Note 8. SERVICING

The Company originates one-to-four-family residential loans that it sells in the secondary market. Servicing of these loans is retained by the Company. The Company also performs servicing for a pool of automobile loans sold in 2010. Loans serviced for others are not included in the accompanying consolidated statements of financial condition, but the related servicing income and expenses are recognized in the consolidated statements of operations. The unpaid balances of mortgage and other loans serviced for others were $154.5 million, $180.0 million and $193.9 million at December 31, 2012, 2011, and 2010, respectively.

The one- to four-family residential mortgage real estate loans were underwritten to Freddie Mac guidelines and were subsequently assigned and delivered to Freddie Mac. At December 31, 2012, substantially all of the loans serviced for others were performing in accordance with their contractual terms.

The following table summarizes the activity pertaining to mortgage servicing rights for the years ended December 31, 2012 and 2011:

	For the Years Ended December 31,
(in thousands)	2012			2011
Balance, beginning of year	$	777		$	751
Mortgage servicing rights capitalized	220			277
Amortization	(322		)	(251		)
Provision for loss in fair value	—			—
Balance, end of year	$	675		$	777

The fair value of all servicing assets was $884 thousand and $1.2 million at December 31, 2012 and 2011, respectively. Fair value has been determined using discount rates ranging from 2.75% to 8.31% and prepayment speeds ranging from 241% to 550% PSA, depending upon the stratification of the specific right. Based upon this fair value, management has determined that no valuation allowance associated with these mortgage servicing rights is necessary at December 31, 2012 and 2011.