as low as $958.75 per $1,000.00 in principal amount. Additionally, an affiliate of BofA Finance may pay a referral fee of up to $5.00 per $1,000.00 in principal amount of notes in connection with distribution to other registered broker-dealers, representing additional compensation within the distribution chain.

Contingent Coupon Mechanism Tied to Three Underlyings

The notes feature a contingent coupon structure that depends on the performance of all three underlying ETFs simultaneously. The contingent coupon payment of $40.75 per $1,000.00 in principal amount (equivalent to 4.075% per quarter or 16.30% per annum) is payable quarterly only if the observation value of each underlying is greater than or equal to 70.00% of its starting value on each applicable observation date. This "all-or-nothing" contingency means that if any single underlying falls below the 70% coupon barrier, investors receive no coupon payment for that quarter, regardless of how the other two underlyings perform. The starting value for each underlying is defined as its closing market price on the July 24, 2026 pricing date.

The observation value for each underlying is calculated as its closing market price on the applicable observation date, multiplied by a price multiplier (set at 1 for each underlying, subject to adjustment for certain events). The disclosure indicates that observation dates follow a quarterly schedule aligned with contingent payment dates throughout the approximately five-year term. This structure exposes investors to diversified sector and commodity exposure through uranium, real estate, and financial services ETFs, but concentrates coupon risk across all three underlyings, creating what the filing characterizes as important differences from conventional debt securities.

Optional Early Redemption Rights Beginning in Year Two

The disclosure reveals that BofA Finance has optional early redemption rights beginning on July 29, 2027, which is one year after the issue date. On any quarterly call payment date thereafter, the issuer may redeem all of the notes (but not less than all) at an early redemption amount equal to $1,000.00 per note plus the applicable contingent coupon payment if the observation value of each underlying on the corresponding observation date is greater than or equal to its coupon barrier. The issuer must provide notice to the trustee at least five business days but not more than 60 calendar days before the applicable call payment date to exercise this right.

The early redemption feature provides BofA Finance with flexibility to manage its liability exposure if market conditions change favorably or if interest rate environments shift. Once a redemption notice is issued and the optional early redemption occurs, the filing specifies that no further amounts are payable on the notes following the redemption, effectively terminating the investment. This callable structure means that investors face the possibility that their investment will be terminated at par plus a final coupon payment, which may occur in a rising market environment where alternative investments yield lower returns.

Downside Risk Profile and Maturity Redemption Mechanics

At maturity on July 29, 2031, assuming the notes have not been called prior to that date, the redemption amount depends on the performance of the least-performing underlying. 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, investors will receive the full principal amount of $1,000.00 per note. However, if any underlying declines by more than 40% from its starting value (bringing the ending value below 60% of the starting value), the least-performing underlying triggers full downside exposure to investors on a 1:1 basis, meaning investors absorb losses dollar-for-dollar below the threshold level.

The disclosure emphasizes that in the downside scenario, the redemption amount could be less than 60.00% of the principal amount, with investors potentially losing up to 100.00% of their investment in the notes. Additionally, investors will receive a final contingent coupon payment at maturity 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. This creates a situation where investors receive no coupon in the final quarter and experience principal loss simultaneously, amplifying losses in severe market deterioration scenarios. The structure concentrates risk on the single worst-performing ETF across the three underlyings, a feature the filing identifies as differentiating these notes from conventional fixed-income securities.

Three Underlying ETFs Spanning Uranium, Real Estate, and Financials

The notes are linked to three distinct sector and commodity exchange-traded funds: the Global X Uranium ETF (Bloomberg symbol: URA), the State Street Real Estate Select Sector SPDR ETF (Bloomberg symbol: XLRE), and the State Street Financial Select Sector SPDR ETF (Bloomberg symbol: XLF). The choice of three uncorrelated or weakly correlated underlyings creates diversification from a single-sector concentration perspective, but simultaneously increases the probability that at least one underlying will underperform significantly over the five-year term. The filing does not provide historical correlation data or performance metrics for these three ETFs, but the construction of the note around the "least performing" underlying suggests that the issuer expects meaningful divergence in returns among the three funds.

The uranium ETF exposure provides access to commodity and energy transition themes, while real estate and financial sector ETFs offer traditional equity sector exposure. The valuation of each underlying uses closing market prices on observation dates, with a price multiplier of 1 for each underlying subject to adjustment for certain anti-dilution events. The filing references detailed anti-dilution and discontinuance adjustment provisions relating to ETFs on page PS-23 of the accompanying product supplement, indicating that the terms account for potential corporate actions or changes in the underlying ETF structures that could affect valuation.

Credit Risk Concentrated in Bank of America Corporation

All payments on the notes—including principal, contingent coupons, and early redemption amounts—are subject to the credit risk of both BofA Finance LLC as the issuer and Bank of America Corporation as the unconditional guarantor. The disclosure states that all payments are fully and unconditionally guaranteed by Bank of America Corporation, meaning investors have recourse to BAC in the event that BofA Finance fails to meet its obligations. However, the notes are not FDIC insured and are not bank guaranteed, emphasizing that investors bear credit risk despite the Bank of America guarantee.

The calculation agent for the notes is BofA Securities, Inc., an affiliate of BofA Finance, creating an internal control structure where the same corporate family determines observation values and payment amounts. The selling agent is also BofA Securities, Inc., concentrating both distribution and calculation functions within the Bank of America organization. This concentration of control over pricing and calculation within Bank of America affiliates means investors rely on Bank of America's internal governance and control processes to ensure accurate valuation and payment determinations throughout the five-year term.

Registration Status and Securities Law Compliance Framework

The disclosure is filed pursuant to Rule 424(b)(2) under the Securities Act of 1933 and relates to Registration Statement Nos. 333-290665 and 333-290665-01. The pricing supplement references 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, indicating that the offering documentation framework was prepared and registered several months in advance of the actual pricing. This structure allows BofA Finance to price and issue notes under the existing registration statement without the delay and expense of filing a new registration statement for each issuance.

The filing is marked as "Preliminary Pricing Supplement—Subject to Completion," indicating that certain pricing terms and specific terms may be updated prior to the final pricing supplement that will be filed with the SEC. The disclosure includes explicit language that the SEC, state securities commissions, and other regulatory bodies have not approved or disapproved the securities, and that any representation to the contrary would constitute a criminal offense. This standard regulatory disclaimer underscores the preliminary nature of the pricing supplement and the need for investors to review final documentation before committing funds.

Additional Risks and Structural Complexities in Product Design

The disclosure identifies that there are "important differences between the Notes and a conventional debt security," and directs potential purchasers to review risk factors beginning on page PS-9 of the pricing supplement, page PS-3 of the accompanying product supplement, page S-7 of the accompanying prospectus supplement, and page 7 of the accompanying prospectus. The primary structural risk is the contingent coupon mechanism, which creates coupon uncertainty even in scenarios where the notes remain in-the-money relative to the threshold value. Additionally, the "least performing underlying" construct concentrates risk on the worst-performing of three diverse assets, a feature that introduces complexity in predicting likely outcomes across different economic scenarios.

The optional early redemption feature introduces reinvestment risk for investors, as notes may be called away at par plus a final coupon when market yields have declined or alternative investments offer lower returns. The filing notes that the initial estimated value of the notes ($850.00 to $920.00) is significantly below par ($1,000.00), reflecting the discount in issuer valuation at the time of pricing. This discount suggests that sophisticated market participants are pricing in a material probability that the contingent coupon structure will not pay coupons in future quarters, or that the expected payoff at maturity will be materially reduced by underling performance deterioration.

Trading Status and Investor Access to Secondary Markets

The disclosure explicitly states that "the Notes will not be listed on any securities exchange," meaning investors will not be able to trade these notes on national securities exchanges such as NYSE or NASDAQ. This lack of exchange listing reduces liquidity for investors seeking to exit positions prior to maturity or a call event, and may result in wider bid-ask spreads in any secondary market trading that does occur through over-the-counter channels. The absence of exchange listing also means that real-time pricing information and trading volume data will not be available through standard market data providers, potentially limiting price transparency compared to publicly listed securities.

The CUSIP number for the notes is 09712G6B5, which will enable identification of the notes in clearing and settlement systems and potentially facilitate secondary market trading through financial intermediaries. However, the filing provides no information regarding the expected size of the offering, the distribution channels beyond the mention of fee-based advisory accounts and broker-dealer referral arrangements, or any liquidity support mechanisms that BofA Finance or its affiliates might provide in secondary markets. Investors should anticipate that exiting these notes prior to maturity could involve negotiated pricing with limited market depth.