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                                                                   Exhibit 10.12

STATE OF NORTH CAROLINA
COUNTY OF YANCEY

                                                   OPTION MODIFICATION AGREEMENT

         THIS OPTION MODIFICATION AGREEMENT (the "Agreement") is made and
entered into as of the 20th day of December, 2001, by William Banks
("Optionee");

                                   WITNESSETH:

         WHEREAS, Optionee is the holder of an option to purchase 6,600 shares
of common stock of First Western Bank ("FWB") at a price of $11.00 per share
(the "Option"); and,

         WHEREAS, FWB, MountainBank ("MountainBank"), and MountainBank Financial
Corporation ("MFC"), have entered into an Agreement and Plan of Reorganization
and Merger dated September 17, 2001 (the "Acquisition Agreement") which provides
for FWB to be merged into MountainBank (the "Merger"), with MountainBank to be
the surviving bank; and,

         WHEREAS, the Acquisition Agreement provides that, at the time the
Merger becomes effective, options to purchase shares of FWB's common stock
previously granted by FWB to its directors under FWB's nonstatutory stock option
plan, and previously granted by FWB to its officers and employees who become
officers and employees of MountainBank in connection with the Merger, will, to
the extent that those options remain outstanding and unexercised at the
effective time of the Merger, be assumed by MFC on their then current terms and
conditions and be converted into options to purchase shares of MFC's common
stock; and,

         WHEREAS, the Acquisition Agreement provides that such conversion will
be made such that, following the effective time of the Merger, each such option
will represent an option to purchase 0.50 shares of MFC's common stock for each
shares of FWB's common stock previously covered by the option, at a purchase
price appropriately adjusted to reflect the effect of the Merger and the
conversion of FWB's outstanding common stock into shares of MFC's common stock;
and,

         WHEREAS, consummation of the Merger is conditioned on the holders of
FWB's outstanding options agreeing to such assumption and conversion, and
Optionee desires to evidence his or her agreement to and acknowledgment of the
conversion of the Option and the terms thereof following assumption by MFC.

         NOW, THEREFORE, for and in consideration of MFC's assumption of the
Option and its conversion into an option to purchase shares of MFC's common
stock, and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, Optionee acknowledges and agrees
as follows:

         1. Modification of Option. The Option hereby is converted, effective as
of the effective time of the Merger ("Conversion Time"), into an option to
purchase 3,300 shares of MFC's common stock at a price of $22.00 per share.

         2. Terms of Option. Except with respect to the number and identity of
shares covered by the Option and the exercise price per share as described
above, all other terms and provisions of the Option (including without
limitation provisions relating to the term of the Option, conditions on
exercise, and provisions relating to termination and vesting of the Option)
shall continue in effect and the


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Option shall remain in full force and effect in
accordance with its terms, with MFC being substituted in the place and stead of
FWB as a party to the Option.

         3. Benefit. This Modification Agreement shall be binding upon and shall
inure to the benefit of Optionee, FWB, MFC and MountainBank and their respective
heirs, legal representatives, successors and permitted assigns, as applicable.

         IN TESTIMONY WHEREOF, Optionee has executed this Agreement under seal
as of this the day and year first above written.


                                                /S/ William A. Banks      (SEAL)
                                         ---------------------------------
                                                Optionee's Signature

                                                    William A. Banks
                                         ---------------------------------------
                                                     (Print Name)



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STATE OF NORTH CAROLINA
COUNTY OF YANCEY

                                                   OPTION MODIFICATION AGREEMENT

         THIS OPTION MODIFICATION AGREEMENT (the "Agreement") is made and
entered into as of the 20th day of December, 2001, by William Banks
("Optionee");

                                   WITNESSETH:

         WHEREAS, Optionee is the holder of an option to purchase 6,500 shares
of common stock of First Western Bank ("FWB") at a price of $9.50 per share (the
"Option"); and,

         WHEREAS, FWB, MountainBank ("MountainBank"), and MountainBank Financial
Corporation ("MFC"), have entered into an Agreement and Plan of Reorganization
and Merger dated September 17, 2001 (the "Acquisition Agreement") which provides
for FWB to be merged into MountainBank (the "Merger"), with MountainBank to be
the surviving bank; and,

         WHEREAS, the Acquisition Agreement provides that, at the time the
Merger becomes effective, options to purchase shares of FWB's common stock
previously granted by FWB to its directors under FWB's nonstatutory stock option
plan, and previously granted by FWB to its officers and employees who become
officers and employees of MountainBank in connection with the Merger, will, to
the extent that those options remain outstanding and unexercised at the
effective time of the Merger, be assumed by MFC on their then current terms and
conditions and be converted into options to purchase shares of MFC's common
stock; and,

         WHEREAS, the Acquisition Agreement provides that such conversion will
be made such that, following the effective time of the Merger, each such option
will represent an option to purchase 0.50 shares of MFC's common stock for each
shares of FWB's common stock previously covered by the option, at a purchase
price appropriately adjusted to reflect the effect of the Merger and the
conversion of FWB's outstanding common stock into shares of MFC's common stock;
and,

         WHEREAS, consummation of the Merger is conditioned on the holders of
FWB's outstanding options agreeing to such assumption and conversion, and
Optionee desires to evidence his or her agreement to and acknowledgment of the
conversion of the Option and the terms thereof following assumption by MFC.

         NOW, THEREFORE, for and in consideration of MFC's assumption of the
Option and its conversion into an option to purchase shares of MFC's common
stock, and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, Optionee acknowledges and agrees
as follows:

         1. Modification of Option. The Option hereby is converted, effective as
of the effective time of the Merger ("Conversion Time"), into an option to
purchase 3,250 shares of MFC's common stock at a price of $19.00 per share.

         2. Terms of Option. Except with respect to the number and identity of
shares covered by the Option and the exercise price per share as described
above, all other terms and provisions of the Option (including without
limitation provisions relating to the term of the Option, conditions on
exercise, and provisions relating to termination and vesting of the Option)
shall continue in effect and the


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Option shall remain in full force and effect in accordance with its terms, with
MFC being substituted in the place and stead of FWB as a party to the Option.

         3. Benefit. This Modification Agreement shall be binding upon and shall
inure to the benefit of Optionee, FWB, MFC and MountainBank and their respective
heirs, legal representatives, successors and permitted assigns, as applicable.

         IN TESTIMONY WHEREOF, Optionee has executed this Agreement under seal
as of this the day and year first above written.


                                                 /S/  William A. Banks   (SEAL)
                                             ----------------------------
                                                Optionee's Signature

                                                        William A. Banks
                                             ----------------------------------
                                                     (Print Name)