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BofA Finance LLC has announced the issuance of Contingent Income Issuer Callable Yield Notes tied to the Dow Jones Industrial Average, Russell 2000 Index, and VanEck Semiconductor ETF, with an anticipated pricing date of July 30, 2026. These structured notes offer a contingent annual coupon rate of 20.00%, paid monthly, provided all three underlying indices remain above 70% of their initial values. Investors bear full downside risk linked to the weakest-performing underlying if any index drops more than 40% from inception, balancing high yield potential with significant capital risk amid market volatility.
Key Highlights
- NYSE: MER-PK
- BofA Finance LLC issues Contingent Income Issuer Callable Yield Notes with about 23-month maturity expected on August 4, 2026
- Public offering price set at $1,000 per note with a 20.00% annualized contingent coupon; initial estimated value ranges between $910 and $960 per $1,000 principal
- Issuer callable monthly starting November 4, 2026; investors risk up to 100% principal loss if the lowest-performing underlying declines over 40%
Structured Note Features and Underlying Market Indices
BofA Finance LLC is launching Contingent Income Issuer Callable Yield Notes maturing on July 6, 2028, linked to three key market benchmarks. The notes track the Dow Jones Industrial Average and Russell 2000 Index as price return indices, alongside the VanEck Semiconductor ETF based on closing prices. Issued in minimum denominations of $1,000 and multiples thereof, these notes carry CUSIP 09712GZU1. BofA Securities, Inc., an affiliate of the issuer, acts as calculation agent, overseeing index observations and payment determinations throughout the notes' term.
This multi-index structure introduces complexity by tying returns to large-cap, small-cap, and semiconductor sectors simultaneously. The payoff depends on the weakest-performing index, increasing risk during broad or sector-specific downturns. Bank of America Corporation guarantees all obligations unconditionally.
Monthly Coupon Payments Conditional on Index Performance
The notes provide a contingent monthly coupon of $16.667 per $1,000 principal, equating to 1.6667% monthly or 20.00% annually. Coupon payments occur only if each underlying index's observation value is at least 70% of its initial level on the observation date. A drop below this threshold in any index results in no coupon payment for that month, regardless of the other indices' performance.
This contingency creates an asymmetric risk profile requiring investors to monitor three market segments. For example, a decline in semiconductor stocks alone can cause a missed coupon payment even if large- and small-cap stocks remain stable. Coupon payments are scheduled monthly throughout the roughly 23-month period unless the issuer redeems the notes early.
Issuer’s Early Call Rights and Redemption Terms
Starting November 4, 2026, BofA Finance LLC may redeem all outstanding notes monthly at the early redemption amount of $1,000 principal plus any applicable coupon, provided all indices meet or exceed their coupon barriers. Notice must be given between five business days and 60 calendar days before the call date. Calls apply to all notes collectively, not partially.
This early call feature benefits the issuer by capping investor upside during rising markets and limiting further coupon payments. Once called, no additional payments are made, ending the investment. This typical callable structured product feature is a key consideration for investors expecting full-term income.
Principal Risk and Downside Exposure Explained
The notes expose investors to significant downside risk if market conditions worsen. If not called early, and any underlying index declines more than 40% from its start value, investors face a 1:1 loss on the least-performing index at maturity, risking up to 100% principal loss. For instance, a 50% drop in the VanEck Semiconductor ETF while other indices remain stable would result in a 50% principal loss.
The filing sets a threshold of 60% of the starting value for each underlying. If the lowest-performing index closes below this on June 30, 2028, redemption could be under 60% of principal, implying losses exceeding 40%. The exact redemption formula below this threshold is undisclosed, indicating substantial tail risk compared to traditional bonds.
Pricing, Valuation, and Offering Details
The public offering price is $1,000 per $1,000 principal, with an underwriting discount of $21.75, yielding net proceeds of $978.25 before expenses. Initial estimated note value at pricing is between $910 and $960 per $1,000 principal, significantly below the offering price, reflecting issuance costs, embedded derivatives, and issuer margins common in structured products.
Some dealers selling to fee-based advisory accounts may reduce or waive selling concessions, potentially lowering the public offering price to $978.25. BofA Finance affiliates may pay referral fees up to $3 per $1,000 principal to other broker-dealers, highlighting potential conflicts of interest. The filing cautions that note values fluctuate and are unpredictable.
Issue Timeline and Terms
Pricing is expected on July 30, 2026, with issuance on August 4, 2026, and maturity on July 6, 2028, creating an approximate 23-month investment horizon if not called early. The valuation date for payment and principal calculations is June 30, 2028, subject to postponements. Starting values are based on closing levels on pricing date for Dow Jones and Russell 2000, and closing market price for VanEck Semiconductor ETF.
Monthly observation dates govern coupon eligibility and principal redemption. Specific observation and call payment dates are detailed in the pricing supplement but not fully listed here. This monthly monitoring adds administrative complexity relative to conventional securities.
Credit Risk and Guarantee Information
All payments depend on the creditworthiness of BofA Finance LLC as issuer and Bank of America Corporation as unconditional guarantor. While the guarantee legally binds Bank of America Corporation to payments if the issuer defaults, the guarantee’s strength relies on the guarantor’s financial health. Notes are not FDIC insured nor bank guaranteed like savings accounts.
Investors face concentration risk tied to the guarantor’s credit profile. Financial distress or rating downgrades of Bank of America Corporation could sharply reduce note values regardless of index performance. The notes are unlisted, lacking liquidity and price transparency of exchange-traded securities, complicating early sale or valuation.
Risks and Investor Guidance
The filing stresses differences from traditional debt, urging review of risk disclosures in the pricing supplement, product supplement, and prospectus. Investors assume multiple risks: index performance across three sectors, call risk limiting upside, coupon contingency risk, and credit risk linked to Bank of America.
No principal guarantee exists; losses up to 100% are possible if the worst-performing index drops over 40%. The complex structure may be difficult for retail investors to fully grasp, especially regarding payment calculations and risk thresholds. Lack of exchange listing reduces transparency and liquidity compared to standard securities.
Distribution and Regulatory Details
The preliminary pricing supplement was filed under Rule 424(b)(2) with registration numbers 333-290665 and 333-290665-01. It is accompanied by a prospectus and supplements dated December 8, 2025. BofA Securities, Inc. acts as both selling and calculation agent, presenting potential conflicts in pricing and valuation.
The filing includes standard disclaimers that no regulatory body has approved or disapproved the notes or verified the documentation’s accuracy. Investors must conduct independent due diligence and cannot rely on government endorsement of suitability or fairness.
