Bank of Montreal Issues $993,000 Autocallable Notes Linked to IBM Stock With Quarterly Contingent Coupons

Structure and Contingent Coupon Features of the Autocallable Notes

The notes issued by Bank of Montreal are structured as autocallable barrier notes designed to provide quarterly contingent periodic interest payments to investors willing to accept early redemption and downside principal risk. The contingent coupon is set at 4.2875% per quarter, or approximately 17.15% per annum, paid only if the closing level of IBM stock on the applicable quarterly observation date meets or exceeds the coupon barrier level of $126.30, representing 60% of the initial level. The first observation date for contingent coupon payment occurs in October 2026, with subsequent observation dates scheduled quarterly thereafter on dates three trading days prior to each scheduled payment date on the 24th of October, January, April, and July.

The contingent nature of the coupon payments means investors face the possibility of receiving no interest payment in any quarter where IBM stock closes below the coupon barrier level. Each contingent coupon payment, if payable, equals $42.875 for each $1,000 in principal amount. The notes are issued in minimum denominations of $1,000 with integral multiples of $1,000, and the total principal amount distributed in this offering is $993,000. Investors in these notes must be willing to forego the contingent coupon payment in periods where the reference asset performs below the coupon barrier threshold.

Automatic Redemption Mechanics and Call Settlement Terms

The autocallable feature of these notes provides for automatic early redemption beginning October 21, 2026, if on any observation date the closing level of IBM stock exceeds its call level, which is set at 100% of the initial level of $210.50. Once the automatic redemption is triggered, no further amounts are owed to investors under the notes, and investors receive their principal amount plus the contingent coupon otherwise due on the subsequent call settlement date. The call settlement date is defined as the contingent coupon payment date immediately following the relevant observation date on which the automatic redemption trigger occurs.

The redemption feature constrains investor upside participation in IBM stock appreciation, as investors will not receive returns beyond their principal and accrued contingent coupons if the stock price rises above the call level. This design prioritizes capital preservation and income generation for Bank of Montreal while limiting investors' ability to benefit from further appreciation of the reference asset. From the investor's perspective, the automatic redemption feature means the investment may terminate early and the capital may be returned prior to the three-year maturity date.

Principal Risk at Maturity and Trigger Event Mechanics

The notes do not guarantee any return of principal at maturity. Instead, final maturity payments depend on the performance of IBM stock relative to specified threshold levels. If the notes are not automatically redeemed, the payment at maturity is based on whether a trigger event has occurred, defined as the final level of IBM stock falling below the trigger level of $126.30 (60% of the initial level) on the valuation date of July 19, 2029. If no trigger event occurs, investors receive their full $1,000 principal for each $1,000 in principal amount invested, plus the final contingent coupon if payable.

However, if a trigger event does occur, investors will lose principal dollar-for-dollar with each percentage point decline in IBM stock from its initial level. Specifically, investors will receive at maturity a cash amount calculated as $1,000 plus ($1,000 times the percentage change in the reference asset level), where the percentage change is the quotient of (final level minus initial level) divided by the initial level. This loss mechanism means that if IBM stock declines 40% from its initial level of $210.50 to $126.30, investors would recover $600 per $1,000 invested, losing 40% of principal. Declines exceeding 60% could result in recovery of zero dollars or near-zero amounts per $1,000 in principal.

Reference Asset Characteristics and IBM Stock Linkage

The notes are linked to the common stock of International Business Machines Corporation, trading under the ticker symbol IBM. Bank of Montreal established an initial level for the reference asset at $210.50 as of the pricing date of July 21, 2026. The closing level of IBM stock on each observation date determines whether contingent coupons are paid and whether automatic redemption is triggered. The notes provide no right to physical delivery or conversion into shares of IBM stock; all payments are made in cash only, as determined by the calculation agent, BMOCM, which is Bank of Montreal's subsidiary.

The investment structure does not provide investors with direct ownership of IBM shares or equivalent economic participation in dividends or voting rights associated with the reference asset. Investors are entirely dependent on the price performance of IBM stock relative to the specified barrier and trigger levels. The offering document notes that investing in the notes is not equivalent to a direct investment in the reference asset, emphasizing the structural differences between owning the notes and holding IBM stock directly.

Pricing and Distribution Terms of the Offering

The notes were priced to the public at 100% of their $1,000 principal amount on the pricing date of July 21, 2026, with a settlement date of July 24, 2026. The total principal amount of $993,000 reflects the aggregate offering size. Bank of Montreal retained an agent's commission of 2.00%, totaling $19,860, with net proceeds to Bank of Montreal of $973,140 after deduction of the commission. The pricing document indicates that the estimated initial value of the notes based on the terms set forth is $966.34 per $1,000 in principal amount, reflecting the embedded cost of the derivative features and Bank of Montreal's hedging costs as of the pricing date.

Certain dealers who purchased notes for sale to fee-based advisory accounts may have foregone some or all of their selling concessions, fees, or commissions, resulting in public offering prices for investors in such accounts between $980.00 and $1,000 per $1,000 in principal amount. The total agent's commission and proceeds to Bank of Montreal specified reflect the aggregate amounts at the time Bank of Montreal established its hedge positions on or prior to the pricing date, which may have been variable and fluctuated depending on market conditions at those times. The notes will not be listed on any securities exchange.

Credit Risk and Regulatory Framework Governing the Notes

All payments on the notes are subject to the credit risk of Bank of Montreal, meaning investors rely on the bank's financial creditworthiness and ability to meet its payment obligations. The notes are unsecured obligations of Bank of Montreal and are not savings accounts or deposits insured by the United States Federal Deposit Insurance Corporation, the Deposit Insurance Fund, the Canada Deposit Insurance Corporation, or any other governmental agency, instrumentality, or entity. Bank of Montreal's subsidiary, BMO Capital Markets Corp., serves as the agent and selling agent for the offering and also functions as the calculation agent responsible for determining final levels and payments.

The notes will not be subject to conversion into Bank of Montreal's common shares or the common shares of any of its affiliates under subsection 39.2(2.3) of the Canada Deposit Insurance Corporation Act. The offering is conducted pursuant to a registration statement filed with the Securities and Exchange Commission, and the pricing supplement is dated July 21, 2026, filed pursuant to Rule 424(b)(2). The prospectus, prospectus supplement, and product supplement provide additional detail regarding risk factors, terms, and conditions governing the notes.

Risk Considerations and Investment Suitability Factors

The notes carry multiple layers of risk for investors, including market risk related to IBM stock price movements, credit risk of Bank of Montreal, liquidity risk due to the notes not being listed on an exchange, and structural risk from the embedded derivative features. Investors may lose some or all of their principal at maturity if IBM stock declines significantly. The contingent coupon structure means investors face the risk of receiving no interest in any quarterly period where IBM stock performance is weak. The automatic redemption feature, while providing some downside protection in the form of capital return, prevents investors from participating in IBM stock appreciation beyond the initial level.

Investors considering these notes must be willing to have their notes automatically redeemed prior to maturity, willing to forego any potential to participate in appreciation of the reference asset beyond the call level, and willing to accept the possibility of losing some or all principal at maturity. The offering document indicates that investing in the notes involves risks including those described in selected risk considerations, additional risk factors relating to the notes, and general risk factors in the prospectus supplement and prospectus. The actual value of the notes at any time reflects many factors and cannot be predicted with accuracy.

Settlement Details and Maturity Timeline

The notes are scheduled to settle on July 24, 2026, the same date as the maturity date label, indicating settlement three business days after the pricing date of July 21, 2026. The valuation date on which the final level of IBM stock is determined for purposes of calculating any trigger event and final maturity payment is set for July 19, 2029, three trading days prior to the stated maturity date of July 24, 2029. The three-year term of the notes provides a medium-term investment horizon, with contingent coupon payments scheduled quarterly over the holding period if IBM stock performance meets or exceeds the coupon barrier level on each observation date.

The final contingent coupon, if payable, will be paid on the maturity date of July 24, 2029, along with the final principal payment calculated based on the performance of IBM stock. The contingent coupon payment dates throughout the life of the notes are scheduled for the 24th of October, January, April, and July, with the first such date being October 24, 2026. All payment dates are subject to adjustment in the event of a market disruption event as described in the accompanying product supplement dated March 25, 2025.

Anti-Dilution Adjustments and Calculation Agent Authority

The calculation agent, BMOCM, possesses authority to make adjustments to the reference asset in certain circumstances, including adjustments related to anti-dilution provisions for equity securities such as IBM stock. The offering document references the "General Terms of the Notes — Anti-dilution Adjustments to a Reference Asset that Is an Equity Security (Including Any ETF)" section in the product supplement for additional information regarding these adjustment mechanisms. Such adjustments may be made to protect investors from the dilutive effects of corporate actions such as stock splits, dividends, or other events that could affect the comparability of historical stock price levels to current levels.

The initial level, coupon barrier level, trigger level, and call level are all subject to potential adjustment as determined by the calculation agent and subject to adjustment in certain circumstances. These adjustment provisions are designed to maintain the economic intent of the structured note terms in the event that IBM undertakes corporate actions that would otherwise distort the reference level comparisons. Investors should review the product supplement for a complete understanding of the anti-dilution adjustment mechanics and the calculation agent's discretion in applying these adjustments.