~~ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

ITEM 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read together with the unaudited consolidated financial statements and the related notes included elsewhere in this report. For additional context with which to understand our financial condition and results of operations, see the MD&A for the fiscal year ended December 31, ~~2011~~2012 contained in our Annual Report on Form 10-K (the ~~"2011~~"2012 10-K") filed with the SEC on March ~~12, 2012,~~8, 2013, as well as the Consolidated Financial Statements and Notes contained therein.

Cautionary Statement Regarding Forward Looking Statements

This MD&A and other sections of this report contain forward looking statements. We make forward-looking statements, as defined by the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, and in some cases, you can identify these statements by forward-looking words such as “if,” “shall,” “may,” “might,” “will likely result,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “intend,” “goal,” “objective,” “predict,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are based on various underlying assumptions and expectations and are subject to risks, uncertainties and other unknown factors, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events that we believe to be reasonable. There are or may be important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the historical or future results, level of activity, performance or achievements expressed or implied by such forward-looking statements. These factors include, but are not limited to, those discussed under the caption “Risk Factors” in our ~~2011~~2012 10-K. In preparing this MD&A, we presume that readers have access to and have read the MD&A in our ~~2011~~2012 10-K, pursuant to Instruction 2 to paragraph (b) of Item 303 of Regulation S-K. We undertake no duty to update any of these forward-looking statements after the date of filing of this report to conform such forward-looking statements to actual results or revised expectations, except as otherwise required by law.

Overview

JMP Group Inc., together with its subsidiaries (collectively, the "Company", "we" or "us"), is a full-service investment banking and asset management firm headquartered in San Francisco, California. We have a diversified business model with a focus on small and middle-market companies and provide:

●

~~investment banking, including corporate finance, mergers and acquisitions and other strategic advisory services, to corporate clients;~~

investment banking, including corporate finance, mergers and acquisitions and other strategic advisory services, to corporate clients;

sales and trading, and related brokerage services to institutional investors;

proprietary equity research in our four target industries;

asset management products and services to institutional investors, high net-worth individuals and for our own account;

●

~~sales and trading, and related brokerage services to institutional investors;~~

●

~~proprietary equity research in our four target industries;~~

●

~~asset management products and services to institutional investors, high net-worth individuals and for our own account;~~

	●•		management of collateralized loan obligations; and

	●•		small business lending.

Components of Revenues

We derive revenues primarily from fees earned from our investment banking business, net commissions on our trading activities in our sales and trading business, asset management fees and incentive fees in our asset management business, and interest income on collateralized loan obligations and small business ~~lending~~loans we manage. We also generate revenues from principal transactions, interest, dividends, and other income.

Investment Banking

We earn investment banking revenues from underwriting securities offerings, arranging private capital market transactions and providing advisory services in mergers and acquisitions and other strategic advisory assignments.

Underwriting Revenues

We earn underwriting revenues from securities offerings in which we act as an underwriter, such as initial public offerings and follow-on equity offerings. Underwriting revenues include management fees, underwriting fees, selling concessions and realized and unrealized net gains and losses on equity positions held in inventory for a period of time to facilitate the completion of certain underwritten transactions. We record underwriting revenues, net of related syndicate expenses, at the time the underwriting is completed. In syndicated underwritten transactions, management estimates our share of transaction-related expenses incurred by the syndicate, and we recognize revenues net of such expense. On final settlement by the lead manager, typically 90 days from the trade date of the transaction, we adjust these amounts to reflect the actual transaction-related expenses and our resulting underwriting fee. We receive a higher proportion of total fees in underwritten transactions in which we act as a lead manager.

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Strategic Advisory Revenues

Our strategic advisory revenues primarily include success fees on closed merger and acquisition transactions, as well as retainer fees, earned in connection with advising both buyers’ and sellers’ transactions. We also earn fees for related advisory work and other services such as providing fairness opinions and in valuation analyses. We record strategic advisory revenues when the transactions or the services (or, if applicable, separate components thereof) to be performed are substantially completed, the fees are determinable and collection is reasonably assured.

Private Capital Market and other Revenues

We earn agency capital market and other fees in non-underwritten transactions such as private placements of equity securities, private investments in public equity (“PIPE”) transactions, Rule 144A private offerings and trust preferred securities offerings. We record private placement revenues on the closing date of these transactions.

Since our investment banking revenues are generally recognized at the time of completion of each transaction or the services to be performed, these revenues typically vary between periods and may be considerably affected by the timing of the closing of significant transactions.

Brokerage Revenues

Our brokerage revenues include commissions paid by customers from brokerage transactions in exchange-listed and over-the-counter (“OTC”) equity securities. Commissions are recognized on a trade date basis. Brokerage revenues also include net trading gains and losses that result from market-making activities and from our commitment of capital to facilitate customer transactions. Our brokerage revenues may vary between periods, in part depending on commission rates, trading volumes and our ability to continue to deliver research and other value-added services to our clients. The ability to execute trades electronically, through the Internet and through other alternative trading systems has increased pressure on trading commissions and spreads. We expect this trend toward alternative trading systems and pricing pressures in our brokerage business to continue. We are, to some extent, compensated through brokerage commissions for the value of research and other ~~value~~value- added services we deliver to our clients. These “soft dollar” practices have been the subject of discussion among regulators, the investment banking community and our sales and trading clients. In particular, commission sharing arrangements have been adopted by some large institutional investors. In these arrangements, institutional investors concentrate their trading with fewer “execution” brokers and pay a fixed amount for execution with an additional amount set aside for payments to other firms for research or other brokerage services. Accordingly, we may experience reduced (or eliminated) trading volume with such investors but may be compensated for our research and sales efforts through allocations of the designated amounts. Depending on the extent to which we adopt this practice and depending on our ability to reach arrangements on terms acceptable to us, this trend would likely impair the revenues and profitability of our commission business by negatively affecting both volumes and trading commissions in our commission business.

Asset Management Fees

Asset management fees for hedge funds, hedge funds of funds, private equity funds and Harvest Capital Credit LLC ("HCC") include base management fees and incentive fees earned from managing investment partnerships sponsored by us. Earned base management fees are generally based on the fair value of assets under management or aggregate capital commitments and the fee schedule for each fund and account. We also earn incentive fees based upon the performance of investment funds and accounts. For most of the funds, such fees are based on a percentage of the excess of an investment return over a specified ~~highwater~~high-water mark or hurdle rate over a defined performance period. For private equity funds, incentive fees are based on a specified percentage of realized gains from the disposition of each portfolio investment in which each investor participates, and we earn after returning contributions by the investors for that portfolio investment and for all other portfolio investments in which each such investor participates that have been disposed of at the time of distribution.

As of ~~September 30, 2012,~~March 31, 2013, the contractual base management fees earned from each of these investment funds ranged between 1% and 2% of assets under management or were 2% of aggregate committed capital. The contractual incentive fees were generally (i) 20%, subject to ~~highwater~~high-water marks, for the hedge funds; (ii) 5% to 20%, subject to high-water marks or a performance hurdle rate, for the hedge funds of funds; (iii) 20%, subject to high-water marks, for Harvest Growth Capital LLC ("HGC") and Harvest Growth Capital II LLC ("HGC II"). Our asset management revenues are subject to fluctuations due to a variety of factors that are unpredictable, including the overall condition of the economy and the securities markets as a whole and our core sectors. These conditions can have a material effect on the inflows and outflows of assets under management, and the performance of our asset management funds. For example, a significant portion of the performance-based or incentive revenues that we recognize are based on the value of securities held in the funds we manage. The value of these securities includes unrealized gains or losses that may change from one period to another. As we consolidate ~~HCC~~HGC, HGC II and ~~HGC,~~HCC, the management and incentive fees earned at HCS from ~~HCC~~HGC, HGC II and ~~HGC~~HCC are eliminated onin consolidation.

Asset management fees for the collateralized loan obligations ("CLOs") we manage currently consist only of senior and subordinated base management fees. We recognize base management fees for the CLOs on a monthly basis over the period in which the collateral management services are performed. The base management fees for the CLOs are calculated as a percentage of the average aggregate collateral balances for a specified period. As we consolidate Cratos CLO, the management fees earned at JMP Credit Advisors LLC ("JMPCA") from Cratos CLO are eliminated on consolidation in accordance with accounting principles generally accepted in the United States ("GAAP"). At ~~September 30, 2012,~~March 31, 2013, the contractual senior and subordinated base management fees earned from the CLO were 0.50% of the average aggregate collateral balance for a specified period.

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The following tables present certain information with respect to the investment funds managed by HCS and CLOs managed by JMPCA:

(In thousands)	Assets Under Management (1) at				Company's Share of Assets Under Management at
	March 31, 2013		December 31, 2012		March 31, 2013			December 31, 2012
Funds Managed by HCS:
Hedge Funds:
Harvest Opportunity Partners II (2)	$	133,102	$	111,853		$	15,934	$	4,506
Harvest Small Cap Partners		303,129		288,391			1,101		4,621
Harvest Franchise Fund		97,632		84,192			2,823		2,000
Harvest Agriculture Select (2)		53,478		31,580			14,166		2,428
Harvest Technology Partners (2)		66,136		65,877			9,851		111
Harvest Diversified Partners		24,946		23,598			15,497		14,241
Private Equity Funds:
Harvest Growth Capital LLC (3)		38,665		39,694			1,718		1,798
Harvest Growth Capital II LLC (3)		14,686		7,660			357		268
Funds of Funds:
JMP Masters Fund		43,746		42,182			117		109
REITs:
New York Mortgage Trust		34,430		32,539			N/A		N/A
Loans:
Harvest Capital Credit (3)		42,004		47,986			13,189		15,005
HCS Totals	$	851,954	$	775,552		$	74,753	$	45,087

CLOs by JMPCA:
Cratos CLO (3)		472,642		471,887			N/A		N/A
JMPCA Totals	$	472,642	$	471,887		$	N/A	$	N/A

JMP Group Inc. Totals	$	1,324,596	$	1,247,439		$	74,753	$	45,087

(In thousands)
Assets Under Management (1) at
Company's Share of Assets Under Management at

September 30,
2012

December 31,
2011

September 30,
2012

December 31,
2011

Funds Managed by HCS:
Hedge Funds:
Harvest Opportunity Partners II (2) $ 104,657 $ 74,953 $ 4,662 $ 3,931
Harvest Small Cap Partners 283,795 324,453 5,143 5,112
Harvest Franchise Fund 80,271 - 1,797 -
Harvest Agriculture Select (2) 28,981 12,149 2,447 1,995
Harvest Technology Partners (2) 91,539 58,712 115 113
Harvest Diversified Partners 23,986 23,637 14,207 12,921
Private Equity Funds:
Harvest Growth Capital LLC (3) 43,486 23,691 1,988 1,195
Funds of Funds:
JMP Masters Fund 51,187 52,853 105 102
REITs:
New York Mortgage Trust 31,391 34,056 N/A N/A
Loans:
Harvest Capital Credit (3) 27,350 10,674 9,452 5,124
HCS Totals $ 766,643 $ 615,178 $ 39,916 $ 30,493

CLOs by JMPCA:
Cratos CLO (3) 470,997 474,138 N/A N/A
Other (4) - 107,274 N/A N/A
JMPCA Totals $ 470,997 $ 581,412 $ N/A $ N/A

JMP Group Inc. Totals $ 1,237,640 $ 1,196,590 $ 39,916 $ 30,493

(1)	For hedge funds, private equity funds and funds of funds, assets under management represent the net assets of such funds. For NYMT, assets under management represent the portion of the net assets of NYMT that is subject to the incentive fee calculation. In connection with its investment in NYMT, in January 2008, we entered into an advisory agreement between HCS and NYMT. The advisory agreement was amended effective July 26, 2010. Under the amended advisory agreement, HCS managed certain assets of NYMT, which were subject to the base advisory fee and incentive fee calculations, and received an annual consulting fee equal to $1.0 million. On December 31, 2011, the amended advisory agreement was terminated, pending certain contingent advisory obligations. For CLOs, assets under management represent the sum of the aggregate collateral balance and restricted cash to be reinvested in collateral, upon which management fees are earned.
(2)	Harvest Opportunity Partners II ("HOP II"), Harvest Agriculture Select ("HAS"), and Harvest Technology Partners ("HTP") include managed accounts in which the Company has neither equity investment nor control. These are included as they follow the respective funds' strategies and earn fees.
(3)	HGC, HGC II, HCC and Cratos CLO were consolidated in the Company’s Statements of Financial Condition at ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011.~~
~~(4)~~	~~The CLO within Other initiated liquidation proceedings in December 2011. The remaining assets were distributed in~~ 2012.

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(In thousands)	Three Months Ended March 31, 2013							Three Months Ended March 31, 2012
	Company's Share of Change in Fair Value			Management Fee		Incentive Fee		Company's Share of Change in Fair Value			Management Fee		Incentive Fee
Hedge Funds:
Harvest Opportunity Partners II (1)	$	386			322		213	$	193		$	135	$	99
Harvest Small Cap Partners		227			1,350		3,641		(112	)		1,511		-
Harvest Franchise Fund		176			236		-		148			136		-
Harvest Agriculture Select (1)		395			136		181		195			32		67
Harvest Technology Partners (1)		(290	)		183		-		8			184		618
Harvest Diversified Partners		368			42		55		888			44		52
Private Equity Funds:
Harvest Growth Capital LLC (2)		-			106		30		197			161		77
Harvest Growth Capital II LLC (2)		(20	)		274		-		-			-		-
Funds of Funds:
JMP Masters Fund		8			98		-		3			123		-
REITs:
New York Mortgage Trust		-			-		300		87			250		206
Loans:
Harvest Capital Credit (2)		N/A			77		320		N/A			25		54
CLOs:
Cratos CLO (2)		N/A			583		-		N/A			590		-
Other (3)		N/A			-		-		N/A			22		-
Totals	$	1,250		$	3,407	$	4,740	$	1,607		$	3,213	$	1,173

(In thousands) Three Months Ended September 30, 2012 Three Months Ended September 30, 2011
Company's Share of Change in Fair Value Management Fee Incentive Fee Company's Share of Change in Fair Value Management Fee Incentive Fee
Hedge Funds:
Harvest Opportunity Partners II (1) $ 231 185 290 $ (91 ) $ 164 $ -
Harvest Small Cap Partners 91 1,275 883 258 1,378 3,068
Harvest Franchise Fund (193 ) 241 - - - -
Harvest Agriculture Select (1) 113 64 101 (253 ) 21 -
Harvest Technology Partners (1) 1 268 - (3 ) 179 -
Harvest Diversified Partners 507 42 57 (764 ) 73 -
Private Equity Funds:
Harvest Growth Capital LLC (2) (131 ) 167 190 (149 ) 203 -
Funds of Funds:
JMP Masters Fund 1 119 - (3 ) 152 -
REITs:
New York Mortgage Trust - - 235 (283 ) 255 102
Loans:
Harvest Capital Credit (2) N/A 78 131 N/A 1 -
CLOs:
Cratos CLO (2) N/A 594 - N/A 594 -
Other (3) N/A - - N/A 296 -
Totals $ 620 $ 3,033 $ 1,887 $ (1,288 ) $ 3,316 $ 3,170

(1)	HOP II, HAS and HTP include managed accounts in which the Company has neither equity investment nor control. These are included with the funds, as they follow the respective strategies and earn fees.
(2)	Revenues earned from HGC, HGC II, HCC, and Cratos are consolidated and then eliminated in consolidation in the Company’s Statements of Operations, net of non-controlling interest.
(3)	The CLO within Other initiated liquidation proceedings in December 2011. The remaining assets were distributed in 2012.

(In thousands) Nine Months Ended September 30, 2012 Nine Months Ended September 30, 2011
Company's Share of Change in Fair Value Management Fee Incentive Fee Company's Share of Change in Fair Value Management Fee Incentive Fee
Hedge Funds:
Harvest Opportunity Partners II (1) $ 453 473 401 $ 34 $ 516 $ 96
Harvest Small Cap Partners 193 4,174 1,624 535 3,939 5,467
Harvest Franchise Fund (203 ) 595 - - - -
Harvest Agriculture Select (1) 353 144 200 (180 ) 64 31
Harvest Technology Partners (1) (8 ) 692 618 9 427 508
Harvest Diversified Partners 1,229 128 120 (80 ) 225 118
Private Equity Funds:
Harvest Growth Capital LLC (2) 394 493 266 (49 ) 609 -
Funds of Funds:
JMP Masters Fund 3 365 - - 455 -
REITs:
New York Mortgage Trust 87 500 663 6 795 1,566
Loans:
Harvest Capital Credit (2) N/A 157 298 N/A 1 -
CLOs:
Cratos CLO (2) N/A 1,787 - N/A 1,778 -
Other (3) N/A 24 - N/A 886 -
Totals $ 2,501 $ 9,532 $ 4,190 $ 275 $ 9,695 $ 7,786

~~(1)~~	~~HOP II, HAS and HTP include managed accounts in which the Company has neither equity investment nor control. These are included with the funds, as they follow the respective strategies and earn fees.~~
~~(2)~~	~~Revenues earned from HGC, HCC, and Cratos are consolidated and then eliminated in consolidation in the Company’s Statements of Operations, net of non-controlling interest.~~
~~(3)~~	~~The CLO within Other initiated liquidation proceedings in December 2011. The remaining assets were distributed in 2012.~~

~~-32-~~

Principal Transactions

Principal transaction revenues includes realized and unrealized net gains and losses resulting from our principal investments, which ~~includes~~include investments in equity and other securities for our own account and as the general partner of funds managed by us, warrants we may receive from certain investment banking assignments, as well as limited partner investments in private funds managed by third parties. In addition, we invest a portion of our capital in a portfolio of equity securities managed by HCS and in side-by-side investments in the funds managed by us. In certain cases, we also co-invest alongside our institutional clients in private transactions resulting from our investment banking business. Principal transaction revenues also include unrealized gains and losses on the private equity securities owned by HGC aand HGC II, two private equity ~~fund~~funds managed by HCS which isare consolidated in our financial statements, as well as unrealized gains and losses on the investments in private companies sponsored by HCS and JMP Capital LLC ("JMP Capital")., and unrealized gains and losses on the warrants, options and equity securities owned by HCC.

Gain on Sale, Payoff and ~~Payoff~~Mark-to-market of Loans

Gain on sale, payoff and ~~payoff~~mark-to-market of loans consists of gains from the sale and payoff of loans collateralizing asset-backed securities at JMP Credit ~~Corporation ("JMP Credit").~~and small business loans at HCC. Gains are recorded when the proceeds exceed ~~our~~the carrying value of the loan. Gain on sale, payoff and ~~payoff~~mark-to-market of loans also consists of lower of cost or market adjustments arising from loans held for ~~sale.~~sale and fair value market adjustments of the small business loans. Losses are recorded for the loan held for sale when the carrying value exceeds fair value. Changes to the fair value of the small business loans are also recorded to this line item.

Net Dividend Income

Net dividend income comprises dividends from our investments offset by dividend expense for paying short positions in our principal investment portfolio.

Other Income

Other income includes loan restructuring fees at JMP Credit and revenues from ~~fee sharing~~fee-sharing arrangements with, and fees earned to raise capital for third-party investment partnerships, or funds. Other income also includes non-recurring revenues associated with the conclusion of HCS's advisory relationship with NYMT. Refer to Note 2 in the Company's ~~2011~~2012 10-K for additional information regarding the termination of the advisory agreement between HCS and NYMT.

Interest Income

Interest income primarily consists of interest income earned on loans collateralizing ~~asset backed~~asset-backed securities issued, small business loans, and loans held for investment. Interest income on loans comprises the stated coupon as a percentage of the face amount receivable as well as accretion of accretable or purchase discounts and deferred fees. Interest income is recorded on the accrual basis in accordance with the terms of the respective loans unless such loans are placed on non-accrual status.

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Interest Expense

Interest expense primarily consists of interest expense incurred on asset-backed securities issued and note payable. Interest expense on asset-backed securities is the stated coupon payable as a percentage of the principal amount as well as amortization of the liquidity discount which was recorded at the acquisition date of Cratos. Interest expense is recorded on the accrual basis in accordance with the terms of the respective asset-backed securities issued and note payable.

Provision for Loan Losses

Provision for loan losses includes provision for losses recognized on our loan notes and non-revolving credit agreements at JMP Capital (collectively loans held for investment), and on loans collateralizing ~~ABS~~asset-backed securities ("ABS") at JMP Credit ~~and on small business loans at HCC~~ to record them at their estimated net realizable value. ~~We maintain an allowance for loan losses that is intended to estimate loan losses inherent in our loan portfolio.~~ A provision for loan losses is charged to expense to establish the allowance for loan losses. The allowance for loan losses is maintained at a level, in the opinion of management, sufficient to offset estimated losses inherent in the loan portfolio as of the date of the financial statements. The appropriateness of the allowance and the allowance components are reviewed quarterly. Our estimate of each allowance component is based on observable information and on market and ~~third party~~third-party data that we believe are reflective of the underlying loan losses being estimated.

~~An allowance~~A specific reserve is provided for loans that are considered impaired. A loan is considered impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. We measure impairment of a loan based upon either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral securing the loan if the loan is collateral dependent, depending on the circumstances and our collection strategy. For those loans held by Cratos at the date of acquisition by JMP Credit, and deemed impaired at that date or a subsequent date, allowance for loan losses is calculated considering two ~~further~~additional factors. For loans deemed impaired at the date of acquisition, if there is a further decline in expected future cash flows, this reduction is recognized as a specific reserve in ~~the current quarter in~~ accordance with the guidance above. For those loans deemed impaired subsequent to the acquisition date, if the net realizable value is lower than the current carrying value then the carrying value is reduced and the difference is booked as provision for loan losses. If the total discount from unpaid principal balance to carrying value is larger than the expected loss at the date of assessment, no provision for loan losses is recognized.

In addition, we provide an allowance on a ~~loan by loan~~loan-by-loan basis at JMP Credit for loans that were purchased after the Cratos acquisition. We employ internally developed and ~~third party~~third-party estimation tools for measuring credit risk (loan ratings, probability of default, and exposure at default), which are used in developing an appropriate allowance for loan losses. We perform periodic detailed reviews of ~~our~~its loan portfolio to identify risks and to assess the overall collectability of loans.

~~-33-~~

Loans which are deemed to be uncollectible are charged off and the charged-off amount is deducted from the allowance.

Components of Expenses

We classify our expenses as compensation and benefits, administration, brokerage, clearing and exchange fees, travel and business development, communications and technology, professional fees, impairment loss on purchased management contract and other expenses. A significant portion of our expense base is variable, including compensation and benefits, brokerage clearing and exchange fees, travel and business development and communication and technology expenses.

Compensation and Benefits

Compensation and benefits is the largest component of our expenses and includes employees’ base pay, performance bonuses, sales commissions, related payroll taxes, medical and benefits expenses, as well as expenses for contractors, temporary employees and equity-based compensation. Our employees receive a substantial portion of their compensation in the form of individual performance-based bonuses. As is the widespread practice in our industry, we pay bonuses on an annual basis, which for senior professionals typically make up a large portion of their total compensation. Bonus payments may have a greater impact on our cash position and liquidity in the periods in which they are paid than would otherwise be reflected in our Consolidated Statements of Operations. We accrue for the estimated amount of these bonus payments ratably over the applicable service period.

Compensation is accrued using specific ratios of total compensation and benefits to total revenues based on revenue categories, as adjusted if, in management’s opinion, such adjustments are necessary and appropriate to maintain competitive compensation levels.

Administration

Administration expense primarily includes the cost of hosted conferences, non-capitalized systems and software expenditures, insurance, business tax (non-income), office supplies, recruiting, regulatory fees and ~~regulatory fees.~~amortization of bond issuance costs.

Brokerage, Clearing and Exchange Fees

Brokerage, clearing and exchange fees include the cost of floor and electronic brokerage and execution, securities clearance, and exchange fees. We clear our securities transactions through J.P. Morgan Clearing Corp. Changes in brokerage, clearing and exchange fees fluctuate largely in line with the volume of sales and trading activity.

- 34 -

Travel and Business Development

Travel and business development expense is net of expenses reimbursed by clients.

Communications and Technology

Communications and technology expense primarily relates to communication and information processing as well as the subscription of certain market data.

Professional Fees

Professional fees primarily relate to legal and accounting professional services.

~~Impairment Loss on Purchased Management Contract~~

Impairment loss on purchased management contract relates to a CLO management contract we purchased from Princeton Advisory Group, Inc. on September 8, 2010 for $3.8 million. Because a single investor had previously acquired control of the right to transfer the management contract without cause at any time with 90 days’ notice, we initially recorded an impairment charge of $2.8 million for the quarter ended September 30, 2010 and an additional impairment charge of $0.7 million in the quarter ended March 31, 2011. The CLO began liquidation proceedings in December 2011. The remaining assets will be distributed in 2012. See Note 9 in the 2011 10-K for further information.

Other Expenses

Other operating expenses primarily include occupancy, depreciation and CLO administration expense at JMP Credit.

Non-controlling Interest

Non-controlling interest for ~~nine~~the three months ended ~~September 30,~~March 31, 2012 includes the interest of third parties in Cratos CLO, HGC and HCC, partially-owned subsidiaries consolidated in our financial statements. Non-controlling interest for the ~~nine~~three months ended ~~September 30, 2011~~March 31, 2013 also includes the interest of third parties in ~~Cratos CLO and~~ HGC II, a partially-owned ~~subsidiaries~~subsidiary consolidated in our financial statements.

- 35 -

We follow the authoritative guidance under GAAP regarding the determination of whether a general partner, or the general partners as a group, controls a limited partnership or similar entity when the limited partners have certain rights. Such guidance applies when a general partner controls a limited partnership and is required to consolidate the limited partnership in its financial statements. Under the guidance, the general partner in a limited partnership is presumed to control the limited partnership regardless of the extent of the general partners’ ownership interest in the limited partnership. If the limited partners have either (a) the substantive ability to liquidate the limited partnership or otherwise remove the general partner without cause or (b) substantive participating rights, the general partner does not control the limited partnership.

~~-34-~~

The limited liability company agreements of HGC do not provide for the right of the members to remove the manager by a simple majority vote of the non-affiliated members and therefore the manager (with a minority interest in the limited liability company) is deemed to control HGC. As a result, we consolidated HGC from its inception on April 1, 2010.

Similar to HGC, the limited liability company agreements of HGC II do not provide for the right of the members to remove the manager by a simple majority vote of the non-affiliated members and therefore the manager (with a minority interest in the limited liability company) is deemed to control HGC II. As a result, we consolidated HGC II from its inception in the fourth quarter of 2012.

On August 6, 2010, along with individual employee security holders (the “Unitholders”) of JMP Credit, we entered into an Exchange Agreement providing for, among other things, an offer to buy the minority interest units and shares in JMP Credit held by the Unitholders in exchange for a combination of (i) restricted common stock of the Company par value $.001 per share, (ii) cash and (iii) certain Cratos CLO subordinated notes. In connection with the Exchange Agreement, we issued an aggregate of 381,310 shares of restricted stock and transferred 109 subordinated notes to the Unitholders and we received all the remaining units and shares of JMP Credit that we did not previously own. The restricted stock and the Cratos CLO notes are subject to limitations on transfer and our repurchase rights in the event of certain terminations of the Unitholder’s employment with the Company or its affiliates through June 1, 2013. As a result of the aforementioned transaction, we own 100% of JMP Credit and approximately 94% of the subordinated notes of Cratos CLO.

On August 18, 2011, HCS entered into an investment management and advisory agreement with HCC. HCC makes direct investments in the form of subordinated debt and, to a lesser extent, senior debt and minority equity investments, in privately-held U.S. small to mid-size companies. HCC commenced operations in September 2011. HCS acts as its investment advisor, earning a base management fee equal to 2% annually of the gross assets acquired with equity. HCS does not charge a base management fee on assets funded through the Company's line of credit. JMP Credit Advisors provides HCC with its administrative services, and is reimbursed its expenses, including the allocable percentage of the compensation costs for the employees performing services under the agreement. The Company consolidates HCC into its consolidated financial statements.

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Results of Operations

The following table sets forth our results of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~ and is not necessarily indicative of the results to be expected for any future period.

(In thousands)	Three Months Ended September 30,						Change from 2011 to 2012						Three Months Ended March 31,						Change from 2012 to 2013
	2012			2011			$			%			2013			2012			$			%
Revenues
Investment banking	$	12,218		$	10,048		$	2,170			21.6	%	$	12,107		$	16,659		$	(4,552	)		-27.3	%
Brokerage		5,371			6,898			(1,527	)		-22.1	%		5,194			5,492			(298	)		-5.4	%
Asset management fees		3,755			5,694			(1,939	)		-34.1	%		6,751			3,474			3,277			94.3	%
Principal transactions		(1,955	)		(6,290	)		4,335			-68.9	%		1,917			6,484			(4,567	)		-70.4	%
Gain on sale and payoff of loans		204			1,373			(1,169	)		-85.1	%
Net dividend (expense) income		(2	)		322			(324	)		-100.6	%
Gain on sale and payoff of loans and mark-to-market of loans														1,089			1,047			42			4.0	%
Net dividend expense														(8	)		(14	)		6			-42.9	%
Other income		365			1,026			(661	)		-64.4	%		288			736			(448	)		-60.9	%
Non-interest revenues		19,956			19,071			885			4.6	%		27,338			33,878			(6,540	)		-19.3	%

Interest income		8,333			7,451			882			11.8	%		8,158			7,458			700			9.4	%
Interest expense		(10,087	)		(9,024	)		(1,063	)		11.8	%		(11,299	)		(9,608	)		(1,691	)		17.6	%
Net interest expense		(1,754	)		(1,573	)		(181	)		11.5	%		(3,141	)		(2,150	)		(991	)		46.1	%

Provision for loan losses		(71	)		(123	)		52			-42.3	%		(949	)		(93	)		(856	)		920.4	%

Total net revenues after provision for loan losses		18,131			17,375			756			4.4	%		23,248			31,635			(8,387	)		-26.5	%

Non-interest expenses
Compensation and benefits		17,358			15,970			1,388			8.7	%		19,605			21,771			(2,166	)		-9.9	%
Administration		1,645			2,246			(601	)		-26.8	%		1,331			1,250			81			6.5	%
Brokerage, clearing and exchange fees		902			1,275			(373	)		-29.3	%		887			896			(9	)		-1.0	%
Travel and business development		746			1,107			(361	)		-32.6	%		958			702			256			36.5	%
Communication and technology		909			1,013			(104	)		-10.3	%		853			908			(55	)		-6.1	%
Professional fees		967			806			161			20.0	%		1,024			639			385			60.3	%
Other		1,108			1,071			37			3.5	%		1,113			1,280			(167	)		-13.0	%
Total non-interest expenses		23,635			23,488			147			0.6	%		25,771			27,446			(1,675	)		-6.1	%
Loss before income tax expense		(5,504	)		(6,113	)		609			-10.0	%
Income tax benefit		(894	)		(1,410	)		516			-36.6	%
Net loss		(4,610	)		(4,703	)		93			-2.0	%
Less: Net loss attributable to non-controlling interest		(2,934	)		(3,080	)		146			-4.7	%
Net loss attributable to JMP Group Inc.	$	(1,676	)	$	(1,623	)	$	(53	)		3.3	%
(Loss) income before income tax expense														(2,523	)		4,189			(6,712	)		-160.2	%
Income tax (benefit) expense														(812	)		381			(1,193	)		-313.1	%
Net (loss) income														(1,711	)		3,808			(5,519	)		-144.9	%
Less: Net income attributable to non-controlling interest														8			3,432			(3,424	)		-99.8	%
Net (loss) income attributable to JMP Group Inc.													$	(1,719	)	$	376		$	(2,095	)		-557.2	%

~~-36-~~- 37 -

(In thousands)
Nine Months Ended
September 30,

Change from
2011 to 2012

2012 2011 $ %
Revenues
Investment banking $ 38,010 $ 40,332 $ (2,322 ) -5.8 %
Brokerage 16,275 19,370 (3,095 ) -16.0 %
Asset management fees 10,721 14,893 (4,172 ) -28.0 %
Principal transactions 12,309 (106 ) 12,415 N/A
Gain on sale and payoff of loans 2,643 14,981 (12,338 ) -82.4 %
Net dividend (expense) income (25 ) 870 (895 ) -102.9 %
Other income 3,507 2,536 971 38.3 %
Non-interest revenues 83,440 92,876 (9,436 ) -10.2 %

Interest income 24,051 25,799 (1,748 ) -6.8 %
Interest expense (29,573 ) (26,460 ) (3,113 ) 11.8 %
Net interest expense (5,522 ) (661 ) (4,861 ) 735.4 %

Provision for loan losses (1,812 ) (477 ) (1,335 ) 279.9 %

Total net revenues after provision for loan losses 76,106 91,738 (15,632 ) -17.0 %

Non-interest expenses
Compensation and benefits 55,833 66,218 (10,385 ) -15.7 %
Administration 4,604 5,060 (456 ) -9.0 %
Brokerage, clearing and exchange fees 2,656 3,552 (896 ) -25.2 %
Travel and business development 2,435 2,568 (133 ) -5.2 %
Communication and technology 2,642 2,929 (287 ) -9.8 %
Professional fees 2,324 2,311 13 0.6 %
Impairment loss on purchased management contract - 700 (700 ) -100.0 %
Other 3,276 3,088 188 6.1 %
Total non-interest expenses 73,770 86,426 (12,656 ) -14.6 %
Income before income tax (benefit) expense 2,336 5,312 (2,976 ) -56.0 %
Income tax (benefit) expense (1,547 ) 2,354 (3,901 ) -165.7 %
Net income 3,883 2,958 925 31.3 %
Less: Net income (loss) attributable to noncontrolling interest 6,832 (475 ) 7,307 N/A
Net (loss) income attributable to JMP Group Inc. $ (2,949 ) $ 3,433 $ (6,382 ) -185.9 %

~~-37-~~

Three months ended ~~September 30, 2012,~~March 31, 2013, Compared to Three months ended ~~September 30, 2011~~March 31, 2012

Overview

Total net revenues after provision for loan losses ~~increased $0.7~~decreased $8.4 million, or ~~4.4%~~26.5%, from ~~$17.4~~$31.6 million for the quarter ended ~~September 30, 2011~~March 31, 2012 to ~~$18.1~~$23.2 million for the quarter ended ~~September 30, 2012,~~March 31, 2013, driven by ~~an increase~~a decrease in non-interest revenues of ~~$0.9~~$6.6 million.

Non-interest revenues ~~increased $0.9~~decreased $6.6 million, or ~~4.6%~~19.3%, from ~~$19.1~~$33.9 million for the quarter ended ~~September 30, 2011~~March 31, 2012 to ~~$20.0~~$27.3 million in the same period in ~~2012.~~2013. This ~~increase~~decrease was primarily due to a ~~$4.3~~$4.6 million decrease in principal ~~transaction losses~~transactions and a ~~$2.2~~$4.6 million ~~increase~~decrease in investment banking revenues, partially offset by a ~~$1.9~~$3.3 million ~~decrease~~increase in asset management ~~revenues, a $1.5 million decrease in brokerage revenues, and a $1.2 million decrease in the sale and payoff of loans.~~revenues.

Net interest expense increased ~~$0.2~~$0.9 million, or ~~11.5%~~46.1%, from ~~$1.6~~$2.2 million for the quarter ended ~~September 30, 2011~~March 31, 2012 to ~~$1.8~~$3.1 million for the same period in ~~2012.~~2013. The increase was primarily related to the net interest expense of JMP Credit, which increased from ~~$1.6~~$2.6 million loss for the quarter ended March 31, 2012 to $4.1 million for the quarter ended ~~September 30, 2011 to $2.7 million for the quarter ended September 30, 2012~~March 31, 2013 as a result of increased net liquidity discount amortization. In addition, interest expense increased $0.7 million due to the bond issued in January 2013. This increase in net interest expense was partially offset by an increase of net interest income at HCC, which increased from ~~a net expense of $3.9 thousand to net income of $0.8~~$0.4 million for the ~~quarters~~quarter ended ~~September 30, 2011 and~~March 31, 2012 ~~respectively.~~to $1.3 million for the quarter ended March 31, 2013.

Provision for loan losses ~~remained at~~increased $0.8 million from $0.1 million for ~~both~~ the ~~quarters~~quarter ended ~~September 30, 2011 and 2012.~~March 31, 2012 to $0.9 million for the quarter ended March 31, 2013. The increase was driven by a specific reserve from one non-accrual loan held at JMP Credit.

Total non-interest expenses ~~increased $0.1~~decreased $1.6 million, or ~~0.6%~~6.1%, from ~~$23.5~~$27.4 million for the quarter ended ~~September 30, 2011~~March 31, 2012 to ~~$23.6~~$25.8 million for the quarter ended ~~September 30, 2012,~~March 31, 2013, primarily due to ~~an increase~~a decrease in compensation and benefits of ~~$1.4~~$2.2 million, partially offset by ~~a $0.6 million decrease~~an increase in ~~administration expenses,~~professional fees of $0.4 million ~~decrease in brokerage, clearing~~ and ~~exchange increases, and $0.4 million decrease in~~ travel and business ~~development.~~development of $0.3 million.

Net ~~loss~~income attributable to JMP Group Inc. ~~increased $0.1~~decreased $2.1 million, or ~~3.3%~~557.2%, from ~~a $1.6~~$0.4 million ~~loss~~ after income tax ~~benefit~~expense of ~~$1.4~~$0.4 million for the quarter ended ~~September 30, 2011~~March 31, 2012 to a $1.7 million loss after income tax benefit of ~~$0.9~~$0.8 million for the quarter ended ~~September 30,~~March 31, 2013.

Adjusted Operating Net Income (Non-GAAP Financial Measure)

Management uses Adjusted Operating Net Income as a non-GAAP metric when evaluating the performance of JMP Group's core business strategy and ongoing operations, as management believes that this metric appropriately illustrates the operating results of JMP Group’s core operations and business activities. Adjusted Operating Net Income is derived from our segment reported results and is the measure of segment profitability on an after-tax basis used by management to evaluate our performance. This non-GAAP measure is presented to enhance investors’ overall understanding of our current financial performance. Additionally, management believes that Adjusted Operating Net Income is a useful measure because it allows for a better evaluation of the performance of JMP Group’s ongoing business and facilitates a meaningful comparison of the company’s results in a given period to those in prior and future periods. Moreover, the company utilized Adjusted Operating Net Income as a threshold for the vesting of performance-related RSUs granted as a component of 2012 and 2013 employee bonus compensation.

Management also reviews the Operating Net Income which differs from the Adjusted Operating Net Income, as it includes the non-cash gains and losses recognized by JMP Credit Corp due to the sale or payoff of loans originally included in the portfolio acquired by JMP Group in April 2009. As these items will be fully accounted for as of May 2013, Adjusted Operating Net Income will revert to Operating Net Income in future periods. Refer to p.41 for financial impact related to this adjustment.

Adjusted Operating Net Income should not be considered a substitute for results that are presented in a manner consistent with GAAP. A limitation of the non-GAAP financial measures presented is that, unless otherwise indicated, the adjustments concern gains, losses or expenses that JMP Group generally expects to continue to recognize, and the adjustment of these items should not be construed as an inference that these gains or expenses are unusual, infrequent or non-recurring. Therefore, management believes that both JMP Group’s GAAP measures of its financial performance and the respective non-GAAP measures should be considered together. Adjusted Operating Net Income may not be comparable to a similarly titled measure presented by other companies.

Adjusted Operating Net Income is a non-GAAP financial measure that adjusts the Company's GAAP net income as follows:

(i)

reverses non-cash stock-based compensation expense recognized under GAAP related to historical equity awards granted in prior periods (both at the time of JMP Group's May 2007 initial public offering and thereafter), as management evaluates performance by considering the full expense of equity awards granted in the period in which such compensation was awarded, even if the expense of an award will be recognized in future periods under GAAP;

(ii)

recognizes 100% of the cost of deferred compensation, including non-cash stock-based compensation expense, in the period for which such compensation was awarded, instead of recognizing such cost over the vesting period as required under GAAP, in order to match compensation expense with the actual period upon which the compensation was based;

- 38 -

(iii)

excludes the non-cash net amortization of liquidity discounts on loans held and asset-backed securities issued by JMP Credit Corporation, due to scheduled contractual principal repayments, which is not representative of the Company’s core operating results or core business activities;

(iv)

excludes non-cash amortization expense related to an intangible asset;

(v)

reverses net non-cash unrealized gains and losses on strategic equity investments and warrants;

(vi)

excludes non-cash unrealized mark-to-market gains or losses on the investment portfolio at HCC, due to its adoption of investment company accounting in preparation for its pending initial public offering as a business development company;

(vii)

excludes a non-recurring bargain purchase gain resulting from the acquisition of Cratos Capital Partners by JMP Credit Corporation;

(viii)

excludes non-cash gains or losses recognized by JMP Credit Corporation due to the sale or payoff of loans originally included in the portfolio acquired by JMP Group in April 2009, as these gains and losses provide a relatively volatile revenue stream that management believes is not indicative of the Company’s core businesses and ongoing operations;

(ix)

presents revenues and expenses on a basis that deconsolidates HGC, HGC II and HCC, which are certain investment funds that HCS manages, as we own a relatively small percentage of these funds, even though it consolidates them under GAAP; and

(x)

assumes a combined federal, state and local income tax rate of 38% for 2013 and 42% for 2012.

Discussed below is our adjusted operating net income by segment. This information is reflected in a manner utilized by management to assess the financial operations of the Company's various business lines.

- 39 -

	Three Months Ended March 31, 2013
(In thousands)	Broker-Dealer			Asset Management		Corporate Credit			Corporate			Eliminations			Total Segments
Revenues
Investment banking	$	12,178		$	-	$	-		$	-		$	(70	)	$	12,108
Brokerage		5,194			-		-			-			-			5,194
Asset management related fees		-			8,033		50			-			(184	)		7,899
Principal transactions		271			624		-			1,329			6			2,230
Gain on sale, payoff and mark-to-market of loans		-			-		843			-			-			843
Net dividend income		(8	)		257		-			-			-			249
Net interest (expense) income		(17	)		1		4,633			(329	)		-			4,288
Provision for loan losses		-			-		(68	)		-			-			(68	)
Adjusted net revenues		17,618			8,915		5,458			1,000			(248	)		32,743

Non-interest expenses
Non-interest expenses		15,915			7,540		(968	)		3,989			(178	)		26,298

Less: Non-controlling interest		-			-		176			-			-			176

Operating pre-tax net income		1,703			1,375		6,250			(2,989	)		(70	)		6,269

Income tax expense (assumed rate of 38%)		647			522		2,375			(1,136	)		(27	)		2,381

Adjusted operating net income	$	1,056		$	853	$	3,875		$	(1,853	)	$	(43	)	$	3,888

	Three Months Ended March 31, 2012
(In thousands)	Broker-Dealer			Asset Management		Corporate Credit			Corporate			Eliminations			Total Segments
Revenues
Investment banking	$	16,713		$	-	$	-		$	-		$	-		$	16,713
Brokerage		5,492			-		-			-			-			5,492
Asset management related fees		-			4,673		39			-			(170	)		4,542
Principal transactions		215			1,470		164			914			-			2,763
Gain on sale, payoff and mark-to-market of loans		-			-		284			-			-			284
Net dividend income		(14	)		77		-			-			-			63
Net interest (expense) income		48			4		4,607			11			-			4,670
Provision for loan losses		-			-		(93	)		-			-			(93	)
Adjusted net revenues		22,454			6,224		5,001			925			(170	)		34,434

Non-interest expenses
Non-interest expenses		18,995			4,767		(537	)		3,864			(170	)		26,919

Less: Non-controlling interest		-			-		135			-			-			135

Operating pre-tax net income		3,459			1,457		5,403			(2,939	)		-			7,380

Income tax expense (assumed rate of 42%)		1,453			612		2,269			(1,234	)		-			3,100

Adjusted operating net income	$	2,006		$	845	$	3,134		$	(1,705	)	$	-		$	4,280

- 40 -

The following table reconciles the adjusted operating net income to Total Segments adjusted operating pre-tax net income, to consolidated pre-tax net income (loss) attributable to JMP Group, and to consolidated net income (loss) attributable to JMP Group, for the three months ended March 31, 2013 and 2012.

(In thousands)	Three Months Ended March 31,
	2013			2012
Adjusted operating net income	$	3,888		$	4,280
Addback of Income tax expense (assumed rate of 38% for 2013 and 42% for 2012)		2,381			3,100
Total Segments adjusted operating pre-tax net income	$	6,269		$	7,380
Adjustments:
Stock compensation expense		137			-
Compensation expense - post-IPO RSUs		616			180
Deferred compensation program accounting adjustment		(1,124	)		-
Net unrealized loss (gain) on strategic equity investments and warrants		157			(321	)
Net amortization of liquidity discounts on loans and asset-backed securities issued		8,740			7,175
Unrealized HCC mark-to-market (gain) loss		(162	)		12
Gain (loss) and specific provision on loan portfolio acquired		436			(423	)
Total Consolidation Adjustments and Reconciling Items		8,800			6,623
Consolidated pre-tax net (loss) income attributable to JMP Group Inc.	$	(2,531	)	$	757

Income tax (benefit) expense		(812	)		381
Consolidated Net (Loss) Income attributable to JMP Group Inc.	$	(1,719	)	$	376

When evaluating the performance of JMP Group's core business strategy and ongoing operations, management also reviews the operating net income which include the non-cash gains and losses recognized by JMP Credit Corp due to the sale or payoff of loans originally included in the portfolio acquired by JMP Group in April 2009, as well as the provision for loan losses related to this portfolio of loans. The reconciling items are included in the line item gain (loss) and specific provisions on loan portfolio acquired in the table above. The reconciling items include the non-cash gains and losses for $0.2 million and $0.7 million, specific reserve on the loan from the portfolio of $0.9 million and zero, and the related compensation decreasing adjustment of $0.3 million and increasing adjustment of $0.3 million for the three months ended March 31, 2013 and 2012, respectively. Including these adjustments, the operating net income, after a 42% and 38% tax rate, is $4.5 million and $3.7 million for the three months ended March 31, 2012 and 2013, respectively.

Revenues

Investment Banking

Investment banking revenues ~~increased $2.2~~decreased $4.6 million, or ~~21.6%~~27.3%, from ~~$10.0~~$16.7 million for the quarter ended ~~September 30, 2011~~March 31, 2012 to ~~$12.2~~$12.1 million for the ~~quarter ended September 30, 2012.~~same period in 2013. As a percentage of total net revenues after provision for loan losses, investment banking revenues increased from ~~57.8%~~52.7% for the quarter ended ~~September 30, 2011~~March 31, 2012 to ~~67.4%~~52.1% for the quarter ended ~~September 30,~~March 31, 2013.

Our segment reported investment banking revenues, earned in our Broker-Dealer segment, decreased $4.6 million, or 27.6%, from $16.7 million for the quarter ended March 31, 2012 to $12.1 million for the same period in 2013. Our strategic advisory revenues decreased $2.6 million, or 64.8%, from $4.0 million for the quarter ended March 31, 2012 to $1.4 million for the quarter ended March 31, 2013. We executed one strategic advisory transaction in the quarter ended March 31, 2013 compared to five in the quarter ended March 31, 2012. Private capital markets and other transaction revenues decreased $2.1 million, or 93.4%, from $2.2 million for the quarter ended March 31, 2012 to $0.1 million for the same period in 2013. We executed no new transactions related to private capital markets and other transactions in the quarter ended March 31, 2013 compared to two in the same period in 2012. Public equity underwriting revenues ~~increased $2.0~~decreased $0.1 million, or ~~27.7%~~1.2%, from ~~$7.3~~$9.0 million for the quarter ended ~~September 30, 2011~~March 31, 2012 to ~~$9.3~~$8.9 million for the quarter ended ~~September 30, 2012.~~March 31, 2013. We executed 2833 and 1323 public equity underwriting transactions in the quarters ended ~~September 30,~~March 31, 2013 and 2012, ~~and 2011,~~ respectively. We acted as a lead manager on seven transactions in the quarter ended ~~September 30, 2012~~March 31, 2013 compared to ~~four~~three in the same period in ~~2011. Private capital markets~~2012. Our debt and ~~other transaction~~convertible revenues increased ~~$0.8~~$0.1 million, or ~~297.4%~~12.9%, from ~~$0.2~~$1.5 million for the quarter ended ~~September 30, 2011 to $1.0 million for the same period in 2012. We executed two transactions related to private capital markets and other transactions in the quarter ended September 30,~~March 31, 2012 ~~compared to zero in the same period in 2011. Our strategic advisory revenues decreased $0.5 million, or 21.1%, from $2.1 million for the quarter ended September 30, 2011~~ to $1.6 million for the quarter ended ~~September 30, 2012.~~March 31, 2013. We executed three strategic advisory transactions in both the quarters ended September 30, 2012 and 2011. Our debt and convertible revenues decreased $0.1 million, or 33.7%, from $0.4 million for the quarter ended September 30, 2011 to $0.3 million for the quarter ended September 30, 2012. We executed three10 debt and convertible transactions in the quarter ended ~~September 30, 2012~~March 31, 2013 compared to ~~one~~five in the same period in ~~2011.~~2012.

Brokerage Revenues

Brokerage revenues earned in our Broker-Dealer segment decreased ~~$1.5~~$0.3 million, or ~~22.1%~~5.4%, from ~~$6.9~~$5.5 million for the quarter ended ~~September 30, 2011~~March 31, 2012 to ~~$5.4~~$5.2 million for the quarter ended ~~September 30, 2012.~~March 31, 2013. The decrease was ~~primarily~~ the result of reduced ~~trading volume.~~commissions per share. Brokerage revenues decreased as a percentage of total net revenues after provision for loan losses, from ~~39.7%~~17.4% for the quarter ended ~~September 30, 2011~~March 31, 2012 to ~~29.6%~~22.3% for the quarter ended ~~September 30, 2012.~~March 31, 2013. On an adjusted basis, brokerage revenues were 15.9% for both the quarters ended March 31, 2012 and March 31, 2013 as a percentage of adjusted net revenue after provision for loan losses.

- 41 -

Asset Management Fees

(In thousands)	Three Months Ended March 31,
	2013		2012
Base management fees:
Fees reported as asset management fees	$	2,365	$	2,438
Fees reported as other income		262		709
Fees earned at HGC, HGC II and HCC		510		201
Total base management fees		3,137		3,348

Incentive fees:
Fees reported as asset management fees	$	4,386	$	1,036
Fees earned at HGC, HGC II and HCC		350		131
Total incentive fees		4,736		1,167

Other fee income:
Fundraising fees	$	26	$	27
Total other fee income		26		27

Asset management related fees:
Fees reported as asset management fees	$	6,751	$	3,474
Fees reported as other income		288		736
Fees earned at HGC, HGC II and HCC		860		332
Total Segment asset management related fee revenues	$	7,899	$	4,542

~~Asset~~Fees reported as asset management fees ~~decreased $1.9~~increased $3.3 million, or ~~34.1%~~94.3%, from ~~$5.7~~$3.5 million for the quarter ended ~~September 30, 2011~~March 31, 2012 to ~~$3.8~~$6.8 million for the quarter ended September 30, 2012. Asset management fees include base management fees and incentive fees for funds and CLOs under management. Base management fees were $2.5 million and $2.2 million for the quarters ended September 30, 2011 and September 30, 2012. Incentive fees decreased $1.6 million from $3.2 million for the quarter ended September 30, 2011 to $1.6 million for the same period in 2012, primarily related to a decrease of $2.2 million in incentive fees earned at Harvest Small Cap Partners, partially offset by increases of $0.3 million earned at HOP II and $0.2 million at HGC.March 31, 2013. As a percentage of total net revenues after provision for loan losses, asset management ~~fees decreased~~revenues increased from ~~32.8%~~11.0% for the quarter ended ~~September 30, 2011~~March 31, 2012 to ~~20.7%~~29.0% for the quarter ended March 31, 2013. Fees reported as other income decreased $0.4 million, or 60.9% from $0.7 million for the quarter ended March 31, 2012 to $0.3 million for the quarter ended March 31, 2013. As a percentage of total net revenues after provision for loan losses, other income decreased from 2.3% for the quarter ended March 31, 2012 to 1.2% for the same period in ~~2012.~~2013.

Total segment asset management related fees include base management fees and incentive fees for our funds and CLOs under management, as well as other income from fee-sharing arrangements with, and fees earned to raise capital for, third-party investment partnerships or funds. Adjusted asset management related fees are a non-GAAP financial measure that adjusts our total segment asset management related fees by reversing the elimination of those fees in the consolidation of HGC, HGC II and HCC. Adjusted asset management related fees are reconciled to the GAAP measure, total segment asset management fee revenues, in the table above. We believe that presenting adjusted asset management related fees is useful to investors as a means of assessing the performance of JMP Group's combined asset management activities, including its fundraising and other services for third parties. We believe that adjusted asset management-related fee revenues provide useful information by indicating the relative contributions of base management fees and performance-related incentive fees, thus facilitating a comparison of those fees in a given period to those in prior and future periods. We also believe that asset management-related fee revenue is a more meaningful measure than standalone asset management fees as reported, because asset management-related fee revenues represent the combined impact of JMP Group's various asset management activities on the Company's total net revenues.

~~-38-~~

Total segment asset management related fee revenue increased $3.4 million from $4.5 million for the quarter ended March 31, 2012 to $7.9 million for the quarter ended March 31, 2013. The increase was primarily attributed to incentive fees, partially offset by declines in base management fees. Total incentive fees increased $3.5 million from $1.2 million for the quarter ended March 31, 2012 to $4.7 million for the same period in 2013. The increase in incentive fees was driven by an increase of $3.6 million related to HSCP, partially offset by a decrease of incentive fees earned at HTP of $0.6 million. Base management fees were $3.3 million and $3.1 million for the quarters ended March 31, 2012 and 2013, respectively. On an adjusted basis, adjusted asset management related fees decreased from 13.2% for the quarter ended March 31, 2012 to 24.1% for the quarter ended March 31, 2013 as a percentage of adjusted net revenues after provision for loan losses.

Principal Transactions

Principal transaction ~~losses~~revenues decreased ~~$4.3~~$4.6 million ~~or 68.9%,~~ from ~~a $6.3~~$6.5 million ~~loss~~ for the quarter ended ~~September 30, 2011~~March 31, 2012 to ~~a $2.0~~$1.9 million ~~loss~~ for the same period in 2012. The difference primarily reflects fewer losses from equity and other securities, and higher revenues from investment partnerships. Losses from equity and other securities decreased $2.2 million from a $4.5 million loss for the quarter ended September 30, 2011 to a $2.3 million loss for the same period in 2012, driven by an increase of $2.1 million revenue related to our principal investment portfolio. Revenues from our family of hedge funds and funds of funds increased $1.6 million, from a $0.9 million loss for the quarter ended September 30, 2011 to a $0.7 million gain for the quarter ended September 30, 2012. This increase primarily reflects a $1.3 million increase related to HDP and a $0.4 million increase related to HAS. Losses from our warrants and other investments decreased $0.6 million from a $1.0 million loss for the quarter ended September 30, 2011 to a $0.4 million loss for the quarter ended September 30, 2012.2013. As a percentage of total net revenues after provision for loan losses, principal transaction revenues decreased from ~~36.2%~~20.5% for the quarter ended ~~September 30, 2011~~March 31, 2012 to ~~10.8%~~8.3% for the quarter ended March 31, 2013.

Total segment principal transaction revenues decreased $0.6 million from $2.8 million for the quarter ended March 31, 2012 to $2.2 million for the same period in ~~2012.~~2013. Total segment principal transaction revenues are a non-GAAP financial measure that aggregates our segment reported principal transaction revenues across each segment. We believe that presenting total segment principal transaction revenues is useful to investors as a means of assessing the performance of JMP Group’s combined investment activities. The principal transaction revenues for 2013 were primarily based in our Asset Management and Corporate segments, which collectively reflected $2.0 million of the $2.2 million principal transaction revenues. The principal transaction revenues for 2012 were primarily based in our Asset Management and Corporate segments, which collectively reflected $2.4 million of the $2.8 million principal transaction revenues. Total segment principal transaction revenues are reconciled to the GAAP measure, total principal transaction revenues, in the table below.

- 42 -

(In thousands)	Three Months Ended March 31,
	2013			2012

Equity and other securities excluding non-controlling interest	$	640		$	1,379
Warrants and other investments		350			(96	)
Investment partnerships		1,240			1,480
Total Segment principal transaction revenues		2,230			2,763
Operating adjustment addbacks		268			321
Non-controlling interest in HGC, HGC II and HCC		(581	)		3,400
Total principal transaction revenues	$	1,917		$	6,484

The decrease primarily reflects reduced revenue from our equity investment and other securities and investment partnerships, partially offset by an increase in revenue from warrants and other investments. Revenues from equity and other securities decreased $0.8 million from $1.4 million for the quarter ended March 31, 2012 to $0.6 million for the same period in 2013, driven primarily by a $0.7 million decrease in unrealized gains in our principal investment portfolio. Revenues from our investment partnerships decreased $0.3 million from $1.5 million for the quarter ended March 31, 2012 to $1.2 million for the quarter ended March 31, 2013. Revenues from warrants and other investments increased by $0.5 million from a loss of $0.1 million for the quarter ended March 31, 2012 to revenues of $0.4 million for the quarter ended March 31, 2013. On an adjusted basis, as a percentage of total net revenues after provision for loan losses, principal transaction revenues increased from 8.0% for the quarter ended March 31, 2012 to 6.8% for the quarter ended March 31, 2013.

Gain on Sale and Payoff of Loans and Mark-to-Market of Loans

Gain on sale, payoff and ~~payoff~~mark-to-market of loans ~~decreased $1.2~~were $1.0 million ~~or 85.1% from $1.4~~and $1.1 million for the quarters ended March 31, 2012 and 2013, respectively. At JMP Credit, during the quarter ended ~~September 30, 2011 to $0.2 million for the same period~~March 31, 2013, 33 loans were sold or paid off, resulting in ~~2012, with all of the gain generated at JMP Credit. The 2012 gains included~~ a ~~$0.4 million gain reflecting fair value adjustments of the loan held for sale. A $0.2 million~~total net gain ~~resulted from 16~~of $0.9 million. Of the total net gain, $0.3 million was related to 22 loan payoffs, where the borrowers repaid the loans at a premium to our carrying value. The remaining $0.6 million related to 11 loans, one of which was sold at a discount to our carrying value, seven of which were sold at par, which was a premium to our carrying ~~value. Partially offsetting this gain, 12 loans~~value, and three of which were sold, resulting in a total net loss of $0.4 million. The $0.2 million net loss of the sale and payoff of loans was primarily the result of activity from the loans acquired subsequent to the 2009 acquisition of Cratos. A gain of $45.5 thousand related to loans acquired in the acquisition.unfunded revolver commitments that expired. While we expect further gains from loan payoffs in future periods, these revenues are highly unpredictable as we are not actively marketing the loans ~~collateralizing~~collateralized by asset-backed securities for ~~sale and the remaining amount of discount from the 2009 acquisition continues to be reduced by the loan liquidity discount accretion even if there are no further gains to be recognized.~~sale. As a percentage of total net revenues after provision for loan losses, gain on sale, payoff and ~~payoff~~mark-to-market of loans ~~decreased~~increased from ~~7.9%~~3.3% for the quarter ended ~~September 30, 2011~~March 31, 2012 to ~~1.1%~~4.7% for the ~~same period~~quarter ended March 31, 2013.

Gain on sale, payoff and mark-to-market of loans was earned in ~~2012.~~our Corporate Credit segment. On a segment reporting basis, the gain on sale, payoff and mark-to-market of loans in our Corporate Credit segment excludes the $0.2 million and $0.7 million financial impact of gains or losses due to the sale or payoff of loans originally included in the Cratos CLO portfolio acquired by JMP Group in April 2009 for the three months ended March 31, 2013 and 2012, respectively. The segment reported gain on sale, payoff and mark-to-market of loans also excludes unrealized mark-to-market gains or losses on the investment portfolio at HCC. Our segment reported gain on sale, payoff and mark-to-market of loans in the Corporate Credit segment increased $0.5 million, from $0.3 million for the quarter ended March 31, 2012 to $0.8 million for the quarter ended March 31, 2013. Gain on sale, payoff and mark-to-market of loans increased from 0.8% for the quarter ended March 31, 2012 to 2.6% for the quarter ended March 31, 2013 as a percentage of total segment adjusted net revenues.

Net Dividend ~~Income~~Loss

Net dividend ~~income~~loss was ~~a loss of $1.5~~$8 thousand and ~~income~~$14 thousand for the quarters ended March 31, 2013 and 2012, respectively.

- 43 -

Net Interest Expense

(In thousands)	Three Months Ended March 31,
	2013			2012
Cratos CLO loan contractual interest income	$	4,940		$	5,344
Cratos CLO ABS issued contractual interest expense		(1,121	)		(1,334	)
Net Cratos CLO contractual interest		3,819			4,010

Bond Payable interest expense		(629	)		-

Other interest income		1,098			660
Total Segment net interest income	$	4,288		$	4,670

Cratos CLO loan liquidity discount accretion		504			881
Cratos CLO ABS liquidity discount amortization		(9,243	)		(8,056	)
Net Cratos CLO liquidity discount amortization		(8,739	)		(7,175	)

HCC interest income		1,786			527
HCC interest expense		(476	)		(172	)
Net HCC interest income		1,310			355

Total net interest expense	$	(3,141	)	$	(2,150	)

Net interest expense increased $0.9 million, or 46.1% from $2.2 million for the quarter ended March 31, 2012 to $3.1 million for the quarter ended March 31, 2013. Net interest expense included liquidity discount amortization of ~~$0.3~~$7.2 million and $8.7 million for the quarters ended ~~September 30,~~March 31, 2012 and ~~2011,~~2013, respectively. ~~For the quarter ended September 30, 2011, dividend income was primarily comprised~~Net interest expense also included bond payable interest expense of ~~dividend income from our investments in NYMT and in our principal investment portfolio.~~

~~Other Income~~

~~Other income decreased~~ $0.6 ~~million, or 64.4%, from $1.0~~ million for the quarter ended September 30, 2011 to $0.4 million for the quarter ended September 30, 2012. For both quarters other income was primarily comprised of revenues from fee sharing arrangements with, and fees earned to raise capital for, third-party investment partnerships or funds.

~~Interest Income~~

Interest income increased $0.8 million, or 11.8%, from $7.5 million for the quarter ended September 30, 2011 to $8.3 million for the same period in 2012. The increase primarily related to HCC, which recorded interest income of $12.7 thousand and $1.0 million for the quarters ended September 30, 2011 and 2012. JMP Credit recorded interest income of $7.2 million for both quarters ended September 30, 2012 and 2011.March 31, 2013. As a percentage of total net revenues after provision for loan losses, net interest ~~income~~expense increased from ~~42.9%~~6.8% for the quarter ended ~~September 30, 2011~~March 31, 2012 to ~~46.0%~~13.5% for the quarter ended ~~September 30, 2012.~~March 31, 2013.

Total segment net interest income decreased from $4.7 million for the quarter ended March 31, 2012 to $4.3 million for the quarter ended March 31, 2013. Our total segment net interest income excludes net amortization of liquidity discounts on loans and asset-backed securities issued and interest earned at HCC. Net interest income is earned primarily in our Corporate Credit segment, and largely reflects net Cratos CLO contractual interest. Total segment net interest income is a non-GAAP financial measure that aggregates our segment reported net interest income (expense) across each segment. We believe that presenting total segment net interest income is useful to investors as a means of assessing the performance of JMP Group’s combined credit activities. Total segment net interest income is reconciled to the GAAP measure, total net interest expense, in the table above. As a percentage of total segment adjusted net revenues, net interest income decreased from 13.6% for the quarter ended March 31, 2012 to 13.1% for the quarter ended March 31, 2013.

The following table sets ~~forth components of net interest expense for the quarters ended September 30, 2012 and 2011:~~

(In thousands)
Three Months Ended
September 30,

2012 2011
Cratos CLO loan contractual interest income $ 5,474 $ 5,379
Cratos CLO ABS issued contractual interest expense (1,311 ) (1,118 )
Net Cratos CLO contractual interest 4,163 4,261

Cratos CLO loan liquidity discount accretion 1,099 1,305
Cratos CLO ABS liquidity discount amortization (8,556 ) (7,639 )
Net Cratos CLO liquidity discount amortization (7,457 ) (6,334 )

HCC interest income 1,017 13
HCC interest expense (220 ) (17 )
Total net interest income (expense) $ 797 $ (4 )

Other interest income 743 754
Other interest expense - (250 )
Total net interest expense $ (1,754 ) $ (1,573 )

~~-39-~~

Total net interest expense increased from $1.6 million for the quarter ended September 30, 2011 to $1.8 million for the quarter ended September 30, 2012 primarily due to reduced loan liquidity discount accretion, offset by an increase in interest income related to HCC. As loans acquired in the 2009 acquisition of Cratos are sold or paid off, the remaining loan liquidity discount to accrete is reduced, thereby lowering the discount accretion and total net interest income.

~~The following tables set~~ forth contractual interest income and expense related to Cratos CLO loans and ABS issued and their weighted average contractual interest rates:

(In thousands)	Three Months Ended September, 2012														Three Months Ended March 2013
	Interest Income (Expense)			Average CLO Loan (CLO ABS Issued) Balance		Weighted Average Contractual Interest Rate			Weighted Average LIBOR			Spread to Weighted Average LIBOR			Interest Income (Expense)			Average CLO Loan (CLO ABS Issued) Balance		Weighted Average Contractual Interest Rate			Weighted Average LIBOR			Spread to Weighted Average LIBOR
Cratos CLO loan contractual interest income	$	5,474		$	428,186		5.00	%		0.45	%		4.55	%	$	4,940		$	416,494		4.75	%		0.30	%		4.45	%
Cratos CLO ABS issued contractual interest expense		(1,311	)		431,003		1.19	%		0.45	%		0.74	%		(1,121	)		431,003		1.04	%		0.30	%		0.74	%
Net Cratos CLO contractual interest	$	4,163		$	N/A		N/A			N/A			N/A		$	3,819		$	N/A		N/A			N/A			N/A

Delaware		20-1450327
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

Large accelerated filer	¨	Accelerated filer	x

Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

		Page
PART I.	FINANCIAL INFORMATION	4

Item 1.	Financial Statements - JMP Group Inc.	4
	Consolidated Statements of Financial Condition - ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012 (Unaudited)	45
	Consolidated Statements of Operations - For the Three months Ended March 31, 2013 and ~~Nine Months Ended September 30,~~ 2012 ~~and 2011~~ (Unaudited)	6
	Consolidated Statements of Comprehensive Income - For the Three months Ended March 31, 2013 and ~~Nine Months Ended September 30,~~ 2012 ~~and 2011~~ (Unaudited)	7
	Consolidated Statement of Changes in Equity - For the ~~Nine Months~~Three months Ended ~~September 30, 2012~~March 31, 2013 (Unaudited)	7
	Consolidated Statements of Cash Flows - For the ~~Nine Months~~Three months Ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~ (Unaudited)	8
	Notes to Consolidated Financial Statements (Unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2430
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5152
Item 4.	Controls and Procedures	5253

PART II.	OTHER INFORMATION	53

Item 1.	Legal Proceedings	53
Item 1A.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 3.	Defaults Upon Senior Securities	54
Item 4.	Mine Safety Disclosures	54
Item 5.	Other Information	54
Item 6.	Exhibits	54

SIGNATURES		55

EXHIBIT INDEX		56

	September 30, 2012			December 31, 2011			March 31, 2013			December 31, 2012

Assets
Cash and cash equivalents	$	59,690		$	70,363		$	41,451		$	67,075
Restricted cash and deposits (includes cash on deposit with clearing broker of $150 and $255 at September 30, 2012 and December 31, 2011, respectively)		63,461			48,440
Restricted cash and deposits (includes cash on deposit with clearing broker of $150 at both March 31, 2013 and December 31, 2012)								69,125			69,813
Receivable from clearing broker		1,113			1,138			1,270			1,117
Investment banking fees receivable, net of allowance for doubtful accounts of zero at September 30, 2012 and December 31, 2011		9,254			2,539
Investment banking fees receivable, net of allowance for doubtful accounts of zero at March 31, 2013 and December 31, 2012								9,660			5,148
Marketable securities owned, at fair value		14,482			24,309			17,829			14,347
Incentive fee receivable		477			2,097			4,059			2,945
Other investments (of which $75,785 and $51,517 are recorded at fair value at September 30, 2012 and December 31, 2011, respectively)		76,288			51,706
Other investments (of which $119,559 and $80,945 are recorded at fair value at March 31, 2013 and December 31, 2012, respectively)								119,858			81,161
Loans held for sale		3,219			2,957			2,528			3,134
Small business loans, net of allowance for loan losses		24,645			7,477
Small business loans								40,375			38,934
Loans collateralizing asset-backed securities issued, net of allowance for loan losses		402,241			410,770			404,319			401,003
Interest receivable		1,575			1,358			1,387			1,229
Fixed assets, net		2,810			2,285			2,542			2,663
Deferred tax assets		16,650			26,221			12,200			13,087
Other assets		8,577			8,961			23,350			8,206
Total assets	$	684,482		$	660,621		$	749,953		$	709,862

Liabilities and Equity
Liabilities:
Marketable securities sold, but not yet purchased, at fair value	$	11,383		$	10,921		$	12,289		$	11,567
Accrued compensation		32,517			38,143			9,234			20,256
Asset-backed securities issued		406,461			381,556			424,699			415,456
Interest payable		647			651			1,216			588
Note payable		22,657			19,222			6,552			10,486
Line of credit								22,227			28,227
Bond payable								46,000			-
Deferred tax liability		12,736			23,214			5,289			9,775
Other liabilities		24,271			30,430			30,494			26,203
Total liabilities		510,672			504,137			558,000			522,558

Redeemable Non-controlling Interest		161			50			161			161
Commitments and Contingencies
JMP Group Inc. Stockholders' Equity
Common stock, $0.001 par value, 100,000,000 shares authorized; 22,780,052 and 22,409,644 shares issued at September 30, 2012 and December 31, 2011, respectively; 22,705,994 and 21,947,353 shares outstanding at September 30, 2012 and December 31, 2011, respectively		23			22
Common stock, $0.001 par value, 100,000,000 shares authorized; 22,780,052 shares issued at both March 31, 2013 and December 31, 2012; 22,609,370 and 22,591,649 shares outstanding at March 31, 2013 and December 31, 2012								23			23
Additional paid-in capital		126,632			132,944			129,118			128,318
Treasury stock, at cost, 74,058 and 462,291 shares at September 30, 2012 and December 31, 2011, respectively		(420	)		(3,011	)
Treasury stock, at cost, 170,682 and 188,403 shares at March 31, 2013 and December 31, 2012, respectively								(926	)		(1,007	)
Accumulated other comprehensive loss		(68	)		(102	)		(41	)		(55	)
Accumulated deficit		(5,376	)		(148	)		(2,936	)		(408	)
Total JMP Group Inc. stockholders' equity		120,791			129,705			125,238			126,871
Nonredeemable Non-controlling Interest		52,858			26,729			66,554			60,272
Total equity		173,649			156,434			191,792			187,143
Total liabilities and equity	$	684,482		$	660,621		$	749,953		$	709,862

	September 30, 2012		December 31, 2011		March 31, 2013		December 31, 2012

Restricted cash	$	50,800	$	36,137	$	55,329	$	56,968
Loans held for sale		3,219		2,957		2,528		3,134
Loans collateralizing asset-backed securities issued, net of allowance for loan losses		402,241		410,770		404,319		401,003
Interest receivable		1,164		1,191		1,021		1,062
Deferred tax assets		4,367		8,567		3,444		3,387
Other assets		55		40		19		32
Total assets of consolidated VIE	$	461,846	$	459,662	$	466,660	$	465,586

Asset-backed securities issued		406,461		381,556		424,699		415,456
Interest payable		589		601		508		542
Deferred tax liability		11,761		21,791		5,021		8,437
Other liabilities		3,253		2,042		3,823		3,573
Total liabilities of consolidated VIE	$	422,064	$	405,990	$	434,051	$	428,008

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended ~~September 30, 2012~~March 31, 2013 OR


¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from to

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2012			2011			2012			2011			2013			2012

Revenues
Investment banking	$	12,218		$	10,048		$	38,010		$	40,332		$	12,107		$	16,659
Brokerage		5,371			6,898			16,275			19,370			5,194			5,492
Asset management fees		3,755			5,694			10,721			14,893			6,751			3,474
Principal transactions		(1,955	)		(6,290	)		12,309			(106	)		1,917			6,484
Gain on sale and payoff of loans		204			1,373			2,643			14,981
Net dividend (expense) income		(2	)		322			(25	)		870
Gain on sale and payoff of loans and mark-to-market of loans														1,089			1,047
Net dividend expense														(8	)		(14	)
Other income		365			1,026			3,507			2,536			288			736
Non-interest revenues		19,956			19,071			83,440			92,876			27,338			33,878

Interest income		8,333			7,451			24,051			25,799			8,158			7,458
Interest expense		(10,087	)		(9,024	)		(29,573	)		(26,460	)		(11,299	)		(9,608	)
Net interest expense		(1,754	)		(1,573	)		(5,522	)		(661	)		(3,141	)		(2,150	)

Provision for loan losses		(71	)		(123	)		(1,812	)		(477	)		(949	)		(93	)

Total net revenues after provision for loan losses		18,131			17,375			76,106			91,738			23,248			31,635

Non-interest expenses
Compensation and benefits		17,358			15,970			55,833			66,218			19,605			21,771
Administration		1,645			2,246			4,604			5,060			1,331			1,250
Brokerage, clearing and exchange fees		902			1,275			2,656			3,552			887			896
Travel and business development		746			1,107			2,435			2,568			958			702
Communications and technology		909			1,013			2,642			2,929			853			908
Occupancy		814			774			2,352			2,216			804			817
Professional fees		967			806			2,324			2,311			1,024			639
Depreciation		227			192			642			529			226			198
Impairment loss on purchased management contract		-			-			-			700
Other		67			105			282			343			83			265
Total non-interest expenses		23,635			23,488			73,770			86,426			25,771			27,446
Income (loss) before income tax expense		(5,504	)		(6,113	)		2,336			5,312
(Loss) income before income tax expense														(2,523	)		4,189
Income tax (benefit) expense		(894	)		(1,410	)		(1,547	)		2,354			(812	)		381
Net (loss) income		(4,610	)		(4,703	)		3,883			2,958			(1,711	)		3,808
Less: Net (loss) income attributable to nonredeemable non-controlling interest		(2,934	)		(3,080	)		6,832			(475	)
Less: Net income attributable to nonredeemable non-controlling interest														8			3,432
Net (loss) income attributable to JMP Group Inc.	$	(1,676	)	$	(1,623	)	$	(2,949	)	$	3,433		$	(1,719	)	$	376

Net (loss) income attributable to JMP Group Inc. per common share:
Basic	$	(0.07	)	$	(0.07	)	$	(0.13	)	$	0.15		$	(0.08	)	$	0.02
Diluted	$	(0.07	)	$	(0.07	)	$	(0.13	)	$	0.15		$	(0.08	)	$	0.02

Dividends declared per common share	$	0.035		$	0.03		$	0.10		$	0.075		$	0.035		$	0.030

Weighted average common shares outstanding:
Basic		22,737			22,354			22,564			22,152			22,607			22,180
Diluted		22,830			22,493			22,977			22,634			22,607			23,273

	JMP Group Inc. Stockholders' Equity																							JMP Group Inc. Stockholders' Equity
	Common Stock					Treasury			Additional Paid-In			Accumulated			Accumulated Other Comprehensive			Nonredeemable Non-controlling			Total			Common Stock			Treasury			Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Nonredeemable Non-controlling
	Shares			Amount		Stock			Capital			Deficit			Loss			Interest			Equity			Shares	Amount		Stock			Capital		Deficit			Loss			Interest			Total Equity
Balance, December 31, 2011		22,410		$	22	$	(3,011	)	$	132,944		$	(148	)	$	(102	)	$	26,729		$	156,434
Net income (loss)		-			-		-			-			(2,949	)		-			6,832			3,883
Balance, December 31, 2012																								22,780	$	23	$	(1,007	)	$	128,318	$	(408	)	$	(55	)	$	60,272		$	187,143
Net loss																								-		-		-			-		(1,719	)		-			8			(1,711	)
Additonal paid-in capital - stock-based compensation		-			-		-			(9,319	)		-			-			-			(9,319	)	-		-		-			726		-			-			-			726
Cash dividends paid to shareholders		-			-		-			-			(2,279	)		-			-			(2,279	)
Dividends and dividend equivalents declared on common stock and restricted stock units																								-		-		-			-		(809	)		-			-			(809	)
Purchases of shares of common stock for treasury		-			-		(4,839	)		-			-			-			-			(4,839	)	-		-		(82	)		-		-			-			-			(82	)
Reissuance of shares of common stock from treasury		-			-		7,430			267			-			-			-			7,697		-		-		163			74		-			-			-			237
Common stock issued		402			1		-			2,740			-			-			-			2,741
Retirement of shares		(32	)		-		-			-			-			-			-			-
Distributions to non-controlling interest holders		-			-		-			-			-			-			(5,272	)		(5,272	)	-		-		-			-		-			-			(1,780	)		(1,780	)
Unrealized gain on cash flow hedge, net of tax		-			-		-			-			-			34			-			34		-		-		-			-		-			14			-			14
Capital contributions from non-controlling interest holders (1)		-			-		-			-			-			-			24,569			24,569		-		-		-			-		-			-			8,054			8,054
Balance, September 30, 2012		22,780		$	23	$	(420	)	$	126,632		$	(5,376	)	$	(68	)	$	52,858		$	173,649
Balance, March 31, 2013																								22,780	$	23	$	(926	)	$	129,118	$	(2,936	)	$	(41	)	$	66,554		$	191,792

Cash flows from financing activities:
Proceeds from bond issuance		46,000			-
Payments of debt issuance costs		(1,694	)		-
Repayments of borrowing on line of credit		(6,000	)		7,737
Repayment of note payable		(3,934	)		(2,184	)
Dividends and dividend equivalents declared on common stock and restricted stock units		(809	)		(684	)
Purchases of shares of common stock for treasury		(82	)		(4,227	)
Capital contributions of redeemable non-controlling interest holders		-			36
Capital contributions of nonredeemable non-controlling interest holders		7,317			12,146
Distributions to non-controlling interest shareholders		(1,780	)		(2,648	)
Net cash provided by financing activities		39,018			10,176
Net decrease in cash and cash equivalents		(25,624	)		(23,668	)
Cash and cash equivalents, beginning of period		67,075			70,363
Cash and cash equivalents, end of period	$	41,451		$	46,695

Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	1,436		$	1,561
Cash paid during the period for taxes	$	2,848		$	671

Non-cash investing and financing activities:
Issuance of shares of common stock from treasury related to vesting of restricted stock units and exercises of stock options	$	163		$	7,238


Cash flows from financing activities:
Proceeds from borrowing on line of credit, net of repayment		9,987			-
Repayment of note payable		(6,552	)		(4,803	)
Cash dividends paid to stockholders		(2,279	)		(1,673	)
Purchases of shares of common stock for treasury		(4,839	)		(5,037	)
Capital contributions of redeemable non-controlling interest holders		110			11
Capital contributions of nonredeemable non-controlling interest holders		24,565			9,254
Distributions to non-controlling interest shareholders		(5,272	)		(1,107	)
Excess tax benefit related to stock-based compensation		-			(335	)
Net cash provided by (used in) financing activities		15,720			(3,690	)
Net decrease in cash and cash equivalents		(10,673	)		(3,394	)
Cash and cash equivalents, beginning of period		70,363			71,114
Cash and cash equivalents, end of period	$	59,690		$	67,720

Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	4,669		$	4,009
Cash paid during the period for taxes	$	839		$	6,005

Non-cash investing and financing activities:
Issuance of shares of common stock from treasury related to vesting of restricted stock units and exercises of stock options	$	7,430		$	5,530

	At March 31, 2013
(In thousands)	Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	41,451	$	41,451	$		$		$	41,451
Restricted cash and deposits		69,125		69,125						69,125
Marketable securities owned		17,829		17,829		-		-		17,829
Other investments		119,858		633		59,375		59,551		119,559
Loans held for sale		2,528		-		2,617		-		2,617
Small business loans		40,375		-		3,552		36,823		40,375
Loans collateralizing asset-backed securities issued, net of allowance for loan losses		404,319		-		411,688		4,836		416,524
Long term receivable		1,298		-		-		1,585		1,585
Total assets:	$	696,783	$	129,038	$	477,232	$	102,795	$	709,065

Liabilities:
Marketable securities sold, but not yet purchased	$	12,289	$	12,289	$	-	$	-	$	12,289
Asset-backed securities issued		424,699		-		412,681		-		412,681
Bond payable		46,000				46,000				46,000
Note payable		6,552		-		6,552		-		6,552
Line of credit		22,227		-		22,227		-		22,227
Total liabilities:	$	511,767	$	12,289	$	487,460	$	-	$	499,749

	At September 30, 2012
(In thousands)			Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Total
Assets:
Marketable securities owned	$	14,482		14,482		-		-		14,482
Other investments		75,785		1,424		29,229		45,132		75,785
Loans held for sale (1)		3,219		-		3,236		-		3,236
Small business loans, net of allowance for loan losses (2), (3)		24,645		-		5,915		19,812		25,727
Loans collateralizing asset-backed securities issued, net of allowance for loan losses (2), (4)		402,241		-		406,416		10,948		417,364
Long term receivable (5)		1,372		-		-		1,597		1,597
Total assets:	$	521,744	$	15,906	$	444,796	$	77,489	$	538,191

Liabilities:
Marketable securities sold, but not yet purchased	$	11,383	$	11,383	$	-	$	-	$	11,383
Asset-backed securities issued (2)		406,461		-		397,805		-		397,805
Note payable (2)		22,657		-		22,657		-		22,657
Total liabilities:	$	440,501	$	11,383	$	420,462	$	-	$	431,845

	At December 31, 2012
(In thousands)	Carrying Value		Fair Value
			Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	67,075	$	67,075	$	-	$	-	$	67,075
Restricted cash and deposits		69,813		69,813						69,813
Marketable securities owned		14,347		14,347		-		-		14,347
Other investments		81,161		865		28,137		51,943		80,945
Loans held for sale		3,134		-		3,134		-		3,134
Small business loans		38,934		-		3,487		35,447		38,934
Loans collateralizing asset-backed securities issued, net of allowance for loan losses		401,003		-		406,313		5,716		412,029
Long term receivable		1,342		-		-		1,647		1,647
Total assets:	$	676,809	$	152,100	$	441,071	$	94,753	$	687,924

Liabilities:
Marketable securities sold, but not yet purchased	$	11,567	$	11,567	$	-	$	-	$	11,567
Asset-backed securities issued		415,456		-		404,341		-		404,341
Note payable		10,486		-		10,486		-		10,486
Line of credit		28,227		-		28,227		-		28,227
Total liabilities:	$	465,736	$	11,567	$	443,054	$	-	$	454,621

	At December 31, 2011
(In thousands)			Fair Value
	Carrying Value		Level 1		Level 2		Level 3		Total
Assets:
Marketable securities owned	$	24,309	$	24,309	$	-	$	-	$	24,309
Other investments		51,517		3,434		24,072		24,011		51,517
Loans held for sale (1)		2,957		-		2,979		-		2,979
Small business loans, net of allowance for loan losses (2), (3)		7,477		-		3,790		4,000		7,790
Loans collateralizing asset-backed securities issued, net of allowance for loan losses (2), (4)		410,770		-		405,386		14,769		420,155
Total assets:	$	497,030	$	27,743	$	436,227	$	42,780	$	506,750

Liabilities:
Marketable securities sold, but not yet purchased	$	10,921	$	10,921	$	-	$	-	$	10,921
Asset-backed securities issued (2)		381,556		-		375,902		-		375,902
Note payable (2)		19,222		-		19,222		-		19,222
Total liabilities:	$	411,699	$	10,921	$	395,124	$	-	$	406,045

Dollars in thousands	Fair Value at March 31, 2013		Valuation Technique	Unobservable Input	Range (Weighted Average)

Investments in Funds of Funds managed by HCS (1)	$	117	Net Asset Value	N/A		N/A
Limited Partner in Private Equity Fund (1)	$	2,558	Net Asset Value	N/A		N/A
Warrants and other held at JMPS	$	296	Black-Scholes Option Model	Annualized volatility of credit	16.5%	-	30.1%	(17.0%)
				Risk adjusted discount factor	0.0%	-	75.0%	(4.8%)
Warrants and equity held at HCC	$	3,102	Market comparable companies	EBITDA multiples	1.2x	-	9.6x	(5.8x)
			Income	Weighted average cost of capital	8.0%	-	20.0%	(16.2%)
Small business loans	$	36,823	Bond yield	Risk adjusted discount factor	8.5%	-	19.2%	(13.5%)
			Market comparable companies	EBITDA multiples	1.2x	-	9.6x	(5.8x)
			Income	Weighted average cost of capital	8.0%	-	20.0%	(16.2%)
				Expected principal recovery		100%
Equity securities in HGC, HGC II and JMP Capital	$	48,478	Market comparable companies	Revenue multiples	2.0x	-	8.3x	(4.5x)
				EBITDA multiples	9.5x	-	26.0x	(17.9x)
				Discount for lack of marketability	30%	-	40%	(33%)
			Market transactions	Revenue multiples	3.2x	-	6.7x	(4.8x)
				EBITDA multiples	11.7x	-	19.5x	(15.9x)
				Control premium		25%
Forward purchase contract	$	5,000	Market comparable companies	Revenue multiples	7.2x	-	8.8x	(7.8x)
				Billing multiples	6.4x	-	7.8x	(7.0x)
				Discount for lack of marketability		30 %
			Market transactions	Revenue multiples		6.3x
				Control premium		25%

Dollars in thousands	Fair Value at December 31, 2012		Valuation Technique	Unobservable Input	Range (Weighted Average)

Investments in Funds of Funds managed by HCS (1)	$	109	Net Asset Value	N/A		N/A
Limited Partner in Private Equity Fund (1)	$	2,332	Net Asset Value	N/A		N/A
Warrants and Other held at JMPS	$	413	Black-Scholes Option Model	Annualized volatility of credit	16.2%	-	28.9%	(16.8%)
Warrants and equity held at HCC	$	2,577	Market comparable companies	EBITDA multiples	3.8x	-	9.3x	(8.5x)
			Income	Weighted average cost of capital	10.0%	-	18.0%	(15.6%)
Small business loans	$	35,447	Bond yield	Risk adjusted discount factor	8.5%	-	16.2%	(13.2%)
			Market comparable companies	EBITDA multiples	3.8x	-	9.3x	(8.5x)
			Income	Weighted average cost of capital	10.0%	-	18.0%	(15.6%)
				Expected principal recovery	0.0%	-	100.0%	(100.0%)
Equity securities in HGC and JMP Capital	$	41,075	Market comparable companies	Revenue multiples	2.1x	-	7.3x	(3.5x)
				EBITDA multiples	8.8x	-	22.9x	(15.8x)
				Discount for lack of marketability	30%	-	40%	(34%)
			Market transactions	Revenue multiples	3.2x	-	11.7x	(5.2x)
				EBITDA multiples	11.7x	-	19.8x	(15.4x)
				Control premium		25%
Forward purchase contract	$	5,437	Market comparable companies	Revenue multiples	6.7x	-	8.1x	(7.3x)
				Billing multiples	6.0x	-	7.2x	(6.5x)
				Discount for lack of marketability		30%
			Market transactions	Revenue multiples		6.3x
				Control premium		25%

(In thousands)	Cash Flow (CF)
	September 30, 2012		December 31, 2011
Moody's rating:
B1 - B3		6,000		4,000
NR		20,459		4,000
Total:	$	26,459	$	8,000

Internal rating:
Rating 2		26,459		8,000
Total:	$	26,459	$	8,000

Performance:
Performing	$	26,459	$	8,000
Total:	$	26,459	$	8,000

	Three Months Ended September 30, 2012																		Three Months Ended March 31, 2013
(In thousands)	Principal			Allowance for Loan Losses			Liquidity Discount			Credit Discount			Deferred Loan Fees			Carrying Value, Net			Principal			Allowance for Loan Losses			Liquidity Discount			Credit Discount		Deferred Loan Fees			Carrying Value, Net
Impaired Loans
Balance at beginning of period	$	3,298		$	(1,524	)	$	(836	)	$	(938	)	$	-		$	-		$	3,517		$	(1,022	)	$	(720	)	$	-	$	(16	)	$	1,759
Repayments		(54	)		-			-			-			-			(54	)		(11	)		-			-			-		-			(11	)
Accretion of discount		-			-			54			-			-			54			-			-			-			-		2			2
Provision for loan losses																				-			(870	)		-			-		-			(870	)
Balance at end of period	$	3,244		$	(1,524	)	$	(782	)	$	(938	)	$	-		$	-		$	3,506		$	(1,892	)	$	(720	)	$	-	$	(14	)	$	880

Non-impaired Loans
Balance at beginning of period	$	431,790		$	(2,122	)	$	(5,468	)	$	-		$	(6,851	)	$	417,349		$	410,483		$	(2,105	)	$	(2,332	)	$	-	$	(6,802	)	$	399,244
Purchases / funding		37,492			-			-			-			(1,321	)		36,171			46,968			-			-			-		(807	)		46,161
Repayments		(8,312	)		-			-			-			-			(8,312	)		(6,402	)		-			-			-		-			(6,402	)
Accretion of discount		-			-			1,045			-			525			1,570			-			-			504			-		699			1,203
Provision for loan losses		-			65			-			-			-			65			-			(79	)		-			-		-			(79	)
Sales and payoff		(44,842	)		-			-			-			240			(44,602	)		(37,356	)		-			43			-		625			(36,688	)
Balance at end of period	$	416,128		$	(2,057	)	$	(4,423	)	$	-		$	(7,407	)	$	402,241		$	413,693		$	(2,184	)	$	(1,785	)	$	-	$	(6,285	)	$	403,439

(In thousands)	September 30, 2012
	Level 1		Level 2		Level 3		Total
Other investments:
General partner investment in hedge funds	$	-	$	28,479	$	-	$	28,479
General partner investment in funds of funds		-		-		105		105
Total general partner investment in funds		-		28,479		105		28,584
Limited partner investment in private equity fund		-		-		2,444		2,444
Warrants and other		-		-		669		669
Equity securities in HGC and JMP Capital		1,424		750		41,914		44,088
Total other investments	$	1,424	$	29,229	$	45,132	$	75,785

(In thousands)	December 31, 2011
	Level 1		Level 2		Level 3		Total
Other investments:
General partner investment in hedge funds	$	-	$	24,072	$	-	$	24,072
General partner investment in funds of funds		-		-		102		102
Total general partner investment in funds		-		24,072		102		24,174
Limited partner investment in private equity fund		-		-		2,585		2,585
Warrants and other		-		-		617		617
Equity securities in HGC and JMP Capital		3,426		-		20,707		24,133
Interest rate cap		8		-		-		8
Total other investments	$	3,434	$	24,072	$	24,011	$	51,517

(In thousands)	Balance as of June 30, 2012		Purchases		Sales		Total gains (losses) - realized and unrealized included in earnings (1)			Transfers out of Level 3			Balance as of September 30, 2012		Unrealized gains/(losses) included in earnings related to assets still held at reporting date			Balance as of December 31, 2012		Purchases		Sales			Total gains (losses) - realized and unrealized included in earnings (1)			Transfers out of Level 3		Balance as of March 31, 2013		Unrealized gains/(losses) included in earnings related to assets still held at reporting date
General partner investment in funds of funds	$	104		-		-		1			-		$	105	$	1		$	109		-		-			8			-	$	117	$	8
Limited partner investment in private equity fund		2,741		25		-		(322	)		-			2,444		(322	)		2,332		-		-			226			-		2,558		226
Warrants		782		-		-		(113	)		-			669		(113	)
Equity securities in HGC and JMP Capital		43,400		2,771		-		(3,957	)		(300	)		41,914		(3,957	)
Warrants and other held at JMPS																			413		-		-			(117	)		-		296		(117	)
Warrants and other held at HCC																			2,577		100		-			425			-		3,102		425
Small business loans																			35,447		1,389		(43	)		30			-		36,823		30
Equity securities in HGC, HGC II and JMP Capital																			41,075		7,782		-			(379	)		-		48,478		(379	)
Forward purchase contract																			5,437		-		-			(437	)		-		5,000		(437	)
Total Level 3 assets	$	47,027	$	2,796	$	-	$	(4,391	)	$	(300	)	$	45,132	$	(4,391	)	$	87,390	$	9,271	$	(43	)	$	(244	)	$	-	$	96,374	$	(244	)

(In thousands)	Balance as of June 30, 2011		Purchases		Sales		Total losses - realized and unrealized included in earnings (1)			Transfers in/(out) of Level 3		Balance as of September 30, 2011		Unrealized losses included in earnings related to assets still held at reporting date
General partner investment in funds of funds	$	105	$	-	$	-	$	(3	)	$	-	$	102	$	(3	)
Limited partner investment in private equity fund		3,184		32		-		(292	)		-		2,924		(292	)
Warrants		1,061		-		-		(623	)		-		438		(623	)
Equity securities in HGC and JMP Capital		17,200		-		-		(2,616	)		-		14,584		(2,616	)
Total Level 3 assets	$	21,550	$	32	$	-	$	(3,534	)	$	-	$	18,048	$	(3,534	)

(In thousands)	Balance as of December 31, 2011		Purchases		Sales			Total gains (losses) - realized and unrealized included in earnings (1)			Transfers in/(out) of Level 3			Balance as of March 31, 2012		Unrealized gains/(losses) included in earnings related to assets still held at reporting date
General partner investment in funds of funds	$	102	$	-	$	-		$	3		$	-		$	105	$	3
Limited partner investment in private equity fund		2,585		-		-			40			-			2,625		40
Warrants and other held at JMPS		617		-		-			188			-			805		188
Small business loans		3,902		4,450		(109	)		(44	)					8,199		(44	)
Equity securities in HGC and JMP Capital		20,707		4,402		-			2,767			(913	)		26,963		2,767
Forward purchase contract		-		5,000		-			-			-			5,000		-
Total Level 3 assets	$	27,913	$	13,852	$	(109	)	$	2,954		$	(913	)	$	43,697	$	2,954

(In thousands)	Balance as of December 31, 2010		Purchases		Sales		Total losses - realized and unrealized included in earnings (1)			Transfers out of Level 3			Balance as of September 30, 2011		Unrealized losses included in earnings related to assets still held at reporting date
General partner investment in funds of funds	$	102	$	-	$	-	$	-		$	-		$	102	$	-
Limited partner investment in private equity fund		3,063		32		-		(171	)		-			2,924		(171	)
Warrants and other		532		15		-		(109	)		-			438		(109	)
Equity securities in HGC and JMP Capital		11,245		8,342		-		(880	)		(4,123	)		14,584		(880	)
Total Level 3 assets	$	14,942	$	8,389	$	-	$	(1,160	)	$	(4,123	)	$	18,048	$	(1,160	)

	Fair Value				Gains (Losses) Three Months Ended
(In thousands)	March 31, 2013		December 31, 2012		March 31, 2013			March 31, 2012
Assets:
Nonaccrual loans	$	880	$	5,716	$	(870	)	$	-
Loans held for sale		2,617		3,134		88			(365	)
Total assets:	$	3,497	$	8,850	$	(782	)	$	(365	)

(In thousands)	Three Months Ended						Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Balance at beginning of period	$	(757	)	$	-		$	(216	)	$	-
Provision for loan losses		(137	)		(32	)		(677	)		(32	)
Balance at end of period	$	(894	)	$	(32	)	$	(893	)	$	(32	)

	Three Months Ended September 30, 2011
(In thousands)	Principal			Allowance for Loan Losses			Liquidity Discount			Credit Discount			Deferred Loan Fees			Carrying Value, Net
Impaired Loans
Balance at beginning of period	$	14,058		$	(582	)	$	(5,951	)	$	(4,763	)	$	(54	)	$	2,708
Repayments		(79	)		-			13			-			-			(66	)
Balance at end of period	$	13,979		$	(582	)	$	(5,938	)	$	(4,763	)	$	(54	)	$	2,642

Non-impaired Loans
Balance at beginning of period	$	435,107		$	(1,764	)	$	(14,929	)	$	-		$	(5,504	)	$	412,910
Purchases / funding		61,837			-			-			-			(891	)		60,946
Repayments		(4,940	)		-			-			-			-			(4,940	)
Accretion of discount		-			-			1,292			-			464			1,756
Provision for loan losses		-			(91	)		-			-			-			(91	)
Sales and payoff		(44,554	)		-			1,183			-			395			(42,976	)
Transfers to/from non-impaired loans, net		(4,686	)		-			1,292			-			175			(3,219	)
Balance at end of period	$	442,764		$	(1,855	)	$	(11,162	)	$	-		$	(5,361	)	$	424,386

	Nine Months Ended September 30, 2012																		Three Months Ended March 31, 2012
(In thousands)	Principal			Allowance for Loan Losses			Liquidity Discount			Credit Discount			Deferred Loan Fees			Carrying Value, Net			Principal			Allowance for Loan Losses			Liquidity Discount			Credit Discount			Deferred Loan Fees			Carrying Value, Net
Impaired Loans
Balance at beginning of period	$	10,538		$	(2,277	)	$	(5,924	)	$	(1,335	)	$	(54	)	$	948		$	10,538		$	(2,277	)	$	(5,924	)	$	(1,335	)	$	(54	)	$	948
Purchases / funding		5			-			-			-			-			5			5			-			-			-			-			5
Repayments		(132	)		-			-			-			-			(132	)		(23	)		-			-			-			-			(23	)
Accretion of discount		-			-			125			-			13			138			-			-			17			-			-			17
Write-off/ restructuring		(7,167	)		1,753			5,017			397			41			41
Provision for loan losses		-			(1,000	)		-			-			-			(1,000	)
Balance at end of period	$	3,244		$	(1,524	)	$	(782	)	$	(938	)	$	-		$	-		$	10,520		$	(2,277	)	$	(5,907	)	$	(1,335	)	$	(54	)	$	947

Non-impaired Loans
Balance at beginning of period	$	426,416		$	(1,922	)	$	(8,535	)	$	-		$	(6,137	)	$	409,822		$	426,416		$	(1,922	)	$	(8,535	)	$	-		$	(6,137	)	$	409,822
Purchases / funding		126,579			-			-			-			(4,042	)		122,537			47,496			-			-			-			(1,715	)		45,781
Repayments		(25,321	)		-			-			-			-			(25,321	)		(8,461	)		-			-			-			-			(8,461	)
Accretion of discount		-			-			3,149			-			1,488			4,637			-			-			863			-			560			1,423
Provision for loan losses		-			(135	)		-			-			-			(135	)		-			(93	)		-			-			-			(93	)
Sales and payoff		(111,546	)		-			963			-			1,284			(109,299	)		(39,063	)		-			963			-			421			(37,679	)
Balance at end of period	$	416,128		$	(2,057	)	$	(4,423	)	$	-		$	(7,407	)	$	402,241		$	426,388		$	(2,015	)	$	(6,709	)	$	-		$	(6,871	)	$	410,793

	Nine Months Ended September 30, 2011
(In thousands)	Principal			Allowance for Loan Losses			Liquidity Discount			Credit Discount			Deferred Loan Fees			Carrying Value,Net
Impaired Loans
Balance at beginning of period	$	13,867		$	(582	)	$	(2,557	)	$	(8,558	)	$	-		$	2,170
Purchases / funding		19			-			-			-			-			19
Repayments		(273	)		-			13			-			-			(260	)
Accretion of discount		-			-			99			-			-			99
Sales and payoff		(6,583	)		-			659			3,795			-			(2,129	)
Transfers to/from non-impaired loans, net		6,949			-			(4,152	)		-			(54	)		2,743
Balance at end of period	$	13,979		$	(582	)	$	(5,938	)	$	(4,763	)	$	(54	)	$	2,642

Non-impaired Loans
Balance at beginning of period	$	439,491		$	(1,410	)	$	(33,037	)	$	-		$	(6,451	)	$	398,593
Purchases / funding		223,416			-			-			-			(2,444	)		220,972
Repayments		(21,452	)		-			-			-			-			(21,452	)
Accretion of discount		-			-			7,418			-			1,226			8,644
Provision for loan losses		-			(445	)		-			-			-			(445	)
Sales and payoff		(187,056	)		-			9,013			-			2,079			(175,964	)
Transfers to/from impaired loans, net		(6,949	)		-			4,152			-			54			(2,743	)
Transfers to loans held for sale		(4,686	)					1,292						175			(3,219	)
Balance at end of period	$	442,764		$	(1,855	)	$	(11,162	)	$	-		$	(5,361	)	$	424,386

(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
September 30, 2012
Impaired loans with an allowance recorded	$	1,525	$	3,244	$	1,525
Impaired loans with no related allowance recorded		-		-		-
	$	1,525	$	3,244	$	1,525
December 31, 2011
Impaired loans with an allowance recorded	$	3,223	$	10,537	$	2,277
Impaired loans with no related allowance recorded		-		-		-
	$	3,223	$	10,537	$	2,277

(In thousands)	Cash Flow (CF)				Enterprise Value (EV)				Total Loans Collateralizing Asset-Backed Securities Issued				Held for Sale - Cash Flow (CF)				Loans Collateralizing Asset-Backed Securities Issued - Cash Flow				Held for Sale - Cash Flow (CF)
	September 30,		December 31,		September 30,		December 31,		September 30,		December 31,		September 30,		December 31,		March 31,		December 31,		March 31,		December 31,
	2012		2011		2012		2011		2012		2011		2012		2011		2013		2012		2013		2012

Moody's rating:
Baa1 - Baa3	$	4,909	$	4,951	$	-	$	-	$	4,909	$	4,951	$	-	$	-	$	10,901	$	5,883	$	-	$	-
Ba1 - Ba3		125,169		131,743		-		-		125,169		131,743		-		-		119,531		129,796		-		-
B1 - B3		271,542		271,770		-		1,958		271,542		273,728		-		-		273,335		263,390		-		-
Caa1 - Caa3		4,202		4,546		-		-		4,202		4,546		3,219		2,957		4,628		5,061		-		3,134
Ca																		-		-		2,528		-
Total:	$	405,822	$	413,010	$	-	$	1,958	$	405,822	$	414,968	$	3,219	$	2,957	$	408,395	$	404,130	$	2,528	$	3,134

Internal rating:
Performing	$	392,400	$	397,033	$	-	$	1,958	$	392,400	$	398,991	$	-	$	-
Moderate		11,897		12,754		-		-		11,897		12,754		-		-
Watchlist (1)		1,525		3,223		-		-		1,525		3,223		3,219		2,957
Non-Accrual (1)		-		-		-		-		-		-		-		-
2																	$	398,860	$	392,208	$	-	$	-
3																		1,874		11,922		-		-
4 (1)																		4,889		-		2,528		3,134
5 (1)																		2,772		-		-		-
Total:	$	405,822	$	413,010	$	-	$	1,958	$	405,822	$	414,968	$	3,219	$	2,957	$	408,395	$	404,130	$	2,528	$	3,134

Performance:
Performing	$	404,297	$	409,787	$	-	$	1,958	$	404,297	$	411,745	$	3,219	$	2,957	$	405,623	$	401,349	$	2,528	$	3,134
Non-performing		1,525		3,223		-		-		1,525		3,223		-		-		2,772		2,781		-		-
Total:	$	405,822	$	413,010	$	-	$	1,958	$	405,822	$	414,968	$	3,219	$	2,957	$	408,395	$	404,130	$	2,528	$	3,134

(In thousands)	Contractual Payments Due
Year Ending December 31,
2012		2,184
2013		8,736
2014		1,750
	$	12,670

(In thousands)
Year Ending December 31,	Contractual Payments Due
2013	$	6,552
	$	6,552

(In millions)	As of March 31, 2013
	Notes Originally Issued		Outstanding Principal Balance			Liquidity Discount			Net Outstanding Balance			Interest Rate Spread to LIBOR				Ratings (Moody's /S&P) (1)
Class A Senior Secured Floating Rate Revolving Notes due 2021	$	326.0	$	315.8		$	(2.3	)	$	313.5		0.26%	-	0.29	%	Aaa/AAA
Class B Senior Secured Floating Rate Notes due 2021		30.0		30.0			(0.6	)		29.4			0.50%			Aaa/AAA
Class C Senior Secured Deferrable Floating Rate Notes due 2021		35.0		35.0			(1.3	)		33.7			1.10%			Aaa/AA+
Class D Secured Deferrable Floating Rate Notes due 2021		34.0		34.0			(1.3	)		32.7			2.40%				A1/A-
Class E Secured Deferrable Floating Rate Notes due 2021		30.0		30.0			(1.3	)		28.7			5.00%			Ba1/BB
Total secured notes sold to investors	$	455.0	$	444.8		$	(6.8	)	$	438.0
Unsecured subordinated notes due 2021		45.0		45.0			(39.9	)		5.1
Total notes for the CLO I offering	$	500.0	$	489.8		$	(46.7	)	$	443.1
Consolidation elimination		N/A		(58.8	)		40.4			(18.4	)
Total asset-backed securities issued		N/A	$	431.0		$	(6.3	)	$	424.7

(In millions)	As of September 30, 2012															As of December 31, 2012
	Notes Originally Issued		Outstanding Principal Balance			Liquidity Discount			Net Outstanding Balance			Interest Rate Spread to LIBOR			Ratings (Moody's /S&P) (1)	Notes Originally Issued		Outstanding Principal Balance			Liquidity Discount			Net Outstanding Balance			Interest Rate Spread to LIBOR			Ratings (Moody's /S&P) (1)
Class A Senior Secured Floating Rate Revolving Notes due 2021	$	326.0	$	315.8		$	(8.7	)	$	307.1		0.26%	-	0.29%	Aaa/AAA	$	326.0	$	315.8		$	(5.5	)	$	310.3			0.26% - 0.29	%	Aaa/AAA
Class B Senior Secured Floating Rate Notes due 2021		30.0		30.0			(2.2	)		27.8				0.50%	Aaa/AA+		30.0		30.0			(1.4	)		28.6			0.50	%	Aaa/AAA
Class C Senior Secured Deferrable Floating Rate Notes due 2021		35.0		35.0			(5.2	)		29.8				1.10%	Aa3/AA-		35.0		35.0			(3.3	)		31.7			1.10	%	Aa3/AA+
Class D Secured Deferrable Floating Rate Notes due 2021		34.0		34.0			(5.2	)		28.8				2.40%	A3/BBB+		34.0		34.0			(3.3	)		30.7			2.40	%	A3/A-
Class E Secured Deferrable Floating Rate Notes due 2021		30.0		30.0			(5.0	)		25.0				5.00%	Ba2/BB-		30.0		30.0			(3.2	)		26.8			5.00	%	Ba2/BB
Total secured notes sold to investors	$	455.0	$	444.8		$	(26.3	)	$	418.5						$	455.0	$	444.8		$	(16.7	)	$	428.1
Unsecured subordinated notes due 2021		45.0		45.0			(39.9	)		5.1							45.0		45.0			(39.9	)		5.1
Total notes for the CLO I offering	$	500.0	$	489.8		$	(66.2	)	$	423.6						$	500.0	$	489.8		$	(56.6	)	$	433.2
Consolidation elimination		N/A		(58.8	)		41.7			(17.1	)						N/A		(58.8	)		41.1			(17.7	)
Total asset-backed securities issued		N/A	$	431.0		$	(24.5	)	$	406.5							N/A	$	431.0		$	(15.5	)	$	415.5

(In millions)	As of December 31, 2011
	Notes Originally Issued		Outstanding Principal Balance			Liquidity Discount			Net Outstanding Balance			Interest Rate Spread to LIBOR			Ratings (Moody's /S&P) (1)
Class A Senior Secured Floating Rate Revolving Notes due 2021	$	326.0	$	315.8		$	(17.6	)	$	298.2		0.26%	-	0.29%	Aaa/AAA
Class B Senior Secured Floating Rate Notes due 2021		30.0		30.0			(4.4	)		25.6				0.50%	Aaa/AA+
Class C Senior Secured Deferrable Floating Rate Notes due 2021		35.0		35.0			(10.5	)		24.5				1.10%	Aa3/AA-
Class D Secured Deferrable Floating Rate Notes due 2021		34.0		34.0			(10.5	)		23.5				2.40%	A3/BBB+
Class E Secured Deferrable Floating Rate Notes due 2021		30.0		30.0			(10.0	)		20.0				5.00%	Ba2/BB-
Total secured notes sold to investors	$	455.0	$	444.8		$	(53.0	)	$	391.8
Unsecured subordinated notes due 2021		45.0		45.0			(39.9	)		5.1
Total notes for the CLO I offering	$	500.0	$	489.8		$	(92.9	)	$	396.9
Consolidation elimination		N/A		(58.8	)		43.5			(15.3	)
Total asset-backed securities issued		N/A	$	431.0		$	(49.4	)	$	381.6

(In thousands)	Three Months Ended September 30, 2012							Nine Months Ended September 30, 2012							Three Months Ended March 31, 2013
	Principal		Liquidity Discount			Net		Principal		Liquidity Discount			Net		Principal		Liquidity Discount			Net

Balance at beginning of period	$	431,003	$	(33,097	)	$	397,906	$	431,003	$	(49,447	)	$	381,556	$	431,003	$	(15,548	)	$	415,455
Amortization of discount		-		8,555			8,555		-		24,905			24,905		-		9,244			9,244
Balance at end of period	$	431,003	$	(24,542	)	$	406,461	$	431,003	$	(24,542	)	$	406,461	$	431,003	$	(6,304	)	$	424,699

(In thousands)	Three Months Ended September 30, 2011							Nine Months Ended September 30, 2011							Three Months Ended March 31, 2012
	Principal		Liquidity Discount			Net		Principal		Liquidity Discount			Net		Principal		Liquidity Discount			Net

Balance at beginning of period	$	431,003	$	(64,923	)	$	366,080	$	431,003	$	(79,681	)	$	351,322	$	431,003	$	(49,447	)	$	381,556
Amortization of discount		-		7,639			7,639		-		22,397			22,397		-		8,056			8,056
Balance at end of period	$	431,003	$	(57,284	)	$	373,719	$	431,003	$	(57,284	)	$	373,719	$	431,003	$	(41,391	)	$	389,612