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BofA Finance LLC has priced Contingent Income Issuer Callable Yield Notes tied to the Dow Jones Industrial Average, Russell 2000 Index, and VanEck Semiconductor ETF, with a preliminary pricing date set for July 30, 2026. These notes feature a contingent annual coupon rate of 23.00% if all three indices remain above 70% of their initial levels. However, investors face full principal risk if any underlying falls more than 40% from its starting value. Fully guaranteed by Bank of America Corporation, these complex structured products combine equity index exposure with embedded call options and performance barriers.
Key Points
- NYSE: MER-PK
- BofA Finance LLC's Contingent Income Issuer Callable Yield Notes expected to price on July 30, 2026, issued August 4, 2026, maturing July 6, 2028
- Contingent coupon payment of $19.167 per $1,000 principal (equal to $1,000 public offering price) paid monthly if each underlying stays at or above 70% of starting value
- Investors bear 1:1 downside exposure to the worst-performing underlying if it drops more than 40% from its initial value; issuer may call notes monthly from November 4, 2026
Structured Note Composition and Multi-Index Exposure
BofA Finance LLC structured these notes to provide exposure to three market benchmarks: the Dow Jones Industrial Average, Russell 2000 Index, and VanEck Semiconductor ETF. The "least performing underlying" mechanism means the worst-performing index governs coupon eligibility and principal risk at maturity. Investors earn coupons only if all three indices remain above their respective 70% coupon barriers during the term. The pricing date is July 30, 2026, with settlement on August 4, 2026, establishing an approximate 23-month maturity on July 6, 2028, unless called earlier by the issuer.
This blend of a large-cap index, small-cap index, and sector-specific ETF offers diversified market exposure but adds complexity in performance tracking and coupon qualification. Each underlying’s monthly observation value is independently measured, with the lowest determining coupon and redemption outcomes. This structure differs from simpler notes linked to single indices or currencies by integrating sector and size-based equity market dynamics.
Contingent Coupon Structure and Monthly Payments
The contingent coupon equals $19.167 per $1,000 principal, representing a 1.9167% monthly coupon or 23.00% annualized, payable only if all three underlyings trade at or above 70% of their initial values on each monthly observation date. Coupon payments are conditional and not guaranteed; if any underlying falls below 70% on an observation date, no coupon is paid for that month. Contingent coupons are paid monthly, with the first payment opportunity occurring after issuance, contingent on performance conditions.
The high 23% annual coupon compensates investors for the embedded risks, including conditional payments and principal exposure. Even if one or two indices perform well, investors may miss coupons if the least performing index dips below the barrier. A final contingent coupon is payable at maturity if all underlyings meet or exceed their coupon barriers on the valuation date.
Principal Protection and Downside Risk
At maturity, investors receive full principal ($1,000 per note) if the worst-performing underlying’s ending value is at or above 60% of its initial level. If any underlying declines over 40% from its start, investors face 1:1 downside exposure to the worst-performing index, risking up to total principal loss. This asymmetric payoff means the coupon barrier is 70%, but principal protection applies only above 60%, creating a "dead zone" between 60% and 70% where coupons are lost but principal is preserved.
The final redemption depends on the least performing underlying’s value on June 30, 2028. If it falls below 60%, redemption is proportionally reduced, exposing investors to substantial or total principal loss. This structure entails significant market risk over the 23-month term, especially if any index suffers a sharp decline. No floor price or principal guarantee exists below 60%, so losses could reach the full invested amount.
Issuer Call Option and Early Redemption Terms
Starting November 4, 2026, BofA Finance LLC may call all outstanding notes on any monthly call date. Early redemption pays $1,000 per note plus any contingent coupon if all underlyings meet their coupon barriers. Notice to the trustee must be given between five business days and 60 calendar days before the call date. This call feature allows the issuer to manage exposure and potentially limit investor upside if market conditions turn unfavorable.
The call option creates a structured product with a maximum term of about 23 months but potentially shorter if called early. From the issuer’s perspective, it helps control liability if indices appreciate significantly, capping coupon costs. Investors should note early calls end future coupons and return principal plus any final payment, limiting income potential if markets remain strong through maturity.
Pricing, Fees, and Initial Valuation
The public offering price is $1,000 per note, with an underwriting discount of $6.75, yielding net proceeds of $993.25 per note before expenses. Some dealers may waive selling concessions for fee-based advisory accounts, allowing purchases at $993.25, lowering effective cost. BofA Finance affiliates may pay referral fees up to $3.00 per $1,000 principal to participating broker-dealers. These layered fees reduce investors’ effective capital deployment.
The initial estimated value at pricing is expected between $920 and $970 per $1,000 principal, below the offering price. This gap reflects embedded optionality, issuer call rights, downside risk, and contingent coupon features. Investors paying $1,000 incur a premium over estimated fair value, an important consideration versus publicly traded alternatives.
Credit Risk and Guarantee Structure
Payments depend on the creditworthiness of BofA Finance LLC as issuer and Bank of America Corporation as unconditional guarantor. While Bank of America’s guarantee enhances credit quality, investors remain exposed to the credit risk of both entities. The notes are not FDIC insured or bank guaranteed in the deposit insurance sense, despite Bank of America backing. Thus, investors rely on Bank of America’s financial strength to honor obligations.
The guarantee offers assurance of coupon and principal payments, given Bank of America’s status as a major U.S. financial institution. However, in systemic financial stress scenarios, even large institutions may face challenges. The notes appear to be senior unsecured obligations of BofA Finance, with BAC’s guarantee supported by its capital structure, and no subordination or priority terms disclosed.
Registration and Distribution Details
The offering is registered under the Securities Act of 1933 (Registration Nos. 333-290665 and 333-290665-01), with the pricing supplement filed under Rule 424(b)(2). Documentation includes a prospectus, Series A Prospectus Supplement, and Product Supplement EQUITY-1 dated December 8, 2025. BofA Securities, Inc. acts as calculation and selling agent.
The notes carry CUSIP 09712GTM6, facilitating secondary market tracking. They will not be listed on any exchange and will trade over-the-counter via authorized dealers. The extensive documentation reflects the complexity and customization of structured products, requiring investors to thoroughly review disclosures to understand terms, risks, and mechanics.
Calculation Agent Role and Observation Date Procedures
BofA Securities, Inc. serves as calculation agent, determining monthly observation values based on closing levels or prices on observation dates. Starting values are set on July 30, 2026. The SMH ETF observation value is adjusted for corporate actions. The valuation date is June 30, 2028, subject to postponement if necessary.
The final coupon and principal redemption depend on these calculated ending values. Investors rely on the calculation agent’s accuracy, with no specified dispute resolution process, highlighting counterparty risk considerations.
Risk Factors and Market-Driven Returns
The notes’ value is influenced by multiple factors and cannot be precisely predicted. Investors should consult the Risk Factors section starting on page PS-9 of the pricing supplement. Exposure to three underlyings creates complex market risk. Significant declines can eliminate coupons or principal. The notes offer a hybrid equity and fixed-income profile, with equity downside risk balanced by conditional coupon payments, which may not suit all investors.
The preliminary pricing supplement indicates terms may change before pricing on July 30, 2026.
Disclosure Status and Investor Guidance
This preliminary pricing supplement is subject to completion and may be updated before pricing. The offering is not available in jurisdictions where prohibited. Regulatory bodies have not approved or disapproved the notes or verified disclosure completeness.
Investors should recognize structured products’ complexity, embedded optionality, and typical trading below par. The 23% contingent coupon compensates for risks including principal loss, contingent payments, and credit exposure. Prospective buyers must carefully review all disclosures and assess alignment with their investment goals and risk tolerance before investing.
