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BofA Finance LLC has submitted a preliminary pricing supplement for Contingent Income Issuer Callable Yield Notes tied to the Russell 2000 Index and the State Street Technology Select Sector SPDR ETF, targeting a pricing date of July 30, 2026. These notes, backed by Bank of America Corporation, offer an 11.25% annual contingent coupon if both underlying assets remain at or above 70% of their initial values. Investors risk full principal loss if either underlying declines more than 30% by maturity on July 6, 2028.
Key Points
- NYSE: MER-PK
- BofA Finance LLC filed preliminary pricing supplement for structured notes linked to two equity indices, with expected pricing on July 30, 2026
- Notes feature an 11.25% contingent annual coupon paid monthly; approximately 23-month term unless called early; payments guaranteed by Bank of America
- Issuer holds monthly call option starting November 4, 2026; investors exposed 1:1 to downside risk with up to 100% principal loss if either underlying falls over 30%
Product Structure and Pricing Details
BofA Finance LLC disclosed terms for Contingent Income Issuer Callable Yield Notes in a preliminary pricing supplement dated July 20, 2026. Pricing is anticipated on July 30, 2026, with issuance on August 4, 2026, and maturity on July 6, 2028, representing about a 23-month duration unless early redemption occurs. Notes will be issued in minimum denominations of $1,000 and multiples thereof, bearing CUSIP 09712GDZ4. The public offering price is $1,000 per note, with an underwriting discount of $21.75 per $1,000 principal, resulting in net proceeds of $978.25 to BofA Finance before expenses.
The initial estimated valuation ranges from $910 to $960 per $1,000 principal as of pricing, reflecting the notes' structural complexity and embedded payoff risks. The total principal amount to be issued was not disclosed. BofA Securities, Inc., an affiliate, will act as calculation and selling agent.
Underlying Assets and Performance Measurement
The notes are linked to the Russell 2000 Index (Bloomberg: RTY), representing small-cap equities, and the State Street Technology Select Sector SPDR ETF (Bloomberg: XLK), providing technology sector exposure. Starting values are set on the pricing date based on closing levels. The XLK price multiplier is initially 1, subject to anti-dilution adjustments as outlined in supplementary documentation.
The "Least Performing Underlying"—the asset with the lowest return by June 30, 2028—is key to payoff determination. Multiple monthly observation dates occur throughout the term, informing coupon payments, call options, and maturity payouts.
Contingent Coupon Payments and Monthly Income
Investors may receive a contingent coupon of $9.375 per $1,000 principal monthly (0.9375% monthly or 11.25% annually) if both underlyings close at or above 70% of their initial values on each observation date. If either underlying falls below this 70% barrier, no coupon is paid for that month.
Coupons are paid on specified contingent payment dates, including monthly call dates and maturity. The final coupon at maturity is also contingent on both underlyings meeting the 70% threshold.
Issuer Call Rights and Early Redemption
Starting November 4, 2026, BofA Finance may redeem all notes on any monthly call date, paying principal plus any contingent coupon due based on underlying performance. Notice must be provided between five business days and 60 calendar days prior to the call date. This call option allows the issuer to terminate the notes early, affecting investors’ expected holding period.
If called, investors receive principal and accrued coupons but no further payments. The high coupon and call features embed issuer-favorable optionality.
Principal Risk and Threshold Mechanism at Maturity
At maturity, full principal ($1,000 per note) is repaid if the least performing underlying is at or above 70% of its starting value. If either underlying declines more than 30%, investors face 1:1 downside exposure, risking up to 100% principal loss.
Thus, severe declines in the Russell 2000 or technology ETF could result in total loss of principal. The final contingent coupon is payable only if both underlyings meet the 70% coupon barrier at maturity.
Guarantee and Credit Risk
All payments are fully guaranteed by Bank of America Corporation, ensuring coupon and principal payments regardless of BofA Finance LLC’s condition. This credit enhancement does not mitigate market risk; principal remains at risk if underlyings decline substantially.
Investors should consider Bank of America’s credit quality, as any deterioration could impact note value. The notes are not FDIC insured or bank deposits.
Anti-Dilution and Structural Adjustments
The XLK ETF component is subject to anti-dilution adjustments for corporate actions such as splits or dividends, detailed in the product supplement starting on page PS-23. These provisions maintain economic integrity amid extraordinary events. The Russell 2000 Index may have separate adjustment rules.
Valuation, Trading, and Liquidity
These notes are not exchange-listed, lacking a centralized secondary market. Initial estimated values between $910 and $960 per $1,000 principal reflect embedded options and risks. Secondary market liquidity may be limited, with potentially wide bid-ask spreads and limited exit opportunities before maturity or call dates.
Risk Factors and Complexity
The notes differ significantly from conventional debt, with risks including market, credit, liquidity, call, and structural risks related to contingent coupons. Detailed risk disclosures appear in multiple sections of the pricing supplement and prospectus.
The complex payoff, dual underlying exposure, contingent income, issuer call rights, and principal risk make these notes suitable mainly for sophisticated investors. The preliminary pricing supplement indicates terms may change before the July 30, 2026 pricing date. The valuation gap illustrates embedded costs favoring the issuer.
Investor Suitability and Documentation
The preliminary supplement is incomplete and subject to change. It relates to an effective registration statement filed under the Securities Act of 1933 (Nos. 333-290665 and 333-290665-01) and is distributed via broker-dealers under Rule 424(b)(2).
Fee-based advisory accounts may acquire notes at prices as low as $978.25 per $1,000 principal due to waived selling concessions. BofA Finance affiliates pay referral fees up to $3.00 per $1,000 principal to participating broker-dealers. No regulatory approval or endorsement of these securities has been made by the SEC or other authorities.
