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BofA Finance LLC, a Bank of America Corporation subsidiary, has filed a preliminary pricing supplement announcing plans to issue Contingent Income Issuer Callable Yield Notes tied to the worst-performing of three major U.S. equity indexes: the Dow Jones Industrial Average, Nasdaq-100 Technology Sector Index, and Russell 2000 Index. These structured notes are slated to price on July 23, 2026, and issue on July 28, 2026, with an approximate 18-month maturity through January 27, 2028. They offer a contingent annual coupon rate of 8.40%, contingent on specified conditions across all three underlying indexes. Investors should note that principal is fully at risk under adverse market conditions, and all payments depend on the creditworthiness of BofA Finance and Bank of America Corporation.
Key Highlights
- NASDAQ: MER-PK
- BofA Finance LLC offers Contingent Income Issuer Callable Yield Notes linked to the lowest performing of the Dow Jones Industrial Average, Nasdaq-100 Technology Sector Index, and Russell 2000 Index, maturing January 27, 2028.
- Notes feature an 8.40% per annum contingent coupon (0.70% monthly), payable monthly if all three indexes remain at or above 70% of their initial values on observation dates; initial estimated value per $1,000 principal ranges from $920.00 to $970.00.
- Final terms will be established on the July 23, 2026 pricing date; investors should monitor all three indexes relative to coupon barriers and thresholds throughout the notes’ duration.
Contingent Income Yield Notes: Structure and Terms
As per the July 14, 2026 preliminary pricing supplement, BofA Finance LLC plans to issue these notes in minimum denominations of $1,000 and whole multiples thereof. Offered at $1,000 per note, the underwriting discount may be up to $25 per $1,000 principal, resulting in proceeds before expenses of at least $975 per note. An affiliate may pay referral fees up to $6.25 per $1,000 principal to registered broker-dealers distributing the notes.
The notes are fully and unconditionally guaranteed by Bank of America Corporation. They are not listed on any securities exchange, so no continuous secondary market will be available. The issuance carries CUSIP 09712CLQ4, with BofA Securities, Inc. acting as selling and calculation agent.
Contingent Coupon Payment Mechanism Explained
The notes provide an 8.40% annual coupon rate (0.70% monthly), equating to $7.00 per $1,000 principal on contingent payment dates. Coupon payments occur only if the closing level of each underlying index—the Dow Jones Industrial Average, Nasdaq-100 Technology Sector Index, and Russell 2000 Index—is at least 70% of its starting value on each monthly observation date.
If any index closes below its coupon barrier on an observation date, no coupon is paid for that period. Because the coupon depends on the worst-performing index meeting the threshold, investors bear the risk of a single index’s decline eliminating monthly coupon payments. This "worst-of" feature is a critical risk factor to consider.
Issuer Call Option Effective October 2026
Starting October 28, 2026, BofA Finance may redeem all notes on any monthly call payment date, but not partial redemptions. Upon call, investors receive $1,000 principal plus the contingent coupon if conditions are met on the observation date. No further payments follow early redemption.
Notice to the trustee must be given between five business days and 60 calendar days before the call date. This call feature introduces reinvestment risk, as favorable market conditions may prompt early redemption, potentially forcing investors to reinvest at lower yields. Conversely, deteriorating conditions may reduce call likelihood, extending exposure.
Principal Protection and Downside Risk at Maturity
At maturity, if the least performing underlying index’s ending value is at least 60% of its starting value (threshold), investors receive full $1,000 principal plus a final contingent coupon if the index is also at or above the 70% coupon barrier.
If the least performing index ends below 60% of its starting value, investors incur losses on a one-to-one basis, reducing redemption below 60% of principal and potentially resulting in a total loss of investment. This highlights the structured note’s risk profile and the importance of understanding potential downside exposure.
Initial Estimated Value Below Offering Price
The preliminary pricing supplement indicates the initial estimated value at pricing is between $920 and $970 per $1,000 principal, meaning investors pay a premium above estimated fair value. This reflects embedded costs such as underwriting discounts, hedging, and issuer margins.
Actual note value will fluctuate based on multiple factors and cannot be precisely predicted. Investors should consult the "Structuring the Notes" and "Risk Factors" sections in the pricing supplement before investing. These notes differ significantly from traditional debt securities and start with an implied market discount.
Underlying Indexes and Their Impact on Payments
The notes reference three major U.S. equity price return indexes: the Dow Jones Industrial Average (Bloomberg: INDU), tracking 30 large-cap companies; the Nasdaq-100 Technology Sector Index (Bloomberg: NDXT), focusing on Nasdaq-100 tech stocks; and the Russell 2000 Index (Bloomberg: RTY), representing around 2,000 small-cap U.S. companies.
Since payments depend on the lowest performing index, the notes require monitoring three distinct market segments simultaneously. Divergent performance—such as small caps declining while large caps remain stable—may trigger the worst-of outcome without a dramatic drop in any single index, adding complexity compared to single-index products.
Credit Risk of Issuer and Guarantor
All payments depend on the credit risk of BofA Finance LLC as issuer and Bank of America Corporation as guarantor. While the guarantee provides exposure to a major U.S. financial institution’s creditworthiness, it does not eliminate credit risk.
The notes are not FDIC insured or bank guaranteed in the deposit-protection sense and may lose value. Investors accept both market risk tied to index performance and credit risk. The "Risk Factors" sections in related documents provide detailed risk disclosures.
Observation Schedule, Valuation, and Maturity Details
The notes feature monthly observations throughout the roughly 18-month term, determining coupon payments and potential issuer calls starting October 2026. The final valuation date is January 24, 2028, with maturity on January 27, 2028.
In case of acceleration due to default, redemption is calculated as if the acceleration date were maturity, with valuation three trading days prior. Any final coupon payment is prorated accordingly, reflecting standard structured note terms.
Distribution, Fees, and Considerations for Fee-Based Accounts
BofA Securities, Inc. serves as selling agent with underwriting discounts up to $25 per $1,000 principal. Dealers selling to fee-based advisory accounts may waive some or all selling concessions, potentially reducing the public offering price to as low as $975 per $1,000 principal for such investors.
An affiliate of BofA Finance will pay referral fees up to $6.25 per $1,000 principal to other registered broker-dealers involved in distribution. These compensation arrangements are typical but important for evaluating total investment costs. The notes are not exchange-listed, so secondary market liquidity—if any—would be through issuer affiliates or broker-dealers, possibly at prices below estimated value.
Preliminary Filing and Final Pricing Timeline
The document is a preliminary pricing supplement subject to change. Final terms, including starting index values, will be set on July 23, 2026. Key economic terms like coupon barriers and thresholds, expressed as percentages of starting values, will be finalized then.
The offering is registered under the Securities Act of 1933, referencing Registration Statement Nos. 333-290665 and 333-290665-01, filed under Rule 424(b)(2). Related documents include a base prospectus dated December 8, 2025, Series A Prospectus Supplement dated December 8, 2025, and Product Supplement EQUITY-1 dated December 8, 2025. Investors should review all materials alongside the preliminary supplement before final terms are set.
