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BofA Finance LLC, a Bank of America Corporation subsidiary, announced the preliminary pricing of Contingent Income Auto-Callable Yield Notes maturing on July 21, 2026. This structured product offers investors exposure to three sector-specific exchange-traded funds. Guaranteed by Bank of America Corporation, the notes feature an 18.50% annualized contingent coupon rate and an approximate three-year term, with early automatic redemption if certain performance criteria are met. The notes carry a complex risk-reward profile linked to the energy, utilities, and semiconductor sectors, with the potential for total capital loss if the worst-performing underlying ETF drops significantly.
Key Points
- NYSE: MER-PK — BofA Finance LLC issues Contingent Income Auto-Callable Yield Notes guaranteed by Bank of America Corporation
- Notes linked to State Street Energy Select Sector SPDR ETF, State Street Utilities Select Sector SPDR ETF, and VanEck Semiconductor ETF; returns depend on the least-performing underlying
- Pricing expected on July 28, 2026; issue date July 31, 2026; maturity August 2, 2029; contingent coupon rate of 18.50% annually, paid monthly if all underlyings remain above 70% of initial value
- Automatic call feature starts January 28, 2027, if all underlyings reach or exceed 100% of initial value; downside risk includes up to 100% capital loss if the lowest-performing underlying falls below 50% of starting value
Contingent Income Notes Structure and Pricing Details
The July 21, 2026 preliminary pricing supplement details the full terms of the Contingent Income Auto-Callable Yield Notes issued by BofA Finance LLC, with Bank of America Corporation providing a full and unconditional guarantee. The public offering price is $1,000 per note, with an $8 underwriting discount per $1,000 principal, resulting in net proceeds of $992 per note before expenses. The initial estimated value at pricing is between $910 and $960 per $1,000 principal, reflecting embedded option costs and structural expenses.
Notes are offered in minimum denominations of $1,000 and whole multiples, bearing CUSIP 09712GG32. BofA Finance affiliates may pay referral fees up to $3 per $1,000 principal to registered broker-dealers. Some dealers selling to fee-based advisory accounts may waive selling concessions, offering prices as low as $992 per $1,000 principal. These notes are not listed on any exchange and lack a secondary market, making them illiquid.
Underlying ETFs and Sector Exposure
The notes are linked to three sector ETFs: State Street Energy Select Sector SPDR ETF (XLE), State Street Utilities Select Sector SPDR ETF (XLU), and VanEck Semiconductor ETF (SMH). The starting value for each underlying is its closing price on the July 28, 2026 pricing date, which serves as the performance benchmark. Observation values on relevant dates are based on closing prices multiplied by a price multiplier of 1, adjusted for corporate actions per anti-dilution provisions.
The payoff depends on the "least performing underlying," meaning the ETF with the largest decline relative to its starting value determines redemption. Price multipliers are subject to adjustment for stock splits, dividends, and other corporate events to maintain economic equivalence.
Contingent Coupon and Monthly Income Features
Investors receive an 18.50% annual contingent coupon, paid monthly at $15.417 per $1,000 principal (1.5417% monthly), only if all three ETFs’ observation values are at least 70% of their starting values on the observation date. If any underlying falls below 70%, no coupon is paid that month, eliminating income for that period.
This monthly coupon structure requires investors to monitor ETF values regularly. Contingent coupon payments occur on specified dates starting on page PS-4 of the pricing supplement. The final coupon at maturity also requires the least-performing ETF to be above 70% of its initial value, concentrating income risk on the weakest sector.
Automatic Call Feature and Early Redemption Terms
Beginning January 28, 2027, if all underlyings’ observation values equal or exceed 100% of starting values on any call observation date, the notes will be automatically called. Investors then receive principal plus the contingent coupon on the call payment date, with no further payments thereafter. This caps investor upside despite potential strong ETF performance.
Monthly call opportunities continue through the approximate three-year term, allowing early redemption if conditions are met. Call observation and payment dates are detailed beginning on page PS-6 of the pricing supplement, with each call date also serving as a contingent coupon payment date for remaining noteholders.
Downside Risk and Potential Capital Loss
The primary risk is substantial capital loss. If the least-performing underlying falls below 50% of its starting value at maturity, investors face 1:1 downside exposure, risking up to 100% loss of principal. For example, if the worst-performing ETF closes at 40% of its initial price, investors receive only 40% of principal, a 60% loss.
If the least-performing ETF’s ending value is 50% or higher, investors receive full principal. Below 50%, redemption falls proportionally, possibly exceeding 50% losses. The notes effectively act like a leveraged short position on the worst-performing sector, with full downside risk borne by holders.
Term, Maturity, and Important Dates
The notes have an approximate three-year term: pricing date July 28, 2026; issue date July 31, 2026; maturity August 2, 2029; and valuation date July 30, 2029, subject to postponement for certain events. The automatic call feature may shorten the holding period if ETFs appreciate.
Monthly observation and contingent coupon payment dates are scheduled throughout the term, starting on page PS-4 of the supplement. Call observation and payment dates begin January 28, 2027, also detailed in the supplement, requiring ongoing monitoring and making the notes an active monthly income and risk assessment investment.
Credit Risk and Guarantee Details
Payments depend on the creditworthiness of BofA Finance LLC as issuer and Bank of America Corporation as guarantor. The notes are "fully and unconditionally guaranteed" by Bank of America Corporation but are not FDIC insured or bank guaranteed, meaning investors lack federal deposit insurance protection.
The guarantee sets the credit quality floor, but investors assume structural risks from contingent coupons and automatic calls, plus credit risk of Bank of America. No guidance is provided on default likelihood. Credit deterioration in BAC would affect note value, though no secondary market exists per the disclosure.
Tax and Regulatory Filings
The pricing supplement, filed under Rule 424(b)(2) of the Securities Act of 1933, relates to registration statements 333-290665 and 333-290665-01, referencing an effective registration dated December 8, 2025, along with a series A prospectus supplement and product supplement EQUITY-1, also dated December 8, 2025. The SEC and other regulators have neither approved nor disapproved the notes, and any contrary representation is a criminal offense.
Additional risk factors, anti-dilution provisions, and default events are detailed in the product supplement and prospectus, with risk discussions starting on page PS-11 of the pricing supplement. Events of default and acceleration are defined in the senior indenture referenced in the prospectus materials.
Distribution and Sales Information
BofA Securities, Inc., an affiliate of BofA Finance LLC, acts as calculation and selling agent, responsible for observation values, coupon eligibility, call triggers, and redemption calculations. This centralized role may present conflicts of interest, addressed through standard indemnification and dispute provisions in the prospectus.
Dealers may waive selling concessions in fee-based advisory accounts, offering prices as low as $992 per $1,000 principal, a potential saving of $8 per note. Referral fees up to $3 per $1,000 principal may be paid to registered broker-dealers by BofA Finance affiliates. Offering size and demand are undisclosed, leaving investors uncertain about distribution breadth.
