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**SECURITIES        AND EXCHANGE COMMISSION**

**WASHINGTON,        D.C. 20549**

**FORM        10-QSB**

**ý  QUARTERLY        REPORT UNDER SECTION 13 OR 15(d) OF THE**

**SECURITIES        EXCHANGE ACT OF 1934**

**For        the quarterly period ended September 30, 2007**

** ̈  TRANSITION        REPORT UNDER SECTION 13 OR 15(D) OF THE**

**EXCHANGE        ACT**

**ROYAL        FINANCIAL, INC.**

| **Delaware**(State                  or other jurisdiction of incorporation or organization)                                                               | **20-1636029**(I.R.S.                  Employer Identification Number) |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------|
|  **9226                  S. Commercial Avenue****Chicago,                  Illinois 60617**(Address                  of principal executive offices) |

**(773) 768-4800**

**Not        Applicable**

| **Class**                                      | **Outstanding                  as of November 1, 2007** |
|------------------------------------------------|--------------------------------------------------------------|
| Common                  Stock, $0.01 par value | 2,597,622                                                    |

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**ROYAL        FINANCIAL, INC. AND SUBSIDIARY**

**FORM        10-QSB**

**For        the quarterly period ended September 30, 2007**

**TABLE        OF CONTENTS**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | **Page** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
| **PART                  I – FINANCIAL INFORMATION**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |     |
| Item                  1.  Financial                  Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |     |
| Consolidated                  Statements of Financial Condition as of                  September 30, 2007 and June 30, 2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 1        |
| Consolidated                  Statements of Operations for the three                  months ended September 30, 2007 and 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 2        |
| Consolidated                  Statements of Stockholders’ Equity for the                  three months ended September 30, 2007 and 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 3        |
| Consolidated                  Statements of Cash Flows for the three                  months ended September 30, 2007 and 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 4        |
| Notes                  to Unaudited Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 5        |
| Item                  2.  Management’s Discussion and Analysis of                  Financial Condition and Results of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 10       |
| Item                  3.  Controls and                  Procedures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 14       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |     |
| **PART II–OTHER                  INFORMATION**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |     |
| Item                  1.  Legal Proceedings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 14       |
| Item                  2.  Unregistered Sales of Equity Securities                  and Use of Proceeds                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 14       |
| Item                  3.  Defaults Upon Senior                  Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 14       |
| Item                  4.  Submission of Matters to a Vote of                  Security Holders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 14       |
| Item                  5.  Other Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 15       |
| Item                  6.  Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 15       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |     |
| **SIGNATURES                                                                                                                             ** | 16       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |     |
| **EXHIBIT INDEX**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |     |

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**PART        I.– FINANCIAL INFORMATION**

**Item        1.     Financial        Statements.**

**ROYAL        FINANCIAL, INC. AND SUBSIDIARY**

CONSOLIDATED

|                                                                                                                                                                   |   | **September 30,                    2007** |        |   | **June 30,                    2007** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|-------------|--------|-------------------------------------------|--------|
| **ASSETS**                                                                                                                                                             |   |                                           |        |   |                                      |   |
| Cash                  and non-interest-bearing balances in financial                  institutions                                                                     |   | $                                              | 3,519,203   |   |                                      | $      | 3,629,356 |   |
| Interest-bearing                  balances in financial institutions                                                                                                   |   |                                           | 186,649     |   |                                      |   | 5,140,346 |   |
| Federal                  funds sold                                                                                                                                    |   |                                           | 6,077,527   |   |                                      |   | 12,626,252 |   |
| Total                  cash and cash equivalents                                                                                                                       |   |                                           | 9,783,379   |   |                                      |   | 21,395,954 |   |
| Securities                  available-for-sale                                                                                                                         |   |                                           | 14,061,232  |   |                                      |   | 15,595,283 |   |
| Loans                  receivable, net of allowance for loan losses of $690,882 at September                  30,                  2007 and $667,105 at June 30, 2007  |   |                                           | 89,654,570  |   |                                      |   | 83,498,883 |   |
| Federal                  Home Loan Bank stock, at cost                                                                                                                 |   |                                           | 340,500     |   |                                      |   | 340,500 |   |
| Cash                  surrender value of life insurance                                                                                                                |   |                                           | 4,789,279   |   |                                      |   | 4,741,698 |   |
| Premises                  and equipment, net                                                                                                                           |   |                                           | 5,824,244   |   |                                      |   | 5,933,862 |   |
| Accrued                  interest receivable                                                                                                                           |   |                                           | 542,297     |   |                                      |   | 508,835 |   |
| Other                  assets                                                                                                                                          |   |                                           | 391,494     |   |                                      |   | 616,696 |   |
| Total                  assets                                                                                                                                          |   | $                                              | 125,386,995 |   |                                      | $      | 132,631,711 |   |
| **LIABILITIES                  AND STOCKHOLDERS’ EQUITY**                                                                                                        |   |                                           |        |   |                                      |   |   |   |
| Liabilities                                                                                                                                                            |   |                                           |        |   |                                      |   |   |   |
| Deposits                                                                                                                                                               |   | $                                              | 91,443,682  |   |                                      | $      | 98,675,891 |   |
| Advances                  from borrowers for taxes and insurance                                                                                                       |   |                                           | 760,376     |   |                                      |   | 571,730 |   |
| Accrued                  interest payable and other liabilities                                                                                                        |   |                                           | 890,311     |   |                                      |   | 753,988 |   |
| Common                  stock in ESOP subject to contingent repurchase obligation                                                                                      |   |                                           | 997,165     |   |                                      |   | 968,070 |   |
| Stockholders’                  equity                                                                                                                            |   |                                           |        |   |                                      |   |   |   |
| Preferred                  stock, $.01 par value per share, authorized 1,000,000 shares; no                  issues                  are outstanding                   |   |                                           | —     |   |                                      |   | — |   |
| Common                  stock, $.01 par value per share, authorized 5,000,000 shares; 2,645,000                  shares issued at September 30, 2007 and June 30, 2007 |   |                                           | 26,450      |   |                                      |   | 26,450 |   |
| Additional                  paid-in capital                                                                                                                            |   |                                           | 24,459,392  |   |                                      |   | 24,169,282 |   |
| Retained                  earnings                                                                                                                                     |   |                                           | 10,963,513  |   |                                      |   | 11,510,299 |   |
| Treasury                  stock, 85,368 shares and 69,498 shares, at cost                                                                                              |   |                                           | (1,289,136  | )      |                                      |   | (1,057,698 | ) |
| Accumulated                  other comprehensive loss, net of tax                                                                                                      |   |                                           | (59,587     | )      |                                      |   | (143,372 | ) |
| Unearned                  ESOP shares                                                                                                                                  |   |                                           | (1,808,006  | )      |                                      |   | (1,874,859 | ) |
| Reclassification                  of ESOP shares                                                                                                                       |   |                                           | (997,165    | )      |                                      |   | (968,070 | ) |
| Total                  stockholders’ equity                                                                                                                      |   |                                           | 31,295,461  |   |                                      |   | 31,662,032 |   |
| Total                  liabilities and stockholders’ equity                                                                                                      |   | $                                              | 125,386,995 |   |                                      | $      | 132,631,711 |   |

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*Table            of Contents*

**ROYAL        FINANCIAL, INC. AND SUBSIDIARY**

CONSOLIDATED

|                                                                     |   | **Three                    Months Ended****September 30,** |      |
|--------------------------------------------------------------------------|--------|-----------------------------------------------------------------|-----------|
|                                                                     |   | **2007**                                                        |      |   | **2006** |   |
| Interest                  income                                         |   |                                                            |      |   |   |   |
| Loans                                                                    |   | $                                                               | 1,620,592 |   |   | $ | 1,404,442 |   |
| Securities,                  taxable                                     |   |                                                            | 161,209   |   |   |   | 194,729 |   |
| Federal                  funds sold and other                            |   |                                                            | 179,525   |   |   |   | 136,873 |   |
| Total                  interest income                                   |   |                                                            | 1,961,326 |   |   |   | 1,736,044 |   |
| Interest                  expense                                        |   |                                                            |      |   |   |   |   |   |
| Deposits                                                                 |   |                                                            | 768,096   |   |   |   | 566,202 |   |
| Federal                  funds purchased and other                       |   |                                                            | 105       |   |   |   | 2,151 |   |
| Total                  interest expense                                  |   |                                                            | 768,201   |   |   |   | 568,353 |   |
| **Net                  interest income**                                 |   |                                                            | 1,193,125 |   |   |   | 1,167,691 |   |
| Provision                  for loan losses                               |   |                                                            | 23,777    |   |   |   | 30,000 |   |
| **Net                  interest income after provision for loan losses** |   |                                                            | 1,169,348 |   |   |   | 1,137,691 |   |
| Noninterest                  income                                      |   |                                                            |      |   |   |   |   |   |
| Service                  charges on deposit accounts                     |   |                                                            | 63,529    |   |   |   | 66,322 |   |
| Earnings                  on bank-owned life insurance                   |   |                                                            | 47,581    |   |   |   | 43,450 |   |
| Other                  income                                            |   |                                                            | 12,547    |   |   |   | 29,826 |   |
| Total                  noninterest income                                |   |                                                            | 123,657   |   |   |   | 139,598 |   |
| Noninterest                  expense                                     |   |                                                            |      |   |   |   |   |   |
| Salaries                  and employee benefits                          |   |                                                            | 717,641   |   |   |   | 720,931 |   |
| Occupancy                  and equipment                                 |   |                                                            | 315,674   |   |   |   | 318,067 |   |
| Data                  processing                                         |   |                                                            | 106,282   |   |   |   | 75,060 |   |
| Professional                  services                                   |   |                                                            | 194,888   |   |   |   | 160,820 |   |
| Investigation                  costs                                     |   |                                                            | 301,180   |   |   |   | - |   |
| Director                  fees                                           |   |                                                            | 30,800    |   |   |   | 34,200 |   |
| Supplies                                                                 |   |                                                            | 14,536    |   |   |   | 41,327 |   |
| Advertising                                                              |   |                                                            | 34,404    |   |   |   | 69,332 |   |
| Insurance                  premiums                                      |   |                                                            | 22,035    |   |   |   | 17,825 |   |
| Other                                                                    |   |                                                            | 102,351   |   |   |   | 121,366 |   |
| Total                  noninterest expense                               |   |                                                            | 1,839,791 |   |   |   | 1,558,928 |   |
| **Loss                  before income tax expense**                      |   |                                                            | (546,786  | ) |   |   | (281,639 | ) |
| Income                  tax benefit                                      |   |                                                            | —   |   |   |   | (106,000 | ) |
| Net                  loss                                                |   | $                                                               | (546,786  | ) |   | $ | (175,639 | ) |
| Basic                  and diluted loss per share                        |   | $                                                               | (0.23     | ) |   | $ | (0.07 | ) |
| Comprehensive                  loss                                      |   | $                                                               | (463,001  | ) |   | $ | (180 | ) |

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*Table            of Contents*

**ROYAL        FINANCIAL, INC. AND SUBSIDIARY**

CONSOLIDATED

|                                                                                                                                                                                           |   | **Common                    Stock** |    |   | **Additional                    Paid-In Capital** |   |       | **Retained                    Earnings** |   |   | **Accumulated                    Other Comprehensive Income (Loss)** |   |   | **Unearned                    ESOP Shares** |     |   | **Amount                    Reclassified on ESOP Shares** |   |       | **Treasury                    Stock** |   |   | **Unearmed                    RRP Shares** |   |   | **Total** |       |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|---------|--------|---------------------------------------------------|--------|------------|------------------------------------------|--------|--------|----------------------------------------------------------------------|--------|--------|---------------------------------------------|----------|--------|-----------------------------------------------------------|--------|------------|---------------------------------------|--------|--------|--------------------------------------------|--------|--------|-----------|------------|
| **2006**                                                                                                                                                                                       |   |                                |    |   |                                              |   |       |                                     |   |   |                                                                 |   |   |                                        |     |   |                                                      |   |       |                                  |   |   |                                       |   |   |      |       |
| Balance                  at July 1, 2006                                                                                                                                                       |   | $                                   | 26,450  |   |                                              | $      | 24,739,005 |                                     |   | $      | 12,822,013                                                           |   |   | $                                           | (393,231 | )      |                                                      | $      | (2,140,299 | )                                     |   | $      | (617,872                                   | )      |   | $         | (783,611   | ) |   | $ | (897,072 | ) |   | $ | 32,755,383 |   |
| Comprehensive                  income (loss)                                                                                                                                                   |   |                                |    |   |                                              |   |       |                                     |   |   |                                                                 |   |   |                                        |     |   |                                                      |   |       |                                  |   |   |                                       |   |   |      |       |   |   |   |   |   |   |   |   |   |
| Net                  loss                                                                                                                                                                      |   |                                | — |   |                                              |   | —    |                                     |   |   | (175,639                                                             | )      |   |                                        | —  |   |                                                      |   | —    |                                  |   |   | —                                    |   |   |      | —    |   |   |   | — |   |   |   | (175,639 | ) |
| Change                  in fair value of securities available-for-sale, net                                                                                                                    |   |                                | — |   |                                              |   | —    |                                     |   |   | —                                                              |   |   |                                        | 175,459  |   |                                                      |   | —    |                                  |   |   | —                                    |   |   |      | —    |   |   |   | — |   |   |   | 175,459 |   |
| Total                  comprehensive                    loss                                                                                                                                   |   |                                |    |   |                                              |   |       |                                     |   |   |                                                                 |   |   |                                        |     |   |                                                      |   |       |                                  |   |   |                                       |   |   |      |       |   |   |   |   |   |   |   | (180 | ) |
| Reclassification                  due to change in fair value of common stock in ESOP subject to                  contingent                  repurchase obligation                            |   |                                | — |   |                                              |   | —    |                                     |   |   | —                                                              |   |   |                                        | —  |   |                                                      |   | —    |                                  |   |   | (21,160                                    | )      |   |      | —    |   |   |   | — |   |   |   | (21,160 | ) |
| Release                  of 5,290 of unearnedESOP                  shares                                                                                                                      |   |                                | — |   |                                              |   | 13,013     |                                     |   |   | —                                                              |   |   |                                        | —  |   |                                                      |   | 66,866     |                                  |   |   | —                                    |   |   |      | —    |   |   |   | — |   |   |   | 79,879 |   |
| Reclassification                  of RRPs in conjunction with adoption of SFAS 123(R)                                                                                                          |   |                                | — |   |                                              |   | (897,072   | )                                        |   |   | —                                                              |   |   |                                        | —  |   |                                                      |   | —    |                                  |   |   | —                                    |   |   |      | —    |   |   |   | 897,072 |   |   |   | — |   |
| Issuance                  of 5,000 shares to RRP plan                                                                                                                                          |   |                                |    |   |                                              |   | (74,250    | )                                        |   |   |                                                                 |   |   |                                        |     |   |                                                      |   |       |                                  |   |   |                                       |   |   |      | 74,250     |   |   |   |   |   |   |   |   |   |
| Stock-based                  compensation                                                                                                                                                      |   |                                | — |   |                                              |   | 105,461    |                                     |   |   | —                                                              |   |   |                                        | —  |   |                                                      |   | —    |                                  |   |   | —                                    |   |   |      | —    |   |   |   | — |   |   |   | 105,461 |   |
| Balance                  at September 30, 2006                                                                                                                                                 |   | $                                   | 26,450  |   |                                              | $      | 23,886,157 |                                     |   | $      | 12,646,374                                                           |   |   | $                                           | (217,772 | )      |                                                      | $      | (2,073,433 | )                                     |   | $      | (639,032                                   | )      |   | $         | (709,361   | ) |   | $ | — |   |   | $ | 32,919,383 |   |
| **2007**                                                                                                                                                                                       |   |                                |    |   |                                              |   |       |                                     |   |   |                                                                 |   |   |                                        |     |   |                                                      |   |       |                                  |   |   |                                       |   |   |      |       |   |   |   |   |   |   |   |   |   |
| Balance                  at July 1, 2007                                                                                                                                                       |   | $                                   | 26,450  |   |                                              | $      | 24,169,282 |                                     |   | $      | 11,510,299                                                           |   |   | $                                           | (143,372 | )      |                                                      | $      | (1,874,859 | )                                     |   | $      | (968,070                                   | )      |   | $         | (1,057,698 | ) |   | $ | — |   |   | $ | 31,662,032 |   |
| Comprehensive                  income                                                                                                                                                          |   |                                |    |   |                                              |   |       |                                     |   |   |                                                                 |   |   |                                        |     |   |                                                      |   |       |                                  |   |   |                                       |   |   |      |       |   |   |   |   |   |   |   |   |   |
| Net                  loss                                                                                                                                                                      |   |                                | — |   |                                              |   | —    |                                     |   |   | (546,786                                                             | )      |   |                                        | —  |   |                                                      |   | —    |                                  |   |   | —                                    |   |   |      | —    |   |   |   | — |   |   |   | (546,786 | ) |
| Change                  in fair value of securities available-for-sale, net                                                                                                                    |   |                                | — |   |                                              |   | —    |                                     |   |   | —                                                              |   |   |                                        | 83,785   |   |                                                      |   | —    |                                  |   |   | —                                    |   |   |      | —    |   |   |   | — |   |   |   | 83,785 |   |
| Total comprehensive loss                                                                                                                                                             |   |                                |    |   |                                              |   |       |                                     |   |   |                                                                 |   |   |                                        |     |   |                                                      |   |       |                                  |   |   |                                       |   |   |      |       |   |   |   |   |   |   |   | (463,001 | ) |
| Reclassification                  due to release and change in fair value of common stock in ESOP                  subject to                  contingent repurchase obligation of ESOP shares |   |                                | — |   |                                              |   | —    |                                     |   |   | —                                                              |   |   |                                        | —  |   |                                                      |   | —    |                                  |   |   | (29,095                                    | )      |   |      | —    |   |   |   | — |   |   |   | (29,095 | ) |
| Release                  of 5,290 of unearnedESOP                  shares                                                                                                                      |   |                                | — |   |                                              |   | 7,369      |                                     |   |   | —                                                              |   |   |                                        | —  |   |                                                      |   | 66,853     |                                  |   |   | —                                    |   |   |      | —    |   |   |   | — |   |   |   | 74,222 |   |
| Issuance                  of 5,290 shares to RRP plan                                                                                                                                          |   |                                | — |   |                                              |   | (78,556    | )                                        |   |   | —                                                              |   |   |                                        | —  |   |                                                      |   | —    |                                  |   |   | —                                    |   |   |      | 78,556     |   |   |   | — |   |   |   | — |   |
| Forfeiture                  of  21,160 shares from the RRP plan                                                                                                                      |   |                                | — |   |                                              |   | 309,994    |                                     |   |   | —                                                              |   |   |                                        | —  |   |                                                      |   | —    |                                  |   |   | —                                    |   |   |      | (309,994   | ) |   |   | — |   |   |   | — |   |
| Stock-based                  compensation                                                                                                                                                      |   |                                | — |   |                                              |   | 51,303     |                                     |   |   | —                                                              |   |   |                                        | —  |   |                                                      |   | —    |                                  |   |   | —                                    |   |   |      | —    |   |   |   | — |   |   |   | 51,303 |   |
| Balance                  at September 30, 2007                                                                                                                                                 |   | $                                   | 26,450  |   |                                              | $      | 24,459,392 |                                     |   | $      | 10,963,513                                                           |   |   | $                                           | (59,587  | )      |                                                      | $      | (1,808,006 | )                                     |   | $      | (997,165                                   | )      |   | $         | (1,289,136 | ) |   | $ | — |   |   | $ | 31,295,461 |   |

----

*Table            of Contents*

**ROYAL        FINANCIAL, INC. AND SUBSIDIARY**

CONSOLIDATED

|                                                                                                                                     |   | **2007** |        |   | **2006** |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|-------------|--------|----------|--------|
| **Cash                  flows from operating activities**                                                                                |   |     |        |   |     |   |
| Net                  loss                                                                                                                |   | $        | (546,786    | )      |     | $      | (175,639 | ) |
| Adjustments                  to reconcile net loss to net cash from operating                  activities:                               |   |     |        |   |     |   |   |   |
| Depreciation                                                                                                                             |   |     | 117,711     |   |     |   | 90,524 |   |
| Provision                  for loan losses                                                                                               |   |     | 23,777      |   |     |   | 30,000 |   |
| ESOP                  expense                                                                                                            |   |     | 74,222      |   |     |   | 79,879 |   |
| Stock-based                  compensation                                                                                                |   |     | 51,303      |   |     |   | 105,461 |   |
| Earnings                  on bank-owned life insurance                                                                                   |   |     | (47,581     | )      |     |   | (43,450 | ) |
| Change                  in accrued interest receivable and other assets                                                                  |   |     | 148,578     |   |     |   | 48,567 |   |
| Change                  in other accrued interest payable and liabilities                                                                |   |     | 136,323     |   |     |   | 109,595 |   |
| Net                  cash from operating activities                                                                                      |   |     | (42,453     | )      |     |   | 244,937 |   |
| **Cash                  flows from investing activities**                                                                                |   |     |        |   |     |   |   |   |
| Proceeds                  from sales, maturities, calls, and paydowns of securities available                  for                  sale |   |     | 1,660,998   |   |     |   | 2,637,172 |   |
| Purchases                  of securities available-for-sale                                                                              |   |     | -           |   |     |   | - |   |
| Change                  in loans receivable                                                                                              |   |     | (3,179,464  | )      |     |   | 1,547,504 |   |
| Purchase                  of loan participations                                                                                         |   |     | (3,000,000  | )      |     |   | - |   |
| Purchase                  of premises and equipment                                                                                      |   |     | (8,093      | )      |     |   | (263,531 | ) |
| Net                  cash from (used in) investing activities                                                                            |   |     | (4,526,559  | )      |     |   | 3,921,145 |   |
| **Cash                  flows from financing activities**                                                                                |   |     |        |   |     |   |   |   |
| Net                  increase (decrease) in deposits                                                                                     |   |     | (7,232,209  | )      |     |   | 18,363,705 |   |
| Net                  decrease in federal funds purchased                                                                                 |   |     | -           |   |     |   | (1,225,404 | ) |
| Net                  increase (decrease) in advances from borrowers for taxes and                  insurance                             |   |     | 188,646     |   |     |   | (173,771 | ) |
| Net                  cash from (used in) financing activities                                                                            |   |     | (7,043,563  | )      |     |   | 16,964,530 |   |
|                                                                                                                                     |   |     |        |   |     |   |   |   |
| Net                  change in cash and cash equivalents                                                                                 |   |     | (11,612,575 | )      |     |   | 21,130,612 |   |
| Cash                  and cash equivalents                                                                                               |   |     |        |   |     |   |   |   |
| Beginning                  of the year                                                                                                   |   |     | 21,395,954  |   |     |   | 4,348,220 |   |
| End                  of period                                                                                                           |   | $        | 9,783,379   |   |     | $      | 25,478,832 |   |

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*Table            of Contents*

**ROYAL        FINANCIAL, INC. AND SUBSIDIARY**

**NOTES        TO UNAUDITED FINANCIAL STATEMENTS**

**Note        1 - Nature of Business**

**Note        2 - Basis of Presentation**

**Note        3 - Use of Estimates and Significant Accounting Policies**

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*Table            of Contents*

**Note        4 - Loans**

|                                           |   | **September                    30, 2007** |       |   | **June                    30, 2007** |   |
|------------------------------------------------|--------|-------------------------------------------|------------|--------|--------------------------------------|--------|
| Real                  estate loans             |   |                                      |       |   |                                 |   |
| One-to-four-family                             |   | $                                         | 37,315,167 |   |                                 | $      | 36,756,599 |   |
| Commercial                                     |   |                                      | 34,274,728 |   |                                 |   | 32,880,378 |   |
| Multi-family                                   |   |                                      | 6,395,403  |   |                                 |   | 4,768,442 |   |
| Total                  real estate loans       |   |                                      | 77,985,298 |   |                                 |   | 74,405,419 |   |
| Commercial                  loans              |   |                                      | 11,674,519 |   |                                 |   | 9,237,266 |   |
| Consumer                  loans                |   |                                      |       |   |                                 |   |   |   |
| Home                  equity loans             |   |                                      | 487,193    |   |                                 |   | 342,492 |   |
| Other                                          |   |                                      | 187,292    |   |                                 |   | 187,195 |   |
| Total                  consumer loans          |   |                                      | 674,485    |   |                                 |   | 529,687 |   |
| Less:                                          |   |                                      |       |   |                                 |   |   |   |
| Net                  deferred loan fees (cost) |   |                                      | (11,150    | )      |                                 |   | 6,384 |   |
| Allowance                  for loan losses     |   |                                      | 690,882    |   |                                 |   | 667,105 |   |
| Loans,                  net                    |   | $                                         | 89,654,570 |   |                                 | $      | 83,498,883 |   |

|                                          |   | **2007** |    |   | **2006** |   |
|-----------------------------------------------|--------|----------|---------|--------|----------|--------|
| Balance                  at beginning of year |   | $        | 667,105 |   |     | $      | 400,000 |   |
| Provision                  for loan loss      |   |     | 23,777  |   |     |   | 30,000 |   |
| Recoveries                                    |   |     | — |   |     |   | — |   |
| Balance                  at end of year       |   | $        | 690,822 |   |     | $      | 430,000 |   |

|                                                          |   | **September                    30, 2007** |    |   | **June                    30, 2007** |   |
|---------------------------------------------------------------|--------|-------------------------------------------|---------|--------|--------------------------------------|--------|
| Loans                  past due over 90 days still on accrual |   | $                                         | 674,000 |   |                                 | $      | 226,000 |   |
| Nonaccrual                  loans                             |   |                                      | — |   |                                 |   | — |   |

**Note        5 - Loss Per Share**

|                                                        |   | **Three                    Months Ended****September 30,                    2007** |      |   | **Three                    Months Ended****September 30,                    2006** |   |
|-------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------|-----------|--------|-----------------------------------------------------------------------------------------|--------|
| Basic                  and diluted loss per share           |   |                                                                                    |      |   |                                                                                    |   |
| Net                  loss as reported                       |   | $                                                                                       | (546,786  | )      |                                                                                    | $      | (175,639 | ) |
| Weighted                  average common shares outstanding |   |                                                                                    | 2,363,949 |   |                                                                                    |   | 2,356,748 |   |
| Basic                  and diluted loss per share           |   | $                                                                                       | (0.23     | )      |                                                                                    | $      | (0.07 | ) |

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*Table            of Contents*

**Note        6 - Stock-Based Compensation**

**Stock        Option Plan:**

|                                       |   | **2007** |   |   | **2006** |   |
|--------------------------------------------|--------|----------|--------|--------|----------|--------|
| Risk-free                  interest rate   |   |     | 4.65   | %      |     |   | 5.10 | % |
| Expected                  term             |   |     | 7      |   |     |   | 7 |   |
| Expected                  stock volatility |   |     | 13     | %      |     |   | 20 | % |
| Dividend                  yield            |   |     | 0      | %      |     |   | 0 | % |

|                                                                            |   | **Shares** |    |   | **Weighted                    Average Exercise Price** |   |    | **Weighted                    Average Remaining Contractual Term** |   |   | **Aggregate                    Intrinsic Value** |   |
|---------------------------------------------------------------------------------|--------|------------|---------|--------|--------------------------------------------------------|--------|---------|--------------------------------------------------------------------|--------|--------|--------------------------------------------------|--------|
| Outstanding                  at July 1, 2007                                    |   |       | 163,410 |   |                                                   | $      | 13.99   |                                                               |   |   |                                             |   |   |   |
| Granted                                                                         |   |       | 13,225  |   |                                                   |   | 13.15   |                                                               |   |   |                                             |   |   |   |
| Exercised                                                                       |   |       | — |   |                                                   |   | — |                                                               |   |   |                                             |   |   |   |
| Forfeited                  or expired                                           |   |       | (10,580 | )      |                                                   |   | 13.90   |                                                               |   |   |                                             |   |   |   |
| Outstanding                  at September 30, 2007                              |   |       | 166,055 |   |                                                   | $      | 13.93   |                                                               |   |   | 8.54                                             |   |   | $ | 94,651 |   |
| Exercisable                  at September 30, 2007                              |   |       | 49,610  |   |                                                   | $      | 13.95   |                                                               |   |   | 8.37                                             |   |   | $ | 27,286 |   |
| Vested                  or expect to vest atSeptember                  30, 2007 |   |       | 166,055 |   |                                                   | $      | 13.93   |                                                               |   |   | 8.54                                             |   |   | $ | 94,651 |   |

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*Table            of Contents*

**Note        6 - Stock-Based Compensation (continued)**

**Share        Award Plan:**

| **Nonvested                    Shares**          |   | **Shares** |   |   | **Weighted                    Average Grant-Date Fair Value** |   |
|--------------------------------------------------|--------|------------|--------|--------|---------------------------------------------------------------|--------|
| Nonvested                  at July 1, 2007  |   |       | 47,320 |   |                                                          | $      | 14.03 |   |
| Granted                                          |   |       | 5,290  |   |                                                          |   | 13.15 |   |
| Vested                                           |   |       | (1,000 | )      |                                                          |   | 14.60 |   |
| Forfeited                                        |   |       | (4,232 | )      |                                                          |   | 13.90 |   |
| Nonvested                  at September 30, 2007 |   |       | 47,378 |   |                                                          | $      | 13.93 |   |

**Note        7 - Income Taxes - Adoption of FIN 48**

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*Table            of Contents*

**Note        8 - Pending Investigation**

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*Table            of Contents*

**Item        2.     Management’s Discussion        and Analysis of Financial Condition and Results of        Operations.**

***Forward-Looking        Information***

***Comparison        of Financial Condition at September 30, 2007 and June 30,        2007***

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*Table            of Contents*

***Comparison        of Results of Operation for the Three Months Ended September 30, 2007 and        2006***

*General*

*Interest        Income*

*Net        Interest Income*

*Interest        Expense*

*Provision        for Loan Losses*

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*Table            of Contents*

*Noninterest        Income*

*Noninterest        Expense*

*Provision        for Income Taxes*

***Liquidity        and Capital Resources***

*Liquidity*

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*Table            of Contents*

*Capital*

***Critical        Accounting Policies and Estimates***

*Allowance        for Loan Losses*

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*Table            of Contents*

*Income        Taxes*

**Item        3.    Controls and        Procedures.**

**PART II.–OTHER        INFORMATION**

**Item        1.    Legal        Proceedings.**

**Item        2.    Unregistered Sales of Equity        Securities and Use of Proceeds.**

**Item        3.    Defaults Upon Senior        Securities.**

**Item        4.    Submission of Matters to a        Vote of Security Holders.**

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*Table            of Contents*

**Item            5.   Other            Information.**

**Item            6.   Exhibits.**

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*Table            of Contents*

**SIGNATURES**

|                                                | **ROYAL                  FINANCIAL, INC.** |                                                                  |
|-----------------------------------------------------|--------------------------------------------|-----------------------------------------------------------------------|
|                                                |                                       |                                                                  |   |
| Date:                   November 14, 2007 | By:                                        | /s/ Leonard                Szwajkowski                           |   |
|                                                |                                       | Leonard                Szwajkowski                                    |   |
|                                                |                                       | Chief                Executive Officer,                President, and |   |
|                                                |                                       | Interim                  Chief Financial Officer                      |   |

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*Table            of Contents*

**EXHIBIT INDEX**

| 31.1 | Certification                  of Chief Executive Officer and Interim Chief Financial Officer                  pursuant to                  Section 302 of the Sarbanes-Oxley Act of                  2002. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.1 | Certification                  of Chief Executive Officer and Interim Chief Financial Officer                  pursuant to                  18 U.S.C. Section 1350, as adopted pursuant to Section 906 of                  the Sarbanes-Oxley Act of 2002. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|