Mac Mail - Signatures - Image not saving

I want to use Mac Mail as my main email but I cannot create a signature that has images embedded. Each time I add an .jpg image (it is small in size, 250x124) it changes from what the image is into .JPEG logo instead. I tried dragging and dropping as well as straight copying into the Signature creator box, but each time, the image is just the JPG logo or the GIFF one dependent on the type of image I am adding. What am I doing wrong?