SUMMARY
The Cash-Settled Equity Linked Notes Linked to
the American Depositary Shares of Shell plc due December 17, 2025 (the “notes”) are our senior debt securities. Any payment
on the notes is fully and unconditionally guaranteed by BAC. The notes and the related guarantee are not insured by the Federal Deposit
Insurance Corporation or secured by collateral. The notes will rank equally in right of payment with all of our other unsecured and
unsubordinated obligations, and the related guarantee will rank equally in right of payment with all of BAC’s other unsecured and
unsubordinated obligations, in each case, except obligations that are subject to any priorities or preferences by law. Any payment due
on the notes, including any repayment of the principal amount, will be subject to the credit risk of BofA Finance, as issuer, and BAC,
as guarantor. The notes will mature on December 17, 2025.
Payments on the notes depend on the credit risk
of BofA Finance, as issuer, and BAC, as guarantor, and on the performance of the Underlying Stock. The economic terms of the notes are
based on BAC’s internal funding rate, which is the rate it would pay to borrow funds through the issuance of market-linked notes,
and the economic terms of certain related hedging arrangements BAC’s affiliates enter into. BAC’s internal funding rate is
typically lower than the rate it would pay when it issues conventional fixed or floating rate debt securities. This difference in funding
rate, as well as the hedging related charges described below, will reduce the economic terms of the notes to you and the initial estimated
value of the notes. Due to these factors, the public offering price you pay to purchase the notes will be greater than the initial estimated
value of the notes as of the pricing date.
The initial estimated value range of the notes
is set forth on the cover page of this preliminary pricing supplement. The final pricing supplement will set forth the initial estimated
value of the notes as of the pricing date. For more information about the initial estimated value and the structuring of the notes, see
“Risk Factors” beginning on page PS-6 and “Structuring the Notes” on page PS-17.
General: |
|
Issuer: |
BofA Finance LLC (“BofA Finance”) |
Guarantor: |
Bank of America Corporation (“BAC”) |
Term: |
Approximately 3 years |
Pricing Date: |
December 12, 2022, subject to change |
Issue Date: |
December 19, 2022, subject to change based on the actual date the notes are priced |
Valuation Date: |
December 12, 2025, subject to change based on the actual date the notes are priced and subject to postponement as described under “Description of the Notes—Certain Terms of the Notes—Events Relating to Calculation Days” in the accompanying product supplement, with references to "calculation day" therein being deemed to be references to "Valuation Date". |
Maturity Date: |
December 17, 2025, subject to change based on the actual date the notes are priced |
Underlying Stock: |
The American Depositary Shares of Shell plc, each representing two ordinary shares of Shell plc (NYSE: SHEL). See the section entitled “The Underlying Stock.” We refer to Shell plc as the “Underlying Company.” |
Determining the Value of the Underlying Stock: |
Threshold Price: |
Expected to be between [115% - 120%] (to be determined on the pricing date) of the Initial Reference Price (as defined below), rounded to two decimal places. |
Initial Reference Price: |
The price of one depositary share of the Underlying Stock determined on the pricing date in good faith and in the sole discretion of the calculation agent. The Initial Reference Price will likely differ from the Closing Market Price of the Underlying Stock on the pricing date. The calculation agent is under no obligation to consider your interests as a holder of the notes in taking any actions, including the determination of the Initial Reference Price, that may affect the value of your notes. Please see Conflict-related Risks on page PS-10. |
Final Stock Price: |
The Closing Market Price of the Underlying Stock times the Price Multiplier on the Valuation Date. |
Price Multiplier: |
The Price Multiplier will be set to 1.0 on the pricing date, and will be subject to adjustment upon the occurrence of certain corporate events affecting the Underlying |
|
Stock, including, but not limited to, an adjustment to take into account any Ordinary Dividend that is higher or lower than the Base Dividend. See “Description of the Notes — Additional Anti-Dilution Adjustments” beginning on page PS-11 of this pricing supplement and “Description of the Notes — Anti-Dilution Adjustments” beginning on page PS-23 in the accompanying product supplement. |
Ordinary Dividend: |
The regular quarterly cash dividend per one depositary share of the Underlying Stock paid by the Underlying Company. |
Base Dividend: |
From the issue date to the maturity date of the notes, $0.50 per calendar quarter per depositary share of the Underlying Stock. See “Description of the Notes — Additional Anti-Dilution Adjustments” beginning on page PS-11 of this pricing supplement and “Description of the Notes — Anti-Dilution Adjustments” beginning on page PS-23 in the accompanying product supplement. |
Payment of the Notes at Maturity: |
Redemption Amount: |
Your payment at maturity for each $1,000 in principal amount of the
notes will be the greater of:
· $1,000;
and
· the
Alternative Settlement Amount (as defined below) |
|
Alternative Settlement Amount: |
An amount calculated as follows:
$1,000 × (Final Stock Price / Threshold Price). |
|
|
Additional Information: |
Calculation Agent: |
BofAS, an affiliate of BofA Finance. |
Selling Agent: |
BofAS |
The pricing date, issue date and other dates
set forth above are subject to change, and will be set forth in the final pricing supplement relating to the notes.
You should read carefully this entire pricing
supplement, and the accompanying product supplement, prospectus supplement, and prospectus, to understand fully the terms of the notes,
as well as the tax and other considerations important to you in making a decision about whether to invest in the notes. In particular,
you should review carefully the section in this pricing supplement entitled “Risk Factors,” which highlights a number of risks
of an investment in the notes, to determine whether an investment in the notes is appropriate for you. If information in this pricing
supplement is inconsistent with the product supplement, prospectus supplement or prospectus, this pricing supplement will supersede those
documents. You are urged to consult with your own attorneys and business and tax advisors before making a decision to purchase any of
the notes.
The information in this “Summary” section
is qualified in its entirety by the more detailed explanation set forth elsewhere in this pricing supplement and the accompanying product
supplement, prospectus supplement and prospectus. You should rely only on the information contained in this pricing supplement and the
accompanying product supplement, prospectus supplement and prospectus. We have not authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent information, you should not rely on it. None of us, the Guarantor or
any selling agent is making an offer to sell these notes in any jurisdiction where the offer or sale is not permitted. You should assume
that the information in this pricing supplement, the accompanying product supplement, prospectus supplement, and prospectus is accurate
only as of the date on their respective front covers.
Certain terms used but not defined in this pricing
supplement have the meanings set forth in the accompanying product supplement, prospectus supplement and prospectus. Unless otherwise
indicated or unless the context requires otherwise, all references in this pricing supplement to “we,” “us,” “our,”
or similar references are to BofA Finance, and not to BAC (or any other affiliate of BofA Finance).
The above-referenced prospectus, prospectus supplement
and product supplement may be accessed at the links set forth on the cover page of this pricing supplement.
Hypothetical Redemption Amount on the Notes
The following table is for purposes of illustration
only. It is based on hypothetical values and shows hypothetical returns on the notes. The table illustrates the calculation
of the Redemption Amount based on a hypothetical Initial Reference Price of $50, a hypothetical Threshold Price of $58.75 (equal to 117.50%
(the midpoint of the Threshold Price range of between [115% - 120%]) of the hypothetical Initial Reference Price) and a range of hypothetical
Final Stock Prices as set forth below. The actual amount you receive and the total resulting return will depend on the actual Initial
Reference Price, Threshold Price and Final Stock Price of the Underlying Stock and the actual price you paid for the notes. The numbers
appearing in the table set forth below have been rounded for ease of analysis, and do not take into account any tax consequences from
investing in the notes.
For recent actual prices of the Underlying Stock,
see “The Underlying Stock” section below. The Final Stock Price of the Underlying Stock will not include any income generated
by dividends paid on the Underlying Stock, which you would otherwise be entitled to receive if you invested in the Underlying Stock directly.
In addition, any payment on the notes is subject to issuer and Guarantor credit risk.
Final Stock
Price |
Percentage Change
from
Initial Reference Price
to
Final Stock Price
|
Alternative
Settlement Amounts
|
Final Payment at
Maturity
|
$95.00 |
90.00% |
$1,617.02 |
$1,617.02 |
$90.00 |
80.00% |
$1,531.91 |
$1,531.91 |
$85.00 |
70.00% |
$1,446.81 |
$1,446.81 |
$80.00 |
60.00% |
$1,361.70 |
$1,361.70 |
$75.00 |
50.00% |
$1,276.60 |
$1,276.60 |
$70.00 |
40.00% |
$1,191.49 |
$1,191.49 |
$65.00 |
30.00% |
$1,106.38 |
$1,106.38 |
$60.00 |
20.00% |
$1,021.28 |
$1,021.28(1) |
$58.75 |
17.50% |
$1,000.00 |
$1,000.00 |
$52.50 |
5.00% |
$893.62 |
$1,000.00(2) |
$50.00 |
0.00% |
$851.06 |
$1,000.00 |
$45.00 |
-10.00% |
$765.96 |
$1,000.00 |
$40.00 |
-20.00% |
$680.85 |
$1,000.00 |
$35.00 |
-30.00% |
$595.74 |
$1,000.00 |
$30.00 |
-40.00% |
$510.64 |
$1,000.00 |
$25.00 |
-50.00% |
$425.53 |
$1,000.00 |
$20.00 |
-60.00% |
$340.43 |
$1,000.00 |
$15.00 |
-70.00% |
$255.32 |
$1,000.00 |
$10.00 |
-80.00% |
$170.21 |
$1,000.00 |
$5.00 |
-90.00% |
$85.11 |
$1,000.00 |
$0.00 |
-100.00% |
$0.00 |
$1,000.00 |
(1) As set forth above, the payment at maturity will exceed the principal
amount only if the Final Stock Price exceeds the Threshold Price.
(2) As set forth above, the payment
at maturity cannot be less than the principal amount.
risk factors
Your investment in the notes entails significant
risks, many of which differ from those of a conventional debt security. Your decision to purchase the notes should be made only after
carefully considering the risks of an investment in the notes, including those discussed below, with your advisors in light of your particular
circumstances. The notes are not an appropriate investment for you if you are not knowledgeable about significant elements of the notes
or financial matters in general. You should carefully review the more detailed explanation of risks relating to the notes in the “Risk
Factors” sections beginning on page PS-5 of the accompanying product supplement, page S-5 of the accompanying prospectus supplement
and page 7 of the accompanying prospectus.
Structure-related Risks
Your return on the notes may be less than the
yield on a conventional debt security of comparable maturity. Any return that you receive on the notes may be less than the return
you would earn if you purchased a conventional debt security with the same maturity date. As a result, your investment in the notes may
not reflect the full opportunity cost to you when you consider factors, such as inflation, that affect the time value of money.
The return on your notes may be zero.
Unless the price of the Underlying Stock appreciates beyond the Threshold Price, you will not receive any positive return at maturity,
even if the price of the Underlying Stock appreciates from the Initial Reference Price. Therefore, the Redemption Amount may be limited
to the principal amount of your notes (a zero return).
The notes do not bear interest. Unlike
a conventional debt security, no interest payments will be paid over the term of the notes, regardless of the extent to which the Ending
Value of the Least Performing Underlying exceeds its Threshold Value.
You will not participate in the full appreciation
of the Underlying Stock. If the Final Stock Price is greater than the Threshold Price, the payment on the notes at maturity will reflect
only appreciation of the Underlying Stock in excess of the Threshold Price. For example, assuming a hypothetical Threshold Price of 117.50%
of the hypothetical Initial Reference Price of $50 and a hypothetical Final Stock Price equal to 120% of the hypothetical Initial Reference
Price, the payment on the notes would be only approximately $1,021.28 per $1,000 in principal amount of the notes, for a return of approximately
2.128%, even though the Underlying Stock appreciated 20% from the Initial Reference Price.
In contrast, a direct investment in the Underlying
Stock would allow you to receive the benefit of any appreciation in its value.
Any payment on the notes is subject to our
credit risk and the credit risk of the Guarantor, and actual or perceived changes in our or the Guarantor’s creditworthiness are
expected to affect the value of the notes. The notes are our senior unsecured debt securities. Any payment on the notes will be fully
and unconditionally guaranteed by the Guarantor. The notes are not guaranteed by any entity other than the Guarantor. As a result, your
receipt of any payment on the notes will be dependent upon our ability and the ability of the Guarantor to repay our respective obligations
under the notes on the maturity date, regardless of how the Underlying Stock performs.
In addition, our credit ratings and the credit
ratings of the Guarantor are assessments by ratings agencies of our respective abilities to pay our obligations. Consequently, our or
the Guarantor’s perceived creditworthiness and actual or anticipated decreases in our or the Guarantor’s credit ratings or
increases in the spread between the yield on our respective securities and the yield on U.S. Treasury securities (the “credit spread”)
prior to the maturity date may adversely affect the market value of the notes. However, because your return on the notes depends upon
factors in addition to our ability and the ability of the Guarantor to pay our respective obligations, such as the price of the Underlying
Stock, an improvement in our or the Guarantor’s credit ratings will not reduce the other investment risks related to the notes.
We are a finance subsidiary and, as such, have
no independent assets, operations or revenues. We are a finance subsidiary of the Guarantor, have no operations other than those
related to the issuance, administration and repayment of our debt securities that are guaranteed by the Guarantor, and are dependent upon
the Guarantor and/or its other subsidiaries to meet our obligations under the notes in the ordinary course. Therefore, our ability
to make payments on the notes may be limited.
Valuation- and Market-related Risks
The public offering price you are paying
for the notes exceeds their initial estimated value. The range of initial estimated values of the notes that is provided on the cover
page of this preliminary pricing supplement, and the initial estimated value as of the pricing date that will be provided in the final
pricing supplement, are estimates only, determined as of a particular point in time by reference to our and our affiliates’ pricing
models. These pricing models consider certain assumptions and variables, including our credit spreads and those of the Guarantor, the
Guarantor’s internal funding rate, mid-market terms on hedging transactions, expectations on interest rates, dividends and volatility,
price-sensitivity analysis, and the expected term of the notes. These pricing models rely in part on certain forecasts about future events,
which may prove to be incorrect. If you attempt to sell the notes prior to maturity, their market value may be lower than the price you
paid for them and lower than their initial estimated value. This is due to, among other things, changes in the price of the Underlying
Stock, changes in the Guarantor’s internal funding rate, and the inclusion in the public offering price of the hedging related charges,
all as further described in “Structuring the Notes” below. These factors, together with various credit, market and economic
factors over the term of the notes, are expected to reduce the price at which you may be able to sell the notes in any secondary market
and will affect the value of the notes in complex and unpredictable ways.
The initial estimated value does not represent
a minimum or maximum price at which we, BAC, BofAS or any of our other affiliates would be willing to purchase your notes in any secondary
market (if any exists) at any time. The value of your notes at any time after issuance will vary based on many factors that cannot
be predicted with accuracy, including the performance of the Underlying Stock, our and BAC’s creditworthiness and changes in market
conditions.
We cannot assure you that a trading market
for your notes will ever develop or be maintained. We will not list the notes on any securities exchange. We cannot predict how the
notes will trade in any secondary market or whether that market will be liquid or illiquid.
Conflict-related Risks
Trading and hedging activities by us, the
Guarantor and any of our other affiliates, including BofAS, may create conflicts of interest with you and may affect your return on the
notes and their market value. We, the Guarantor or one or more of our other affiliates, including BofAS, may buy or sell depositary
shares of the Underlying Stock, or futures or options contracts or exchange traded instruments on the Underlying Stock, or other instruments
whose value is derived from the Underlying Stock. We, the Guarantor or one or more of our other affiliates, including BofAS, may execute
such purchases or sales for our own or their own accounts, for business reasons, or in connection with hedging our obligations under the
notes. These transactions may present a conflict of interest between your interest in the notes and the interests we, the Guarantor and
our other affiliates, including BofAS, may have in our or their proprietary accounts, in facilitating transactions, including block trades,
for our or their other customers, and in accounts under our or their management. These transactions may adversely affect the price of
the Underlying Stock in a manner that could be adverse to your investment in the notes. On or before the date the Initial Reference Price
is determined, any purchases or sales by us, the Guarantor or our other affiliates, including BofAS or others on our or their behalf (including
those for the purpose of hedging some or all of our anticipated exposure in connection with the notes), may affect the price of the Underlying
Stock. Consequently, the price of the Underlying Stock may change subsequent to the pricing date and the determination of the Initial
Reference Price, which may adversely affect the market value of the notes.
We, the Guarantor or one or more of our other
affiliates, including BofAS, also expect to engage in hedging activities that could affect the price of the Underlying Stock on or before
the date the Initial Reference Price is determined. In addition, these hedging activities, including the unwinding of a hedge, may decrease
the market value of your notes prior to maturity, and may affect the amounts to be paid on the notes. We, the Guarantor or one or more
of our other affiliates, including BofAS, may purchase or otherwise acquire a long or short position in the notes and may hold or resell
the notes. For example, BofAS may enter into these transactions in connection with any market making activities in which it engages. We
cannot assure you that these activities will not adversely affect the price of the Underlying Stock, the market value of your notes prior
to maturity or the amounts payable on the notes.
There may be potential conflicts of interest
involving the calculation agent, which is an affiliate of ours. We have the right to appoint and remove the calculation agent. One
of our affiliates will
be the calculation agent for the notes and, as such, will make a
variety of determinations relating to the notes, including the amounts that will be paid on the notes. Under some circumstances, these
duties could result in a conflict of interest between its status as our affiliate and its responsibilities as calculation agent.
The Initial Reference Price will be determined
in the sole discretion of the calculation agent. Although the calculation agent will make all determinations and will take all actions
in relation to establishing the Initial Reference Price and, in turn, the Threshold Price, in good faith, it should be noted that such
discretion could have an impact (positive or negative) on the value of your notes. The calculation agent is under no obligation to consider
your interests as a holder of the notes in taking any actions, including the determination of the Initial Reference Price and, in turn,
the Threshold Price, that might affect the value of your notes.
Underlying Stock-related Risks
You will have no rights in the Underlying
Stock. As a holder of the notes, you will not have any ownership interest or rights in the Underlying Stock, such as voting rights
or rights to receive cash dividends or other distributions. Your notes will be paid in cash and you have no right to receive delivery
of depositary shares of any Underlying Stock. In addition, the Underlying Company will not have any obligation to consider your interests
as a holder of the notes in taking any corporate action that might affect the value of the Underlying Stock and, therefore, the value
of the notes.
The value of the Underlying Stock may
not accurately track the value of the ordinary shares of the Underlying Company. The Underlying Stock is an American depositary share
(“ADS”), each representing two ordinary shares of the Underlying Company. The ADSs are issued under a deposit agreement that
sets forth the rights and responsibilities of the depositary, the Underlying Company and the holders of the ADSs. The trading patterns
of the ADSs generally will reflect the characteristics and valuations of the underlying ordinary shares of the Underlying Company; however,
the value of the ADSs may not completely track the value of those shares. There are important differences between the rights of holders
of ADSs and the rights of holders of the underlying ordinary shares. In addition, trading volume and pricing on the applicable exchange
for the underlying ordinary shares of the Underlying Company may, but will not necessarily, have similar characteristics as the ADSs.
For example, certain factors may increase or decrease the public float of the ADSs and, as a result, the ADSs may have less liquidity
or lower market value than the underlying ordinary shares.
Exchange rate movements may adversely
impact the value of the Underlying Stock which is an ADS. The market price of the Underlying Stock will generally track the U.S. dollar
value of the market price of its underlying ordinary shares. Therefore, if the value of the related foreign currency in which the underlying
ordinary shares are traded decreases relative to the U.S. dollar, the market price of the Underlying Stock may decrease while the market
price of the underlying ordinary shares remains stable or increases, or does not decrease to the same extent. As a result, changes in,
and the volatility of, the exchange rates between the U.S. dollar and the relevant non-U.S. currency could have an adverse impact on the
value of the Underlying Stock and consequently, adversely affect the value of your notes and the amount payable on the notes.
There are risks associated with an investment
linked to a single Underlying Stock. The price of the Underlying Stock can fall sharply due to factors specific to the Underlying
Stock and the Underlying Company, such as stock price volatility, earnings, financial conditions, corporate, industry and regulatory developments,
management changes and decisions and other events, as well as general market factors, such as general stock market volatility and levels,
interest rates and economic and political conditions.
The anti-dilution adjustments for the Underlying
will be limited. The calculation agent may adjust the Price Multiplier for the Underlying Stock and other terms of the notes to reflect
certain corporate actions, as described in this document and in the accompanying product supplement. The calculation agent will not be
required to make an adjustment for every event that may affect the Underlying Stock, and will have broad discretion to determine whether
and to what extent an adjustment is required.
Tax-related Risks
The U.S. federal income tax consequences of an
investment in the notes are uncertain, and may be adverse to a holder of the notes. No statutory, judicial, or administrative authority
directly
addresses the characterization of the notes or securities similar to
the notes for U.S. federal income tax purposes. As a result, significant aspects of the U.S. federal income tax consequences of an investment
in the notes are not certain. We intend to treat the notes as debt instruments for U.S. federal income tax purposes. Accordingly, you
should consider the tax consequences of investing in the notes, aspects of which are uncertain. See the section entitled “U.S. Federal
Income Tax Summary.”
You may be required to include income on the notes over their term,
even though you will not receive any payments until maturity. The notes will be considered to be issued with original issue discount.
You will be required to include income on the notes over their term based upon a comparable yield, even though you will not receive any
payments until maturity. You are urged to review the section entitled “U.S. Federal Income Tax Summary” and consult your own
tax advisor. You are urged to consult with your own tax advisor regarding all aspects of the U.S. federal income tax consequences of investing
in the notes.
DESCRIPTION OF THE NOTES
General
The notes will be part of a series of medium-term
notes entitled “Senior Medium-Term Notes, Series A” issued under the senior indenture, as amended and supplemented from time
to time, among us, the Guarantor and The Bank of New York Mellon Trust Company N.A., as trustee. The senior indenture is described more
fully in the accompanying prospectus supplement and prospectus. The following description of the notes supplements and, to the extent
is inconsistent with, supersedes the description of the general terms and provisions of the notes and debt securities set forth under
the headings “Description of the Notes” in each of the accompanying product supplement and prospectus supplement and “Description
of Debt Securities” in the accompanying prospectus. These documents should be read in connection with this pricing supplement. If
any information in this pricing supplement is inconsistent with the information in the product supplement, prospectus supplement and prospectus,
you should rely on the information in this pricing supplement.
Our payment obligations on the notes are fully
and unconditionally guaranteed by the Guarantor. The notes will rank equally in right of payment with all of our other unsecured and unsubordinated
obligations from time to time outstanding and the guarantee of the notes will rank equally in right of payment with all other unsecured
and unsubordinated obligations of the Guarantor, in each case except obligations that are subject to any priorities or preferences by
law. Any payments due on the notes, including any repayment of principal, are subject to our credit risk, as issuer, and the credit risk
of BAC, as guarantor.
The notes will be issued in minimum denominations
of $1,000 and whole multiples of $1,000. You may transfer the notes only in whole multiples of $1,000.
The notes do not bear interest.
The notes will mature on December 17, 2025, subject
to change based on the actual date the notes are priced. Prior to maturity, the notes are not repayable at our option or your option.
The notes are not subject to a sinking fund.
If the maturity date is not a business day, the
payment will be postponed to the next business day, and no interest will be payable as a result of that postponement.
Payment at Maturity
At maturity, subject to our credit risk as issuer
of the notes and the credit risk of the Guarantor as guarantor of the notes, you will be entitled to receive the Redemption Amount per
note that you hold, denominated in U.S. dollars. The Redemption Amount per note will be the greater of:
| · | The Alternative Settlement Amount. |
The “Alternative Settlement Amount” will be calculated
as follows:
$1,000 |
x |
Final Stock Price |
Threshold Price |
The “Threshold Price” of the Underlying
Stock will be between [115% - 120%] (to be set on the pricing date) of its Initial Reference Price, rounded to two decimal places.
Determining the Initial Reference Price and the Final Stock Price
of the Underlying Stock
The “Initial Reference Price” will be
the price of one depositary share of the Underlying Stock determined on the pricing date in the sole discretion of the calculation agent.
The Initial Reference Price will likely differ from the Closing Market Price of the Underlying Stock on the pricing date. The calculation
agent is under no obligation to consider your interests as a holder of the notes in taking any actions, including the determination of
the Initial Reference Price, that may affect the value of your notes.
The “Final Stock Price” will be the
Closing Market Price of the Underlying Stock times the Price Multiplier on the Valuation Date.
The “Valuation Date” is set forth on
page PS-3 of this pricing supplement.
“Price Multiplier” is defined on page
PS-4 of this pricing supplement.
Additional Anti-Dilution Adjustments
The following provisions will apply to the notes
in addition to those set forth under “Description of the Notes—Anti-Dilution Adjustments” in the accompanying product
supplement:
Cash Dividends or Distributions
If the Underlying Company pays a dividend or makes
a distribution consisting exclusively of cash to all or substantially all holders of depositary shares of the Underlying Stock (other
than any dividend or distribution in connection with the liquidation, dissolution or winding up of the Underlying Company), then, once
the dividend or distribution has become effective and the depositary shares of the Underlying Stock are trading ex-dividend, the Price
Multiplier will be adjusted so that the new Price Multiplier will equal the product of:
| · | the
prior Price Multiplier, and |
| · | a fraction, the numerator of which is the Closing Market Price per depositary
share of the Underlying Stock on the trading day immediately preceding the ex-dividend date for the distribution (the “Ex-Dividend
Closing Market Price”) and the denominator of which is the amount by which the Ex-Dividend Closing Market Price exceeds the difference
of (i) the Ordinary Dividend minus (ii) the Base Dividend. |
The Base Dividend is subject to adjustment in
a manner inversely proportional to adjustments to the Price Multiplier; provided that no adjustment will be made to the Base Dividend
for any adjustment to the Price Multiplier as described above.
The “Ordinary Dividend” means the
regular quarterly cash dividend per one depositary share of the Underlying Stock paid by the Underlying Company pursuant to the applicable
deposit agreement.
The “Base Dividend” means, from the
original issue date to the maturity date of the notes, $0.50 per calendar quarter per depositary share of the Underlying Stock.
Events of Default and Rights of Acceleration
If an Event of Default, as defined in the senior
indenture relating to the notes and in the section entitled “Description of Debt Securities—Events of Default and Rights of
Acceleration” beginning on page 22 of the accompanying prospectus, with respect to the notes occurs and is continuing, the amount
payable to a holder of the notes upon any acceleration permitted under the senior indenture will be equal to the amount described above
under “—Payment at Maturity,” calculated as though the Valuation Date were the third trading day prior to the date of
acceleration. In case of a default in the payment of the notes, the notes will not bear a default interest rate.
Listing
The notes will not be listed on any securities
exchange.
THE UNDERLYING STOCK
We have derived the following information on
the Underlying Stock and the Underlying Company from publicly available documents. Because the Underlying Stock is registered under the
Securities Exchange Act of 1934, as amended, the Underlying Company is required to file periodically certain financial and other information
specified by the SEC. Information provided to or filed with the SEC by the Underlying Company can be located through the SEC’s web
site at sec.gov by reference to the CIK number set forth below.
This document relates only to the offering of
the notes and does not relate to any offering of Underlying Stock or any other securities of the Underlying Company. None of us, the Guarantor,
BofAS or any of our other affiliates has made any due diligence inquiry with respect to the Underlying Company in connection with the
offering of the notes. None of us, the Guarantor, BofAS or any of our other affiliates has independently verified the accuracy or completeness
of the publicly available documents or any other publicly available information regarding the Underlying Company and hence makes no representation
regarding the same. Furthermore, there can be no assurance that all events occurring prior to the date of this pricing supplement, including
events that would affect the accuracy or completeness of these publicly available documents that could affect the trading price of the
Underlying Stock, have been or will be publicly disclosed. Subsequent disclosure of any events or the disclosure of or failure to disclose
material future events concerning the Underlying Company could affect the price of the Underlying Stock and therefore could affect your
return on the notes. The selection of the Underlying Stock is not a recommendation to buy or sell the Underlying Stock.
Shell plc
Shell plc, organized under the laws of England and Wales,
is an energy company that explores and refines petroleum products. The Underlying Company produces and imports fuels, chemicals, and lubricants,
as well as operates service station networks worldwide. On January 29, 2022, Shell plc announced the assimilation of its A and B shares
into a single line of ordinary shares and changed its name from Royal Dutch Shell plc, and on January 31, 2022 began trading a single
line of its American depositary shares on the NYSE under the ticker symbol "SHEL". The company’s CIK number is 0001306965.
The following graph sets forth the daily historical performance of SHEL
based on its Closing Market Price per depositary share in the period on its primary exchange from January 3, 2017 through December 8,
2022. The data subsequent to the assimilation date represents the actual historical performance of the Underlying Stock. The data prior
to the assimilation date reflects hypothetical historical data of the assimilated A and B shares using SHEL LN Equity expressed in USD.
On December 8, 2022, the Closing Market Price of SHEL was $56.59.
‘
We obtained the historical data in the graphs above
from the Bloomberg Professional® service (“Bloomberg”). We have not independently verified the accuracy or
completeness of the information obtained from Bloomberg. This data may have been adjusted by Bloomberg for corporate actions such as stock
splits, public offerings, mergers and acquisitions, spin-offs, delistings and bankruptcy.
Before investing in the notes, you should consult
publicly available sources for the Closing Market Prices and trading pattern of SHEL.
SupplementAL
Plan of Distribution; Role of BofAS
and Conflicts
of Interest
BofAS, a broker-dealer affiliate of ours, is a member
of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and will participate as selling agent in the distribution of
the notes. Accordingly, the offering of the notes will conform to the requirements of FINRA Rule 5121. BofAS may not make sales in this
offering to any of its discretionary accounts without the prior written approval of the account holder.
We will deliver the notes against payment therefor
in New York, New York on a date that is greater than two business days following the pricing date. Under Rule 15c6-1 of the Securities
Exchange Act of 1934, trades in the secondary market generally are required to settle in two business days, unless the parties to any
such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the notes more than two business days prior to the original
issue date will be required to specify alternative settlement arrangements to prevent a failed settlement.
Under our distribution agreement with BofAS, BofAS
will purchase the notes from us as principal at the public offering price indicated on the cover of this pricing supplement, less the
indicated underwriting discount, if any. BofAS will sell the notes to other broker-dealers that will participate in the offering and that
are not affiliated with us, at an agreed discount to the principal amount. Each of those broker-dealers may sell the notes to one or more
additional broker-dealers. BofAS has informed us that these discounts may vary from dealer to dealer and that not all dealers will purchase
or repurchase the notes at the same discount.
At BofAS’s discretion, for a short, undetermined
initial period after the issuance of the notes, BofAS may offer to buy the notes in the secondary market at a price that may exceed the
initial estimated value of the notes. Any price offered by BofAS for the notes will be based on then-prevailing market conditions and
other considerations, including the performance of the Underlying Stock and the remaining term of the notes. However, none of us, the
Guarantor, BofAS or any of our other affiliates is obligated to purchase your notes at any price or at any time, and we cannot assure
you that any party will purchase your notes at a price that equals or exceeds the initial estimated value of the notes.
Any price that BofAS may pay to repurchase the
notes will depend upon then prevailing market conditions, the creditworthiness of us and the Guarantor, and transaction costs. At certain
times, this price may be higher than or lower than the initial estimated value of the notes.
Sales Outside of the United States
The notes have not been approved for public sale
in any jurisdiction outside of the United States. There has been no registration or filing as to the notes with any regulatory, securities,
banking, or local authority outside of the United States and no action has been taken by BofA Finance, BAC, BofAS or any other affiliate
of BAC, to offer the notes in any jurisdiction other than the United States. As such, these notes are made available to investors outside
of the United States only in jurisdictions where it is lawful to make such offer or sale and only under circumstances that will result
in compliance with applicable laws and regulations, including private placement requirements.
Further, no offer or sale of the notes is being
made to residents of:
You are urged to carefully review the selling
restrictions that may be applicable to your jurisdiction beginning on page S-68 of the accompanying prospectus supplement.
European Economic Area and United Kingdom
None of this pricing supplement, the accompanying
product supplement, the accompanying prospectus or the accompanying prospectus supplement is a prospectus for the purposes of the Prospectus
Regulation (as defined below). This pricing supplement, the accompanying product supplement, the accompanying prospectus and the accompanying
prospectus supplement have been prepared on the basis that any offer of Notes in any Member State of the European Economic Area (the “EEA”)
or in the United Kingdom (each, a “Relevant State”) will only be made to a legal entity which is a qualified investor under
the Prospectus Regulation (“Qualified Investors”). Accordingly any person making or intending to make an offer in that Relevant
State of Notes which are the subject of the offering contemplated in this pricing supplement, the accompanying product supplement, the
accompanying prospectus and the accompanying prospectus supplement may only do so with respect to Qualified Investors. Neither BofA Finance
nor BAC has authorized, nor does it authorize, the making of any offer of Notes other than to Qualified Investors. The expression “Prospectus
Regulation” means Regulation (EU) 2017/1129.
PROHIBITION OF SALES TO EEA AND UNITED KINGDOM RETAIL INVESTORS
– The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise
made available to any retail investor in the EEA or in the United Kingdom. For these purposes: (a) a retail investor means a person who
is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU, as amended (“MiFID II”);
or (ii) a customer within the meaning of Directive (EU) 2016/97 (the Insurance Distribution Directive) where that customer would not qualify
as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in the Prospectus
Regulation; and (b) the expression “offer” includes the communication in any form and by any means of sufficient information
on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe for the Notes. Consequently
no key information document required by Regulation (EU) No 1286/2014, as amended (the “PRIIPs Regulation”) for offering or
selling the Notes or otherwise making them available to retail investors in the EEA or in the United Kingdom has been prepared and therefore
offering or selling the Notes or otherwise making them available to any retail investor in the EEA or in the United Kingdom may be unlawful
under the PRIIPs Regulation.
United Kingdom
The communication of this pricing supplement, the accompanying
product supplement, the accompanying prospectus supplement, the accompanying prospectus and any other document or materials relating to
the issue of the Notes offered hereby is not being made, and such documents and/or materials have not been approved, by an authorized
person for the purposes of section 21 of the United Kingdom’s Financial Services and Markets Act 2000, as amended (the “FSMA”).
Accordingly, such documents and/or materials are not being distributed to, and must not be passed on to, the general public in the United
Kingdom. The communication of such documents and/or materials as a financial promotion is only being made to those persons in the United
Kingdom who have professional experience in matters relating to investments and who fall within the definition of investment professionals
(as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Financial
Promotion Order”)), or who fall within Article 49(2)(a) to (d) of the Financial Promotion Order, or who are any other persons to
whom it may otherwise lawfully be made under the Financial Promotion Order (all such persons together being referred to as “relevant
persons”). In the United Kingdom, the Notes offered hereby are only available to, and any investment or investment activity to which
this pricing supplement, the accompanying product supplement, the accompanying prospectus supplement and the accompanying prospectus relates
will be engaged in only with, relevant persons. Any person in the United Kingdom that is not a relevant person should not act or rely
on this pricing supplement, the accompanying product supplement, the accompanying prospectus supplement or the accompanying prospectus
or any of their contents.
Any invitation or inducement to engage in investment
activity (within the meaning of Section 21 of the FSMA) in connection with the issue or sale of the Notes may only be communicated or
caused to be
communicated in circumstances in which Section 21(1) of the FSMA does not
apply to BofA Finance, as issuer, or BAC, as guarantor.
All applicable provisions of the FSMA must be complied
with in respect to anything done by any person in relation to the Notes in, from or otherwise involving the United Kingdom.
STRUCTURING THE NOTES
The notes are our debt securities, the return
on which is linked to the performance of the Underlying Stock. The related guarantees are BAC’s obligations. As is the case for
all of our and BAC’s respective debt securities, including our market-linked notes, the economic terms of the notes reflect our
and BAC’s actual or perceived creditworthiness at the time of pricing. In addition, because market-linked notes result in increased
operational, funding and liability management costs to us and BAC, BAC typically borrows the funds under these types of notes at a rate,
which we refer to in this pricing supplement as BAC’s internal funding rate, that is more favorable to BAC than the rate that it
might pay for a conventional fixed or floating rate debt security. This generally relatively lower internal funding rate, which is reflected
in the economic terms of the notes, along with the fees and charges associated with market-linked notes, typically results in the initial
estimated value of the notes on the pricing date being less than their public offering price.
In order to meet our payment obligations on the
notes, at the time we issue the notes, we may choose to enter into certain hedging arrangements (which may include call options, put options
or other derivatives) with BofAS or one of our other affiliates. The terms of these hedging arrangements are determined based upon terms
provided by BofAS and its affiliates, and take into account a number of factors, including our and BAC’s creditworthiness, interest
rate movements, the volatility of the Underlying Stock, the tenor of the notes and the hedging arrangements. The economic terms of the
notes and their initial estimated value depend in part on the terms of these hedging arrangements.
BofAS has advised us that the hedging arrangements
will include hedging related charges, reflecting the costs associated with, and our affiliates’ profit earned from, these hedging
arrangements. Since hedging entails risk and may be influenced by unpredictable market forces, actual profits or losses from these hedging
transactions may be more or less than any expected amounts.
For further information, see “Risk Factors”
beginning on page PS-6 above and "Supplemental Use of Proceeds" on page PS-18 of the accompanying product supplement.
U.S.
FEDERAL INCOME TAX SUMMARY
The following summary of the material U.S. federal income
tax considerations of the acquisition, ownership, and disposition of the notes supplements, and to the extent inconsistent supersedes,
the discussions under “U.S. Federal Income Tax Considerations” in the accompanying prospectus and under “U.S. Federal
Income Tax Considerations” in the accompanying prospectus supplement and is not exhaustive of all possible tax considerations. This
summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”), regulations promulgated under the Code by
the U.S. Treasury Department (“Treasury”) (including proposed and temporary regulations), rulings, current administrative
interpretations and official pronouncements of the Internal Revenue Service (“IRS”), and judicial decisions, all as currently
in effect and all of which are subject to differing interpretations or to change, possibly with retroactive effect. No assurance can be
given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below.
This summary does not include any description of the tax laws of any state or local governments, or of any foreign government, that may
be applicable to a particular holder.
Although the notes are issued by us, they will be treated
as if they were issued by Bank of America Corporation for U.S. federal income tax purposes. Accordingly throughout this tax discussion,
references to “we,” “our” or “us” are generally to Bank of America Corporation unless the context
requires otherwise.
This summary is directed solely to U.S. Holders and
Non-U.S. Holders that, except as otherwise specifically noted, will purchase the notes upon original issuance and will hold the notes
as capital assets within the meaning of Section 1221 of the Code, which generally means property held for investment, and that are not
excluded from the discussion under “U.S. Federal Income Tax Considerations” in the accompanying prospectus. This discussion
does not address the tax consequences applicable to holders subject to Section 451(b) of the Code. This summary assumes that the issue
price of the notes, as determined for U.S. federal income tax purposes, equals the principal amount thereof.
You should consult your own tax advisor concerning
the U.S. federal income tax consequences to you of acquiring, owning, and disposing of the notes, as well as any tax consequences arising
under the laws of any state, local, foreign, or other tax jurisdiction and the possible effects of changes in U.S. federal or other tax
laws.
General
No statutory, judicial, or administrative authority
directly addresses the characterization of the notes or securities similar to the notes for U.S. federal income tax purposes. As a result,
certain aspects of the U.S. federal income tax consequences of an investment in the notes are not certain. We intend to treat the notes
as “contingent payment debt instruments” for U.S. federal income tax purposes, subject to taxation under the “noncontingent
bond method.” The balance of this discussion assumes that this characterization is proper and will be respected.
U.S. Holders
If the notes are properly characterized as contingent
payment debt instruments for U.S. federal income tax purposes, such notes generally will be subject to Treasury regulations governing
contingent payment debt instruments. Under those regulations, and as further described under “U.S. Federal Income Tax Considerations—General—Consequences
to U.S. Holders—Debt Securities Subject to Contingencies” in the accompanying prospectus, a U.S. Holder will be required to
report original issue discount (“OID”) or interest income based on a “comparable yield” and a “projected
payment schedule,” established by us for determining interest accruals and adjustments with respect to the notes. A U.S. Holder
of the notes generally will be required to include in income OID in excess of actual cash payments received for certain taxable years.
The following table is based upon a hypothetical projected
payment schedule (including a hypothetical Redemption Amount) and a hypothetical comparable yield equal to 4.6500% per annum (compounded
semi-annually). The hypothetical comparable yield is our current estimate of the comparable yield based upon market conditions as of the
date of this preliminary pricing supplement. It has been determined by us for purposes of illustrating the application of the Code and
the Treasury regulations to the notes as if the notes had been issued on December 19, 2022 and were scheduled to
mature on December 11, 2027. This tax accrual table is based upon a hypothetical
projected payment schedule per $1,000.00 principal amount of the notes, which would consist of a single payment of $1,147.4296 at maturity.
The following table is for tax purposes only, and we make no representations or predictions as to what the actual Redemption Amount will
be. The actual “projected payment schedule” will be completed on the pricing date, and included in the final pricing supplement.
Accrual Period |
Interest Deemed to
Accrue During Accrual
Period
(per $1,000 principal
amount of the Notes) |
Total Interest Deemed
to Have Accrued from
Original Issue Date
(per $1,000 principal
amount of the Notes) |
December 19, 2022, through December 31, 2022 |
$ 2.0667 |
$2.0667 |
January 1, 2023 through December 31, 2023 |
$ 47.1460 |
$49.2127 |
January 1, 2024 through December 31, 2024 |
$ 49.3556 |
$98.5683 |
January 1, 2025 through December 17, 2025 |
$ 48.8613 |
$147.4296 |
Hypothetical Projected Redemption Amount = $1,147.4296 per note.
Upon a sale, exchange, retirement, or other disposition
of the notes, a U.S. Holder generally will recognize taxable gain or loss equal to the difference between the amount realized and that
holder’s tax basis in the notes. A U.S. Holder’s tax basis in the notes generally will equal the cost of the notes, increased
by the amount of OID previously accrued by the holder for the notes. A U.S. Holder generally will treat any gain as interest income, and
will treat any loss as ordinary loss to the extent of the previous interest inclusions in respect of the notes, and the balance as long-term
or short-term capital loss depending upon the U.S. Holder’s holding period for the note. The deductibility of capital losses by
a U.S. Holder is subject to limitations.
Non-U.S. Holders
Please see the discussion under “U.S. Federal
Income Tax Considerations—General—Consequences to Non-U.S. Holders” in the accompanying prospectus for the material
U.S. federal income tax consequences that will apply to Non-U.S. Holders of the notes, except that the following disclosure supplements
the discussion in the prospectus.
A “dividend equivalent” payment is treated
as a dividend from sources within the United States and such payments generally would be subject to a 30% U.S. withholding tax if paid
to a Non-U.S. Holder. Under Treasury regulations, payments (including deemed payments) with respect to equity-linked instruments (“ELIs”)
that are “specified ELIs” may be treated as dividend equivalents if such specified ELIs reference an interest in an “underlying
security,” which is generally any interest in an entity taxable as a corporation for U.S. federal income tax purposes, if a payment
with respect to such interest could give rise to a U.S. source dividend. However, IRS guidance provides that withholding on dividend equivalent
payments will not apply to specified ELIs that are not delta-one instruments and that are issued before January 1, 2025. Based on our
determination that the notes are not delta-one instruments, Non-U.S. Holders should not be subject to withholding on dividend equivalent
payments, if any, under the notes. However, it is possible that the notes could be treated as deemed reissued for U.S. federal income
tax purposes upon the occurrence of certain events affecting the Underlying Stock or the notes, and following such occurrence the notes
could be treated as subject to withholding on dividend equivalent payments. Non-U.S. Holders that enter, or have entered, into other transactions
in respect of the Underlying Stock or the notes should consult their tax advisors as to the application of the dividend equivalent withholding
tax in the context of the notes and their other transactions. If any payments are treated as dividend equivalents subject to withholding,
we (or the applicable paying agent) would be entitled to withhold taxes without being required to pay any additional amounts with respect
to amounts so withheld.
Backup Withholding and Information Reporting
Please see the discussion under “U.S. Federal
Income Tax Considerations — General — Backup Withholding and Information Reporting” in the accompanying prospectus for
a description of the applicability of the backup withholding and information reporting rules to payments made on the notes.