FORM 10 - Q

                          SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C. 20549

         (Mark One)

          [X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
                        OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the Quarterly Period Ended September 30, 1996

                                          OR

          [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
                        OF THE SECURITIES EXCHANGE ACT OF 1934

                For the transition period from --------- to ---------

                            Commission File Number 0-20829

                             DIAMOND HOME SERVICES, INC.
                (Exact name of registrant as specified in its charter)

                  DELAWARE                                   36-3886872
       (State or other jurisdiction of                     (I.R.S. Employer
        incorporation or organization)                    Identification No.)

                     222 Church Street, Woodstock, Illinois 60098
             (Address of principal executive offices, including zip code)

                                    (815) 334-1414
                 (Registrant's telephone number, including area code)
                  -------------------------------------------------

     Indicate by check mark whether the registrant (1) has filed all reports
     required to be filed by section 13 or 15 (d) of the Securities Exchange Act
     of 1934 during the preceding 12 months (or for such shorter period that the
     registrant was required to file such reports), and (2) has been subject to
     such filing requirements for the past 90 days.  Yes (X) No ( )

     Indicate the number of shares outstanding of each of the issuer's classes
     of Common Stock, as of the latest practicable date:  9,074,900 shares of
     Common Stock outstanding as of October 31, 1996.


                            PART I. FINANCIAL INFORMATION

     ITEM 1. FINANCIAL STATEMENTS
     <TABLE>
                                                  DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES

                                                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                                                   (Unaudited)
     <CAPTION>
                                                             Three Months Ended                Nine Months Ended
                                                                September 30                     September 30
                                                               1996            1995             1996              1995
                                                                     (In thousands, except per share data)
          <S>                                               <C>             <C>             <C>                <C>    
          NET SALES . . . . . . . . . . . . . . . . .       $46,492         $36,459         $114,974           $89,955
          Cost of sales . . . . . . . . . . . . . . .        25,962          21,097           64,096            52,125
          GROSS PROFIT  . . . . . . . . . . . . . . .        20,530          15,412           50,878            37,830
          Operating expenses:
             Selling, general, and administrative            16,245          12,619           42,151            32,851
             expense  . . . . . . . . . . . . . . . .
             Operating interest expense   . . . . . .             -               -              234                 -
             Amortization expense   . . . . . . . . .           135             126              396               376
          OPERATING INCOME  . . . . . . . . . . . . .         4,150           2,667            8,097             4,603
          Interest income(expense), net . . . . . . .           122            (96)               26             (434)
          Income before income taxes  . . . . . . . .         4,272           2,571            8,123             4,169
          Income tax provision  . . . . . . . . . . .         1,681           1,039            3,264             1,744
          NET INCOME  . . . . . . . . . . . . . . . .        $2,591          $1,532           $4,859            $2,425

          INCOME PER SHARE  . . . . . . . . . . . . .          $.28            $.25             $.67              $.39

          Weighted average number of common shares and
          equivalent outstanding  . . . . . . . . . .         9,198           6,250            7,296             6,250


         See accompanying notes.

         </TABLE>


         <TABLE>
                                                  DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES

                                                      CONDENSED CONSOLIDATED BALANCE SHEETS

         <CAPTION>
                                                                                SEPTEMBER 30,           DECEMBER 31,
                                                                                     1996                   1995
                                                                                  (UNAUDITED) 
                                                                                                (In thousands)
           
          <S>                                                                        <C>                    <C>      
                           ASSETS

          Current assets:
             Cash and cash equivalents  . . . . . . . . . . . . . . . . . . .       $8,516                 $4,715
             Accounts receivable  . . . . . . . . . . . . . . . . . . . . . .        7,675                  3,389
             Finance company accounts receivable  . . . . . . . . . . . . . .       18,357                    542
             Prepaids and other current assets  . . . . . . . . . . . . . . .        1,393                    567
             Deferred income taxes  . . . . . . . . . . . . . . . . . . . . .          895                    404
             Total current assets   . . . . . . . . . . . . . . . . . . . . .       36,836                  9,617
          Net property and equipment  . . . . . . . . . . . . . . . . . . . .        1,507                  1,437
          Intangible assets, net  . . . . . . . . . . . . . . . . . . . . . .       17,043                 17,395
          Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . .        1,089                  1,051
          Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        2,146                    643
          Total assets  . . . . . . . . . . . . . . . . . . . . . . . . . . .      $58,621                $30,143

        LIABILITIES AND COMMON STOCKHOLDERS' EQUITY

          Current liabilities:
             Accounts payable and accrued liabilities   . . . . . . . . . . .      $14,730                $13,077
             Due to stockholders  . . . . . . . . . . . . . . . . . . . . . .          554                  1,354
             Income taxes   . . . . . . . . . . . . . . . . . . . . . . . . .          732                      -
          Total current liabilities . . . . . . . . . . . . . . . . . . . . .       16,016                 14,431
          Long-term liabilities:
             Warranty and retention   . . . . . . . . . . . . . . . . . . . .        7,144                  4,617
             Due to stockholders  . . . . . . . . . . . . . . . . . . . . . .        1,222                  4,862
          Total long-term liabilities . . . . . . . . . . . . . . . . . . . .        8,366                  9,479
          Preferred stock, at redemption price  . . . . . . . . . . . . . . .            -                  1,400
          Common stockholders' equity . . . . . . . . . . . . . . . . . . . .       34,239                  4,833
          Total liabilities and common stockholders' equity . . . . . . . . .      $58,621                $30,143

         See accompanying notes.

         </TABLE>

         <TABLE>
                                                  DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES

                                                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                   (UNAUDITED)
         <CAPTION>

                                                                                              NINE MONTHS ENDED
                                                                                                 SEPTEMBER 30
                                                                                                (IN THOUSANDS)
                                                                                            1996             1995  
         <S>                                                                                <C>              <C>   
         Operating activities:
           Net income  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        $4,859           $2,425
           Adjustments to reconcile net income to net cash provided by (used in)
             operating activities:
             Depreciation and amortization . . . . . . . . . . . . . . . . . . . . .           599              524
             Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . .          (529)          (1,044)
                Changes in operating assets and liabilities:
                 Accounts receivable and other assets  . . . . . . . . . . . . . . .        (5,927)          (1,390)
                 Accounts payable and accrued expenses   . . . . . . . . . . . . . .         1,653            5,275
                 Warranty and retention  . . . . . . . . . . . . . . . . . . . . . .         2,527            1,758
           Net cash provided by operating activities . . . . . . . . . . . . . . . .         3,182            7,548
         Investing activities:
           Consumer finance loans originated . . . . . . . . . . . . . . . . . . . .       (22,603)               -
           Consumer finance loans repaid . . . . . . . . . . . . . . . . . . . . . .         4,788                -
           Capital expenditures  . . . . . . . . . . . . . . . . . . . . . . . . . .          (273)            (778)
           Net cash used in investing activities . . . . . . . . . . . . . . . . . .       (18,088)            (778)
         Financing activities: 
           Issuance of Common Stock, net of offering expenses  . . . . . . . . . . .        33,147                -
           Common Stock special dividend . . . . . . . . . . . . . . . . . . . . . .        (8,600)               -
           Preferred Stock redemption  . . . . . . . . . . . . . . . . . . . . . . .        (1,400)               -
           Borrowings (repayment) on bank line of credit, net  . . . . . . . . . . .             -           (7,283)
           Payments due to stockholders  . . . . . . . . . . . . . . . . . . . . . .        (4,440)          (1,920)
           Net cash provided by (used in) financing activities . . . . . . . . . . .        18,707           (9,203)
           Net increase (decrease) in cash and cash equivalents  . . . . . . . . . .         3,801           (2,433)
           Cash and cash equivalents at beginning of period  . . . . . . . . . . . .         4,715            5,048
           Cash and cash equivalents at end of period  . . . . . . . . . . . . . . .         8,516           $2,615

           Supplemental cash flow disclosure:
             Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          $738             $233
             Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . .        $3,061           $2,099

         See accompanying notes.

         </TABLE>


                     DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES

                 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                     (Unaudited)
                          (TABULAR AMOUNTS ARE IN THOUSANDS)

     1.   BASIS OF PRESENTATION

          The accompanying unaudited condensed consolidated financial
     statements have been prepared in accordance with generally accepted
     accounting principles for interim financial information and Article 10 of
     Regulation S-X. Accordingly, they do not include all of the information and
     footnotes required by generally accepted accounting principles for complete
     financial statements. In the opinion of management, all adjustments
     (consisting of normal recurring accruals) considered necessary for a fair
     presentation have been included. Operating results for the three-month and
     nine-month periods ended September 30, 1996 are not necessarily indicative
     of the results that may be expected for the year ending December 31, 1996.
     For further information, refer to the consolidated financial statements
     included in the Company's Registration Statement on Form S-1, as amended
     (Reg. No. 333-10973).

          The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect the amounts reported in the financial statements
     and accompanying  notes.  Actual results could differ from those estimates.


     2.   SIGNIFICANT ACCOUNTING POLICIES

          Credit participation fees paid by Sears and its affiliates are
     recognized in the period the receivables are placed with Sears and its
     affiliates, without recourse to the Company, utilizing the discounted
     present value of the contractual payment stream. Approximately 71% of the
     total credit participation fee earned is received in cash during the first
     three years.  Credit participation fees paid by other third-party finance
     companies on receivables placed with these third-party finance companies,
     without recourse to the Company, are recognized when received. 

     3.   CONSUMER FINANCING

          The Company's consumer finance subsidiary, Marquise Financial
     Services, Inc. ("Marquise Financial"), began operations on November 20,
     1995. Marquise Financial provides consumer financing through direct
     consumer loans to customers of the Company. Finance receivables are payable
     through monthly installments and may be secured or unsecured. Marquise
     Financial's first billings for monthly installments to consumers occurred
     on January 9, 1996. Interest income from finance receivables is recognized
     using the interest method. Accrual of interest income on finance
     receivables is suspended when a loan is contractually delinquent for 90
     days or more and resumes when the loan becomes contractually current. No
     interest income was recorded during 1995. Provisions for credit losses are
     charged to income in amounts sufficient to maintain the allowance at a
     level considered adequate to cover the losses of principal and interest in
     the existing portfolio. It is Marquise Financial's policy to charge-off
     finance receivables when they are 210 days past due.

          The following summarized condensed financial information for Marquise
     Financial is before eliminations of intercompany transactions in
     consolidation:

     <TABLE>
     <CAPTION>

                                                                              September 30,             December 31,
                                                                                  1996                      1995
          <S>                                                                       <C>                       <C>  
          ASSETS:
             Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . .             $180                        -
             Financing receivables  . . . . . . . . . . . . . . . . . . .           18,357                     $542
             Other current assets . . . . . . . . . . . . . . . . . . . .               46                        5
             Intangibles, net . . . . . . . . . . . . . . . . . . . . . .              133                      122
                                                                                   $18,716                     $669
          LIABILITIES AND STOCKHOLDER'S EQUITY:
             Due to Diamond . . . . . . . . . . . . . . . . . . . . . . .          $18,528                     $442
             Other  . . . . . . . . . . . . . . . . . . . . . . . . . . .               68                        3
             Total Liabilities  . . . . . . . . . . . . . . . . . . . . .           18,596                      445
             Total stockholder's equity . . . . . . . . . . . . . . . . .              120                      224
             Total liabilities and stockholder's equity . . . . . . . . .          $18,716                     $669

          RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED AND NINE MONTHS ENDED SEPTEMBER 30, 1996, RESPECTIVELY:

             Financing income . . . . . . . . . . . . . . . . . . . . . .             $726                   $1,219
             General and administrative expenses  . . . . . . . . . . . .              726                    1,393
             Loss before tax benefit  . . . . . . . . . . . . . . . . . .                0                     (174)
             Income tax benefit . . . . . . . . . . . . . . . . . . . . .                0                       70
             Net loss . . . . . . . . . . . . . . . . . . . . . . . . . .               $0                     $104

          CASH FLOW FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996:

             Net cash used in operating activities  . . . . . . . . . . .                                     ($104)
             Net cash used in investing activities  . . . . . . . . . . .                                   (17,867)
             Net cash provided by financing activities  . . . . . . . . .                                    18,151
             Cash at September 30, 1996 . . . . . . . . . . . . . . . . .                                      $180

      </TABLE>


     4.  STOCKHOLDERS' EQUITY

          At September 30, 1996, and December 31, 1995, the Company had
     9,074,900 and 6,249,950 common shares, respectively, issued and
     outstanding.

          The Company has reserved 620,000 shares of Common Stock in respect to
     the 1996 Incentive Stock Option Plan. On June 19, 1996, the Company issued
     275,000 options to purchase Common Stock at an exercise price of $13 per
     share. At September 30, 1996, 68,750 options to purchase Common Stock were
     exercisable.  Through September 30, 1996, no options to purchase Common
     Stock were exercised or cancelled.

     5.  COMMON STOCK OFFERING

          In June 1996, the Company issued 2,824,950 shares of common stock
     (including underwriters' over-allotment option) at $13 per share in its
     initial public offering. Proceeds from the offering, net of underwriting
     commissions and related expenses totaling $3.7 million, were $33.1 million.
     Following the offering, the Company had 9,074,900 common shares issued and
     outstanding.  A portion of the offering proceeds were used to pay a $8.6
     million special dividend to pre-offering stockholders.

          In September 1996, the Company's largest stockholder, Globe Building
     Materials, Inc. ("Globe"), sold 750,000 shares of common stock at $29 per
     share in a public offering.  The Company did not receive any proceeds from
     the public offering.


     ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS

     RESULTS OF OPERATIONS
     THIRD QUARTER 1996 COMPARED TO THIRD QUARTER 1995

     Net sales

          Net sales increased $10.0 million, or 27.5%, from $36.5 million for
     the third quarter 1995 to $46.5 million for the third quarter 1996.
     Approximately 46.6% of the increase in net sales was attributable to
     roofing and gutter products and services, net sales of which increased $4.8
     million to $30.5 million for the third quarter 1996. Approximately 26.1% of
     the increase in net sales was attributable to fencing products and
     services, net sales of which increased $2.6 million to $8.2 million for the
     third quarter 1996. Approximately 13.2% of the increase in net sales was
     attributable to garage door and entry door products and services, net sales
     of which increased $1.3 million to $6.4 million for the third quarter of
     1996. The balance, 14.1% of the increase in net sales, was due to credit
     participation fee income of $685 thousand from Sears and its affiliates ,
     which was payable beginning January 1, 1996, on installed sales financed by
     Sears and its affiliates during the quarter, and interest income of $726
     thousand on receivables financed by the Company's newly-formed consumer
     finance subsidiary, Marquise Financial. The third quarter increases in net
     sales were due primarily to an increase in the number of installations as
     the Company increased the average number of its sales associates during the
     comparative period from 640 to 752; and, new in 1996, credit participation
     fee and finance income.

     Gross Profit

          Gross profit increased $5.1 million, or 33.2%, from $15.4 million, or
     42.3% of net sales, for the third quarter 1995 to $20.5 million, or 44.2%
     of net sales, for the third quarter 1996. The increased gross profit
     resulted from an increased number of installations, an increase in balance
     of sales to higher margin products and services, primarily fencing, the
     credit participation fee income from Sears and its affiliates and interest
     income from Marquise Financial. The license fee incurred to Sears increased
     $979 thousand, or 25.1%, from $3.9 million, or 10.7% of net installed
     sales, for the third quarter 1995 to $4.9 million, or 10.5% of net
     installed sales, for the third quarter 1996. The dollar increase in the
     license fee incurred to Sears for the third quarter 1996 was due to the
     increase in sales volume. Sears and the Company entered into a new three-
     year license agreement effective January 1, 1996. Among other things, the
     license agreement provides for a fixed license fee, at the March 1995
     license fee rate, to be charged during the term of the license agreement.
     Gross profit before the Sears license fee, credit participation fee and
     interest income increased $4.7 million, or 24.3%, from $19.3 million, or
     53.0% of net installed sales, for the third quarter 1995 to $24.0 million,
     or 53.2% of net installed sales, for the third quarter 1996. The unit costs
     of materials, installation labor and warranty expense remained relatively
     constant during the quarterly period. 

     Selling, General and Administrative Expenses

          Selling, general and administrative expenses increased $3.6 million,
     or 28.7%, from $12.6 million in the third quarter 1995 to $16.2 million in
     the third quarter 1996 and, as a percentage of net sales, increased from
     34.6% to 34.9%. The dollar increase in selling, general and administrative
     expenses resulted primarily from expenses associated with increased sales
     volume, the increased number of sales associates and expenses related to
     the hiring of personnel to support the expansion of the infrastructure of
     the Company's core sales and installation business including the expansion
     of Marquise Financial. Direct advertising expense increased $525 thousand,
     or 33.1%, from $1.6 million for the third quarter 1995 to $2.1 million for
     the third quarter 1996; as a percentage of net sales, direct advertising
     expense increased from 4.3% for the third quarter 1995 to 4.5% for the
     third quarter 1996, reflecting advertising price increases partially offset
     by improved utilization of sales leads primarily due to the increase in the
     number of sales associates. Selling commission expense increased $868
     thousand, or 23.5%, from $3.7 million in the third quarter 1995 to $4.6
     million in the third quarter 1996; as a percentage of net installed sales,
     selling commission expense remained constant at 10.1%. Sales
     representatives are compensated on a variable commission basis depending
     upon the type and gross profit of product sold. Performance-based
     compensation paid to officers and regional sales and production managers
     increased  $277 thousand, or 49.4%, from $561 thousand in the third quarter
     1995 to $838 thousand in the third quarter 1996, primarily due to the
     increase in operating income.  The balance of selling, general and
     administrative expenses, primarily sales lead-generation activities,
     administrative, field operations and Marquise Financial payrolls and
     related costs and general expenses, increased $2.0 million, or 29.8%, from
     $6.7 million, or 18.5% of net sales, in the third quarter 1995 to $8.7
     million, or 18.8% of net sales, in the third quarter 1996. The dollar
     increase was primarily due to increased expenses relating to support
     personnel and services required to manage the Company's expanding
     infrastructure and captive finance subsidiary, Marquise Financial.

     Operating Interest Expense

          The Company had no operating interest expense for the third quarter
     1996. Operating interest expense relates to bank borrowings required to
     finance a portion of Marquise Financial's receivables.  The Company
     utilized a portion of the proceeds from the June 1996 initial public
     offering to paydown all bank borrowings.

     Amortization of Intangibles

          Amortization of intangibles increased from $126 thousand in the third
     quarter 1995 to $135 thousand in the third quarter 1996. The amortization
     expense relates primarily to goodwill incurred in connection with the
     September 1994 stock repurchase from management.

     Interest Income, Net

          Net interest income increased $218 thousand from $96 thousand net
     interest expense in the third quarter 1995 to $122 thousand net interest
     income in the third quarter 1996, primarily due to increased interest
     income from invested cash balances and the reduction of interest expense
     related to the notes payable to certain of the Company's senior managers in
     connection with the September 1994 stock repurchase from management. $4.0
     million of notes payable to senior managers was repaid during the first six
     months of 1996.

     Income Tax Provision

          The Company's income tax provision increased from $1.0 million, or an
     effective rate of 40.4%, for the third quarter 1995 to $1.7 million, or an
     effective rate of 39.3%, for the third quarter 1996. The difference in the
     effective income tax rate and the federal statutory rate (34%) is due
     primarily to amortization of intangibles which are not deductible for
     income tax purposes and the effect of state income taxes.

     Net Income

          The Company's net income increased $1.1 million from $1.5 million in
     the third quarter 1995 to $2.6 million in the third quarter 1996.

     FIRST NINE MONTHS 1996 COMPARED TO FIRST NINE MONTHS 1995

     Net Sales

          Net sales increased $25.0 million, or 27.8%, from $90.0 million for
     the first nine months of 1995 to $115.0 million for the first nine months
     of 1996. Approximately 54.0% of the increase in net sales was attributable
     to roofing and gutter products and services, net sales of which increased
     $13.5 million to $75.2 million for the first nine months of 1996.
     Approximately 27.6% of the increase in net sales was attributable to
     fencing products and services, net sales of which increased $6.9 million to
     $21.3 million for the first nine months of 1996. Approximately 7.2% of the
     increase in net sales was attributable to garage door and entry door
     products and services, net sales of which increased $1.8 million to $15.7
     million for the first nine months of 1996. The balance, 11.2% of the
     increase in net sales, was due to credit participation fee income of $1.6
     million from Sears and its affiliates, which was payable beginning January
     1, 1996, on installed sales financed by Sears and its affiliates during the
     first nine months, and interest income of $1.2 million on receivables
     financed by the Company's newly-formed consumer finance subsidiary,
     Marquise Financial. The increases in net sales were due primarily to an
     increase in the number of installations as the Company increased the
     average number of its sales associates during the comparative periods from
     587 to 701 and increased selling prices in the first three months of the
     year and, new in 1996, credit participation fee and finance income.

     Gross Profit

          Gross profit increased $13.0 million, or 34.5%, from $37.8 million, or
     42.1% of net sales, for the first nine months of 1995 to $50.9 million, or
     44.3% of net sales, for the first nine months of 1996. The increased gross
     profit resulted from an increased number of installations, increased
     selling prices in the first three months of the year, an increase in
     balance of sales to higher margin products and services, primarily fencing,
     the credit participation fee from Sears and its affiliates and interest
     income from Marquise Financial, partially offset by the increase, in the
     first quarter 1995, in the Sears license fee rate. The license fee incurred
     to Sears increased $2.6 million, or 27.4%, from $9.4 million, or 10.4% of
     net installed sales, for the first nine months 1995 to $12.0 million, or
     10.7% of net installed sales, for the first nine months of 1996. The
     increase in the license fee incurred to Sears for the first nine months of
     1996 was due to the increase in sales volume and an increase in the
     composite license fee rates related to the shift in balance of sales. Sears
     and the Company entered into a new three-year license agreement effective
     January 1, 1996. Among other things, the license agreement provides for a
     fixed license fee, at the March 1995 license fee rate, to be charged during
     the term of the license agreement. Gross profit before the Sears license
     fee, credit participation fee and interest income increased $12.8 million,
     or 26.9%, from $47.3 million, or 52.6% of net installed sales, for the
     first nine months of 1995 to $60.1 million, or 53.5% of net installed
     sales, for the first nine months of 1996. The unit costs of materials,
     installation labor and warranty expense remained relatively constant during
     the first nine month period.

     Selling, General and Administrative Expenses

               Selling, general and administrative expenses increased $9.3
     million, or 28.3%, from $32.9 million in the first nine months 1995 to
     $42.2 million in the first nine months 1996 and, as a percentage of net
     sales, increased from 36.5% to 36.7%.  The dollar increase in selling,
     general and administrative expenses resulted primarily from the expenses
     associated with the increased sales volume, the increased number of sales
     associates and expenses related to the hiring of personnel to support the
     expansion of the infrastructure of the Company's core sales and
     installation business including the expansion of Marquise Financial. 
     Direct advertising expense increased $1.0 million, or 22.5%, from $4.8
     million for the first nine months 1995 to $5.8 million for the first nine
     months 1996; as a percentage of net sales, however, direct advertising
     expense decreased from 5.3% for the first nine months 1995 to 5.1% for the
     first nine months 1996, reflecting improved utilization of sales leads
     primarily due to the increase in number of sales associates partially
     offset by advertising price increases in the third quarter.  Selling
     commission expense increased $2.1 million, or 22.3%, from $9.2 million in
     the first nine months 1995 to $11.3 million in the first nine months 1996;
     as a percentage of net installed sales, selling commission expense
     decreased from 10.3% in the first nine months 1995 to 10.1% in the first
     nine months 1996.  Sales representatives are compensated on a variable
     commission basis depending upon the type and gross profit of product sold. 
     Performance-based compensation paid to officers and regional sales and
     production managers increased $745 thousand, or 54.6%, from $1.4 million in
     the first nine months 1995 to $2.1 million in the first nine months 1996,
     primarily due to the increase in operating income.  Management fees
     incurred to Globe decreased from $444 thousand in the first nine months
     1995 to $311 thousand in the first nine months 1996.  The management fee
     agreement between the Company and Globe was terminated June 20, 1996.  The
     balance of selling, general and administrative expenses, primarily sales
     lead-generation activities, administrative, field operations and Marquise
     Financial payrolls and related costs and general expenses, increased $5.6
     million, or 33.1%, from $17.0 million, or 18.9% of net sales, in the first
     nine months 1995 to $22.6 million, or 19.7% of net sales, in the first nine
     months 1996.  The increase was primarily due to increased expenses 
     relating to support personnel and services required to manage the Company's
     expanding infrastructure and captive finance subsidiary, Marquise
     Financial.

     Operating Interest Expense

          Operating interest expense, incurred in the first half of the year,
     was $234 thousand for the first nine months 1996.  The Company did not have
     any operating interest expense in the first nine months of 1995.  Operating
     interest expense relates to bank borrowings required to finance a portion
     of Marquise Financial's receivables.  The Company utilized a portion of the
     proceeds from the June 1996 initial public offering to paydown all bank
     borrowings.  

     Amortization of Intangibles

          Amortization of intangibles increased from $376 thousand in the first
     nine months 1995 to $396 thousand in the first nine months 1996.  The
     amortization expense relates primarily to goodwill incurred in connection
     with the September 1994 stock repurchase from management.

     Interest Income, Net

          Net interest income increased $460 thousand from $434 thousand net
     interest expense in the first nine months 1995 to $26 thousand net interest
     income in the first nine months 1996, primarily due to increased  interest
     income from invested cash balances and the reduction of interest expense
     related to notes payable to certain of the Company's senior managers in
     connection with the September 1994 stock repurchase from management.  $4
     million of notes payable to senior managers was repaid during the first six
     months 1996.

     Income Tax Provision

          The Company's income tax provision increased from $1.7 million, or an
     effective rate of 41.8%, for the first nine months 1995, to $3.3 million,
     or an effective rate of 40.2%, for the first nine months 1996.  The
     difference in the effective income tax rate and federal statutory rate
     (34%) is due primarily to amortization of intangibles which are not
     deductible for income tax purposes and the effect of state income taxes.

     Net Income

          The Company's net income increased $2.5 million from $2.4 million in
     the first nine months 1995 to $4.9 million in the first nine months 1996.

     LIQUIDITY AND CAPITAL RESOURCES

          The Company's primary capital needs have been to fund the growth of
     the Company, the September 1994 stock repurchase from management, and, more
     recently, to fund the operations of the Company's captive finance
     subsidiary, Marquise Financial.  The Company's primary sources of liquidity
     have been cash flow from operations, borrowings under its bank credit
     facility, and, in June 1996, from the net proceeds of its initial public
     offering.  The Company's core sales and installation business is not
     capital intensive.  Capital expenditures for 1994, 1995 and the first nine
     months 1996 were approximately $573 thousand, $888 thousand and $272
     thousand, respectively.  Capital expenditures  for the next twelve months
     are expected to approximate $1.2 million, primarily related to ongoing
     upgrading of computer hardware and software.  Future requirements for
     capital expenditures are expected to be funded by cash flow from
     operations.  The Company believes that it has sufficient operating cash
     flow, working capital base, available bank credit facility as well as
     additional bank financing currently being pursued by the Company with
     respect to Marquise Financial, to meet all of its obligations for the
     foreseeable future, including ongoing funding for Marquise Financial and
     for the development and expansion of complementary product lines and
     services.

          In November 1995, the Company commenced the operations of Marquise
     Financial, its consumer finance subsidiary.  Marquise Financial has been
     capitalized and funded with the Company's excess operating cash flow and
     secured borrowings under the Company's $15 bank million line of credit,
     which were subsequently paid down with a portion of the proceeds from the
     Company's June 1996 initial public offering.  At September 30, 1996,
     Marquise Financial had consumer finance receivables of approximately $ 18.4
     million.  The Company anticipates that its existing cash balances, the bank
     line of credit, the sale of Marquise Financial's consumer finance
     receivables as market conditions may warrant from time to time and excess
     cash flow from operations will be sufficient to satisfy the Company's
     financing cash requirements in the foreseeable future.

          The preceding paragraphs of this Liquidity and Capital Resources
     section contain forward-looking statements about the funding of various
     activities within the meaning of Section 27A of the Securities Act of 1933,
     as amended, and Section 21E of the Securities Exchange Act of 1934, as
     amended.  Actual results could differ materially from those projected in
     the forward-looking statements.  Factors that could cause actual results
     to differ materially include, but are not limited to, the rate of growth of
     the Company's revenues, the rate of expansion of the Company's business,
     other available sources of financing for customer purchases, market
     conditions with respect to the sale of consumer finance receivables, the
     availability and cost of financing and cash flow from operations.

          In June 1996, the Company issued 2,824,950 shares of Common Stock
     (including underwriters' over-allotment option) at $13 per share in its
     initial public offering.  Proceeds from the offering, net of underwriting
     commissions and related expenses totaling $3.7 million, were $33.1 million.
     A portion of the offering proceeds was used to pay a $8.6 million special
     dividend to pre-offering stockholders, repay all borrowings aggregating
     $11.9 million under the bank line of credit (used to finance Marquise
     Financial receivables) and repay $3.2 million of notes to senior managers
     related to the September 1994 stock repurchase.

          From its inception in June 1993, the Company has generated cash flow
     from operations of approximately $20.5 million.  The Company used $12.5
     million of cash in connection with the repurchase of 40.2% of its Common
     Stock in September 1994, $2.0 million for capital expenditures and $4.5
     million for the initial funding of Marquise Financial's consumer financing
     activities.  At September 30, 1996, the Company had approximately $8.5
     million in cash and cash equivalents and  net working capital of $20.8
     million.  At September 30, 1996, the Company had available $15 million 
     in bank line of credit and $1.8 million total debt to management 
     stockholders.  At September 30, 1996, the Company had no amounts 
     outstanding under its bank line of credit.

          The Company's results of operations may fluctuate from year to year or
     quarter to quarter due to a variety of factors.  The Company expects lower
     levels of sales and profitability during the period from mid-November
     through mid-March, impacting the first and fourth quarter of each year. 
     The Company believes that this seasonality is caused by winter weather in
     certain of the Company's markets located in the northeastern and north
     central U.S. and rainy weather, each of which limits the Company's ability
     to install exterior home improvement products.  


                             PART II.  OTHER INFORMATION


     ITEM. 6.  EXHIBITS AND REPORTS ON FORM 8-K

          (a)  Exhibits

          (10.1) Diamond Home Services, Inc. Incentive Stock Option Plan, as
                 amended.

            (27) Financial Data Schedule


          (b)  No reports on Form 8-K were filed during the quarter.


                                      Signatures


          Pursuant to the requirements of the Securities Exchange Act of 1934,
     the registrant has duly caused this report to be signed on its behalf by
     the undersigned thereunto duly authorized.


                              DIAMOND HOME SERVICES, INC.


                              By:  /s/ Richard G. Reece
                                   ----------------------------------------
                                       Richard G. Reece 
                                       Vice President and Chief Financial
                                       Officer (For the Registrant and as
                                       Principal Financial and Accounting
                                       Officer)

     Date:  November 12, 1996