**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**




**FORM
      10-QSB**




(mark
      one)




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


**EXCHANGE
      ACT OF 1934**


**For
      the quarterly period ended March 31, 2007**




or




** ̈** **TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
      ACT**




For
      the
      transition period from _______to_______




Commission
      File Number 000-51123




**ROYAL
      FINANCIAL, INC.**


(Exact
      name of small business issuer specified in its charter)







**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**


(Issuer’s
      telephone number)




**Not
      Applicable**


(Former
      name, former address and former fiscal year,


if
      changes since last report)




Check
      whether the issuer (1) filed all reports required to be filed by
      Section 13 or 15(d) of the Exchange Act during the past 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 ý No  ̈




Indicate
      by a check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes  ̈ No ý




State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date:




**Class**
            **Outstanding
                as of April 30, 2007**Common
                Stock, $0.01 par value
            2,574,639





Transitional
      Small Business Disclosure Format (check one): Yes  ̈ No ý




*Table
          of Contents*




**ROYAL
        FINANCIAL, INC. AND SUBSIDIARY**




**FORM
      10-QSB**




**For
      the quarterly period ended March 31, 2007**




**TABLE
      OF CONTENTS**




**Page****PART
                I - FINANCIAL INFORMATION**Item
                1. Financial StatementsConsolidated
                Statements of Financial Condition as of
                March 31, 2007 and June 30, 2006
            1Consolidated
                Statements of Income (Loss) and
                Comprehensive Income (Loss) for the three months and nine months
                ended
                March 31, 2007 and 2006
            2Consolidated
                Statements of Stockholders’ Equity for
                the nine months ended March 31, 2007 and 2006
            3Consolidated
                Statements of Cash Flows for the nine
                months ended March 31, 2007 and 2006
            4Notes
                to Unaudited Financial Statements
            5Item
                2. Management’s Discussion and Analysis of Financial
                Condition and Results of Operations
            8Item
                3. Controls and Procedures
            13**PART II
                - OTHER
                INFORMATION**Item
                1. Legal Proceedings
            14Item
                2. Unregistered Sales of Equity Securities and
                Use of Proceeds
            14Item
                3. Defaults Upon Senior
                Securities
            14Item
                4. Submission of Matters to a Vote of Security
                Holders
            14Item
                5. Other Information
            14Item
                6. Exhibits
            14**SIGNATURES**
            15**EXHIBIT INDEX**




i
 *Table
          of Contents*





**PART
      I. - FINANCIAL INFORMATION**




**Item
      1.**  **Financial
      Statements** **.**




**ROYALFINANCIAL,
      INC. AND SUBSIDIARY**


CONSOLIDATED
        STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)


March
      31,
      2007 and June 30, 2006




**March 31,
                2007**
            
            **June 30,
                2006****ASSETS**Cash
                and due from financial institutions
            
            $
            3,950,120
            
            $
            3,454,828Federal
                funds sold
            
            
            16,277,951
            
            
            893,392Total
                cash and cash equivalents
            
            
            20,228,071
            
            
            4,348,220Interest-bearing
                term deposits in other institutions
            
            
            5,000,000
            
            
            -Securities
                available for sale
            
            
            16,486,226
            
            
            21,517,841Loans
                receivable, net of allowance for loan losses of $495,667 at March 31,
                2007 and $400,000 at June 30, 2006
            
            
            78,946,019
            
            
            77,325,934Federal
                Home Loan Bank stock, at cost
            
            
            322,992
            
            
            345,913Cash
                surrender value of life insurance
            
            
            4,693,206
            
            
            4,553,721Premises
                and equipment, net
            
            
            6,040,114
            
            
            5,402,419Accrued
                interest receivable
            
            
            435,289
            
            
            446,591Other
                assets
            
            
            493,832
            
            
            337,975Total
                assets
            
            $
            132,645,749
            
            $
            114,278,614**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**LiabilitiesDeposits
            
            $
            98,634,470
            
            $
            78,897,747Federal
                funds purchased
            
            
            -
            
            
            1,225,404Advances
                from borrowers for taxes and insurance
            
            
            371,182
            
            
            479,706Accrued
                interest payable and other liabilities
            
            
            433,568
            
            
            302,502Common
                stock in ESOP subject to contingent repurchase obligation
            
            
            948,497
            
            
            617,872Total
                liabilities
            
            
            100,387,717
            
            
            81,523,231Stockholders’
                equityPreferred
                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 March 31, 2007 and June 30, 2006
            
            
            26,450
            
            
            26,450Additional
                paid-in capital
            
            
            24,132,900
            
            
            24,739,005Retained
                earnings
            
            
            12,210,507
            
            
            12,822,013Treasury
                stock, 70,143 and 52,900 shares, at cost
            
            
            (1,066,476
            )
            
            (783,611
            )Accumulated
                other comprehensive loss, net of tax
            
            
            (155,633
            )
            
            (393,231
            )Unearned
                RRP shares
            
            
            -
            
            
            (897,072
            )Unearned
                ESOP shares
            
            
            (1,941,219
            )
            
            (2,140,299
            )Reclassification
                of ESOP shares
            
            
            (948,497
            )
            
            (617,872
            )Total
                stockholders’ equity
            
            
            32,258,032
            
            
            32,755,383Total
                liabilities and stockholders’ equity
            
            $
            132,645,749
            
            $
            114,278,614





*See
      accompanying notes to these unaudited consolidated financial
      statements.*




1
 *Table
          of Contents*




**ROYALFINANCIAL,
      INC. AND
      SUBSIDIARY**


CONSOLIDATED
        STATEMENTS OF INCOME (LOSS)
 AND
        COMPREHENSIVE INCOME (LOSS)


Three
      months and nine months ended March 31, 2007 and 2006


(Unaudited)




**Three
                Months Ended**
              **March
                31,**
            
            **Nine
                Months Ended**
              **March
                31,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Interest
                incomeLoans
            
            $
            1,326,649
            
            $
            1,194,149
            
            $
            4,065,186
            
            $
            3,139,577SecuritiesTaxable
            
            
            171,719
            
            
            226,865
            
            
            553,141
            
            
            802,524Federal
                funds sold and other
            
            
            320,299
            
            
            31,360
            
            
            783,532
            
            
            174,767Total
                interest income
            
            
            1,818,667
            
            
            1,452,374
            
            
            5,401,859
            
            
            4,116,868Interest
                expenseDeposits
            
            
            740,800
            
            
            339,153
            
            
            2,058,618
            
            
            971,352Federal
                funds purchased
            
            
            -
            
            
            264
            
            
            2,151
            
            
            264Total
                interest expense
            
            
            740,800
            
            
            339,417
            
            
            2,060,769
            
            
            971,616**Net
                interest income**
            
            
            1,077,867
            
            
            1,112,957
            
            
            3,341,090
            
            
            3,145,252Provision
                for loan losses
            
            
            35,667
            
            
            30,000
            
            
            95,667
            
            
            90,000**Net
                interest income after provision for loan losses**
            
            
            1,042,200
            
            
            1,082,957
            
            
            3,245,423
            
            
            3,055,252Noninterest
                incomeService
                charges on deposit accounts
            
            
            65,144
            
            
            55,697
            
            
            197,941
            
            
            174,110Loss
                on sale of securities, net
            
            
            -
            
            
            (43,823
            )
            
            -
            
            
            (45,457
            )Mortgage
                banking fees
            
            
            25,612
            
            
            37,364
            
            
            84,153
            
            
            74,639Earnings
                on cash surrender value of life insurance
            
            
            47,425
            
            
            54,566
            
            
            139,485
            
            
            162,697Other
                income
            
            
            10,227
            
            
            18,546
            
            
            48,148
            
            
            56,903Total
                noninterest income
            
            
            148,408
            
            
            122,350
            
            
            469,727
            
            
            422,892Noninterest
                expenseSalaries
                and employee benefits
            
            
            711,105
            
            
            695,442
            
            
            2,137,143
            
            
            1,797,164Occupancy
                and equipment
            
            
            336,972
            
            
            254,469
            
            
            936,189
            
            
            726,951Data
                processing
            
            
            106,024
            
            
            103,127
            
            
            272,575
            
            
            312,798Professional
                services
            
            
            126,966
            
            
            94,155
            
            
            483,813
            
            
            362,529Director
                fees
            
            
            34,200
            
            
            34,200
            
            
            102,600
            
            
            100,200Supplies
            
            
            19,018
            
            
            22,117
            
            
            87,319
            
            
            55,126Advertising
            
            
            33,902
            
            
            5,629
            
            
            187,422
            
            
            28,475Insurance
                premiums
            
            
            15,610
            
            
            20,055
            
            
            50,841
            
            
            58,943Other
            
            
            122,076
            
            
            90,523
            
            
            395,254
            
            
            222,048Total
                noninterest expense
            
            
            1,505,873
            
            
            1,319,717
            
            
            4,653,156
            
            
            3,664,234**Loss
                before income tax expense**
            
            
            (315,265
            )
            
            (114,410
            )
            
            (938,006
            )
            
            (186,090
            )Income
                tax benefit
            
            
            (93,500
            )
            
            (54,724
            )
            $
            (326,500
            )
            $
            (103,250
            )Net
                loss
            
            $
            (221,765
            )
            $
            (59,686
            )
            $
            (611,506
            )
            $
            (82,840
            )Basic
                and diluted earnings (loss) per share
            
            $
            (.09
            )
            $
            (.02
            )
            $
            (.26
            )
            $
            (.03
            )Comprehensive
                income (loss)
            
            $
            (184,809
            )
            $
            (67,396
            )
            $
            (373,908
            )
            $
            (281,550
            )





*See
      accompanying notes to these unaudited consolidated financial
      statements.*




2
 *Table
          of Contents*




**ROYALFINANCIAL,
      INC. AND
      SUBSIDIARY**


CONSOLIDATED
        STATEMENT OF STOCKHOLDERS’ EQUITY


Nine
      months ended March 31, 2007 and 2006


(Unaudited)




**2006**
            
            **Common
                Stock**
            
            **Additional
                Paid-In Capital**
            
            **Retained
                Earnings**
            
            **Treasury**
              **Stock**
            
            **Accumulated
                Other Compre-hensive Income (Loss)**
            
            **Unearned
                RRP Shares**
            
            **Unearned
                ESOP Shares**
            
            **Amount
                Reclassified on ESOP Shares**
            
            **Total**Balance
                at July 1, 2005
            
            $
            26,450
            
            $
            24,764,553
            
            $
            12,268,336
            
            $
            —
            
            $
            (113,322
            )
            $
            —
            
            $
            (2,406,726
            )
            $
            (272,964
            )
            $
            34,266,327Comprehensive
                income (loss)Net
                loss
            
            
            —
            
            
            —
            
            
            (82,840
            )
            
            
            
            
            —
            
            
            
            
            
            —
            
            
            —
            
            
            (82,840
            )Change
                in fair value of securities available-for-sale, net
            
            
            —
            
            
            —
            
            
            —
            
            
            
            
            
            (198,710
            )
            
            
            
            
            —
            
            
            —
            
            
            (198,710
            )Total
                comprehensive (loss)
            
            
            —
            
            
            —
            
            
            —
            
            
            
            
            
            —
            
            
            
            
            
            —
            
            
            —
            
            
            (281,550
            )Reclassification
                due to change in fair value of common stock in ESOP subject to contingent
                repurchase obligation
            
            
            —
            
            
            —
            
            
            —
            
            
            
            
            
            —
            
            
            
            
            
            —
            
            
            (41,262
            )
            
            (41,262
            )Purchase
                of 107,550 treasury shares at cost
            
            
            —
            
            
            —
            
            
            —
            
            
            (1,582,768
            )
            
            —
            
            
            
            
            
            —
            
            
            —
            
            
            (1,582,768
            )Allocation
                of 79,350 shares to the RRP plan
            
            
            
            
            
            (57,912
            )
            
            
            
            
            1,163,998
            
            
            
            
            
            (1,106,086
            )
            
            
            
            
            
            
            
            —RRP
                shares earned
            
            
            —
            
            
            
            
            
            —
            
            
            
            
            
            —
            
            
            156,837
            
            
            —
            
            
            —
            
            
            156,837Release
                of 15,800 of unearned ESOP shares
            
            
            —
            
            
            22,342
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            200,067
            
            
            —
            
            
            222,409Balance
                at March 31, 2006
            
            $
            26,450
            
            $
            24,728,983
            
            $
            12,185,496
            
            $
            (418,770
            )
            $
            (312,032
            )
            $
            (949,249
            )
            $
            (2,206,659
            )
            $
            (314,226
            )
            $
            32,739,9932007Balance
                at July 1, 2006
            
            $
            26,450
            
            $
            24,739,005
            
            $
            12,822,013
            
            $
            (783,611
            )
            $
            (393,231
            )
            $
            (897,072
            )
            $
            (2,140,299
            )
            $
            (617,872
            )
            $
            32,755,383Comprehensive
                income (loss)Net
                loss
            
            
            —
            
            
            —
            
            
            (611,506
            )
            
            
            
            
            —
            
            
            
            
            
            —
            
            
            —
            
            
            (611,506
            )Change
                in fair value of securities available-for-sale, net
            
            
            —
            
            
            —
            
            
            —
            
            
            
            
            
            237,598
            
            
            
            
            
            —
            
            
            —
            
            
            237,598Total
                comprehensive (loss)
            
            
            —
            
            
            —
            
            
            —
            
            
            
            
            
            —
            
            
            
            
            
            —
            
            
            —
            
            
            (373,908
            )Reclassification
                due to change in fair value of common stock in ESOP subject to contingent
                repurchase obligation
            
            
            —
            
            
            —
            
            
            —
            
            
            
            
            
            —
            
            
            
            
            
            —
            
            
            (330,625
            )
            
            (330,625
            )Reclassification
                of RRPS in conjunction with adoption of SFAS 123 (R)
            
            
            —
            
            
            (897,072
            )
            
            —
            
            
            —
            
            
            —
            
            
            897,072
            
            
            —
            
            
            —
            
            
            —Release
                of 15,800 of unearned ESOP shares
            
            
            —
            
            
            50,733
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            199,080
            
            
            —
            
            
            249,813Issuance
                of 5,000 shares to RRP plan
            
            
            —
            
            
            (74,250
            )
            
            —
            
            
            74,250
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Tax
                benefit on RRP shares vested
            
            
            —
            
            
            7,482
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            7,482Purchase
                of 22,243 treasury shares at cost
            
            
            —
            
            
            —
            
            
            —
            
            
            (357,115
            )
            
            —
            
            
            
            
            
            —
            
            
            —
            
            
            (357,115
            )Stock-based
                compensation
            
            
            —
            
            
            307,002
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            307,002Balance
                at March 31, 2007
            
            $
            26,450
            
            $
            24,132,900
            
            $
            12,210,507
            
            $
            (1,066,476
            )
            $
            (155,633
            )
            $
            -
            
            $
            (1,941,219
            )
            $
            (948,497
            )
            $
            32,258,032





*See
      accompanying notes to these unaudited consolidated financial
      statements.*




3
 *Table
          of Contents*





**ROYALFINANCIAL,
      INC. AND
      SUBSIDIARY**


**CONSOLIDATED
        STATEMENTS OF CASH FLOWS**


Nine
      months ended March 31, 2007 and 2006


(Unaudited)




**2007**
            
            **2006****Cash
                flows from operating activities**Net
                income (loss)
            
            $
            (611,506
            )
            $
            (82,840
            )Adjustments
                to reconcile net income (loss) to net cash from operating
                activities:Depreciation
            
            
            327,412
            
            
            210,129Provision
                for loan losses
            
            
            95,667
            
            
            90,000Loss
                on sale of securities available for sale
            
            
            —
            
            
            45,457Federal
                Home Loan Bank stock dividend
            
            
            —
            
            
            (8,014
            )Earnings
                on bank-owned life insurance
            
            
            (139,485
            )
            
            (162,697
            )ESOP
                expense
            
            
            249,813
            
            
            222,409Stock-based
                compensation
            
            
            307,002
            
            
            156,837Change
                in accrued interest receivable and other assets
            
            
            (266,954
            )
            
            (146,373
            )Change
                in other accrued interest payable and liabilities
            
            
            131,066
            
            
            193,578Net
                cash from operating activities
            
            
            93,015
            
            
            518,486**Cash
                flows from investing activities**Investment
                in interest-bearing term deposits at other financial
                institutions
            
            
            (5,000,000
            )
            
            -Proceeds
                from sales, maturities, calls, and paydowns of available for sale
                securities
            
            
            7,394,741
            
            
            11,343,481Purchases
                of securities available for sale
            
            
            (2,003,129
            )
            
            (2,000,000
            )Change
                in loans receivable
            
            
            130,811
            
            
            (14,652,397
            )Purchase
                of loan participations
            
            
            (1,846,563
            )
            
            (6,851,000
            )Redemption
                of Federal Home Loan Bank stock
            
            
            22,921
            
            
            —Purchase
                of premises and equipment
            
            
            (965,107
            )
            
            (155,123
            )Net
                cash from investing activities
            
            
            (2,266,326
            )
            
            (12,315,039
            )**Cash
                flows from financing activities**Net
                increase (decrease) in deposits
            
            
            19,736,723
            
            
            (473,268
            )Net
                increase (decrease) in Federal funds purchased
            
            
            (1,225,404
            )
            
            2,500,000Change
                in advances from borrowers for taxes and insurance
            
            
            (108,524
            )
            
            (92,184
            )Purchase
                of Treasury stock
            
            
            (357,115
            )
            
            (1,582,768
            )Tax
                benefit on RRP shares
            
            
            7,482
            
            
            —Net
                cash from financing activities
            
            
            18,053,162
            
            
            351,780Net
                change in cash and cash equivalents
            
            
            15,879,851
            
            
            (11,444,773
            )Cash
                and cash equivalentsBeginning
                of the year
            
            
            4,348,220
            
            
            17,021,696End
                of period
            
            $
            20,228,071
            
            $
            5,576,923





*See
      accompanying notes to these unaudited consolidated financial
      statements.*




4
 *Table
          of Contents*




**ROYALFINANCIAL,
      INC. AND SUBSIDIARY**


**Notes
      to Unaudited Financial Statements**




**Note
      1 — Nature of Business**




Royal
      Financial, Inc. was incorporated under the laws of Delaware on
      September 15, 2004, for the purpose of serving as the holding company of
      Royal Savings Bank (the “Bank”) as part of the Bank’s conversion from a mutual
      to stock form of organization.




**Note
      2 — Basis of Presentation**




The
      accompanying unaudited consolidated financial statements include the accounts
      of
      Royal Financial, Inc. (the “Company”) and its wholly owned subsidiary, Royal
      Savings Bank, as of and for the three- and nine- month periods ended
      March 31, 2007 and 2006. Significant intercompany accounts and transactions
      have been eliminated in consolidation.




The
      accompanying unaudited interim consolidated financial statements have been
      prepared pursuant to the rules and regulations for reporting on Form 10-QSB.
      Accordingly, certain disclosures required by U.S. generally accepted accounting
      principles (GAAP) are not included herein. These interim financial statements
      should be read in conjunction with the audited financial statements and
      accompanying notes of the Company for the fiscal years ended June 30, 2006
      and 2005. The results of the Company’s operations for any interim period are not
      necessarily indicative of the results of the Company’s operations for any other
      interim period or for a full fiscal year.




Interim
      statements are subject to possible adjustment in connection with the annual
      audit of the Company’s financial statements for the fiscal year ending
      June 30, 2007. In the opinion of management of the Company, the
      accompanying unaudited interim consolidated financial statements reflect all
      adjustments (consisting of normal recurring adjustments) necessary for a fair
      presentation of the consolidated financial position and consolidated results
      of
      operations for the periods presented.




**Note
      3 — Use of Estimates**




The
      preparation of the consolidated financial statements in conformity with GAAP
      requires management to make estimates and assumptions that affect amounts
      reported in the consolidated financial statements. Changes in these estimates
      and assumptions are considered reasonably possible and may have a material
      impact on the consolidated financial statements and thus actual results could
      differ from the amounts reported and disclosed herein. The Company considers
      the
      allowance for loan losses and the carrying value of deferred tax asset accounts
      to be critical accounting estimates.




**Note
      4 — Earnings (Loss) Per Share**




The
      following table presents a reconciliation of the components used to compute
      basic and diluted earnings (loss) per share for the three-month and nine-month
      periods ended March 31, 2007 and 2006. Weighted average common shares
      outstanding excludes unallocated ESOP shares.




5
 *Table
          of Contents*




**Three
                Months Ended**
              **March 31,
                2007**
            
            **Three
                Months Ended**
              **March
                31, 2006**
            
            **Nine
                Months Ended**
              **March 31,
                2007**
            
            **Nine
                Months Ended**
              **March
                31, 2006**Basic
                and diluted loss per shareNet
                loss as reported
            
            $
            (221,765
            )
            $
            (59,686
            )
            $
            (611,506
            )
            $
            (82,840
            )Weighted
                average common shares outstanding
            
            
            2,351,023
            
            
            2,389,703
            
            
            2,355,674
            
            
            2,435,879Basic
                and diluted loss per share
            
            $
            (.09
            )
            $
            (.02
            )
            $
            (.26
            )
            $
            (.03
            )




The
      effect of stock options and stock awards was not included in the calculation
      of
      diluted loss per share because to do so would have been anti-dilutive for all
      shares given the Company’s losses for the periods.




**Note
      5 - Stock-Based Compensation**




In
      October 2005, the Company’s stockholders approved the Royal Financial, Inc. 2005
      Stock Option Plan (“SOP”) and the Royal Financial, Inc. 2005 Management
      Recognition and Retention Plan (“RRP”). The SOP provides for issue of up to
      264,500 options to directors, officers, and key employees. The options become
      exercisable in equal installments over a five-year period from the date of
      grant. The options expire ten years from the date of grant. As of March 31,
      2007, there are 56,125 shares available for future grants under the Plan. Option
      activity under the Plan is as follows:




**Number
                of Shares**
            
            **Weighted
                Average Exercise Price**
            
            **Weighted
                Average Contractual Life**
            
            **Aggregate
                Intrinsic Value**Outstanding
                at July 1, 2006
            
            
            198,375
            
            $
            13.94Granted
            
            
            10,000
            
            
            14.60Exercised
            
            
            —
            
            
            —Forfeited
            
            
            —
            
            
            —Outstanding
                at March 31, 2007
            
            
            208,375
            
            $
            13.97
            
            
            8.63
            
            $
            485,297Exercisable
                at March 31, 2007(1)
            
            
            50,255
            
            $
            13.93
            
            
            8.63
            
            $
            119,051




(1)  The
      vesting of 13,225 options was accelerated in the third quarter of 2006 due
      to
      the death of the Company's former chief financial officer.




No
      options were granted during the quarter ended March 31, 2007.





The
      fair
      value of each option grant is estimated on the date of grant using the
      Black-Scholes option pricing model using the following assumptions for options
      granted in July 2006 of the fiscal year ended 2007:




**2007**Risk-free
                interest rate
            
            
            5.10
            %Expected
                option life
            
            
            7
                yearsExpected
                stock price volatility
            
            
            20.00
            %Dividend
                yield
            
            
            0.00
            %




6
 *Table
          of Contents*




As
      of
      March 31, 2007, there was $694,000 of total unrecognized compensation cost
      related to nonvested share-based compensation arrangements granted under the
      SOP. That cost is expected to be recognized over a weighted-average period
      of
      approximately 3.60 years. Options for 2,645 shares of common stock vested during
      the three months ended March 31, 2007.




The
      Company adopted FAS 123(R) on July 1, 2006, which has resulted in compensation
      expense of $41,000 and $142,000 for the three and nine months ended March 31,
      2007. The Company elected the modified prospective method, under which prior
      periods are not revised for comparative purposes.




Forfeitures
      for options granted prior to 2006 were recognized as they occurred. Beginning
      July 1, 2006, the Company is estimating the impact of future forfeitures
      consistent with the provisions of FAS 123(R).




Prior
      to
      July 1, 2006, the Company accounted for stock-based awards to employees using
      the intrinsic value method in accordance with Accounting Principles Board
      (“APB”) Opinion No. 25, *Accounting
      for Stock Issued to Employees* .
      No
      compensation expense was recognized in the financial statements for stock option
      arrangements, as the Company’s stock option plan provides for the issuance of
      options at a price of no less than the fair market value at the date of the
      grant.




Statement
      of Financial Accounting Standards (“Statement”) No. 123, *Accounting
      for Stock-Based Compensation* ,
      requires the disclosure of pro forma net income and earnings per share had
      the
      Company adopted the fair value method at the grant date of all stock options.
      Under Statement 123, the fair value of stock-based awards is calculated through
      the use of option pricing models, even though such models were developed to
      estimate the fair value of freely tradable, fully transferable options without
      vesting restrictions, which differ significantly from the Company's stock option
      awards. These models also require subjective assumptions, which affect the
      calculated values.




In
      December 2004, the FASB issued Statement 123 (revised 2004), *Share-Based
      Payment* .
      This
      Statement requires that compensation costs related to share-based payment
      transactions be recognized in the financial statements. Measurement of the
      cost
      of employee service is based on the grant-date fair value of the equity or
      liability instruments issued. That cost is recognized over the period during
      which an employee is required to provide service in exchange for the award.




The
      weighted average grant-date fair value of options granted for the three and
      nine
      months ended March 31, 2006 was $5.05 and $4.83.  The following table
      illustrates the effect on net loss and loss per share if expense was measured
      using the fair value recognition provisions of FASB Statement No. 123, *Accounting
      for Stock-Based Compensation* ,
      for the
      three and nine month periods ended March 31, 2006.




**Three
                Months Ended**
            
            **Nine
                Months Ended**Net
                loss as reported
            
            $
            (59,686
            )
            $
            (82,840
            )Ded
                Deducted: stock-based compensation expense
              determined
                under fair value-based method
            
            
            99,106
            
            
            133,639Pro
                forma loss income
            
            $
            (158,792
            )
            $
            (216,479
            )Basic
                and diluted loss per share as reported
            
            
            (.02
            )
            
            (.03
            )Pro
                forma basic and diluted loss per share
            
            
            (.07
            )
            
            (.09
            )




7
 *Table
          of Contents*




A
      Recognition and Retention Plan (“RRP”)
      provides for
      issue of shares to directors, officers, and employees. Compensation expense
      is
      recognized over the vesting period of the shares based on the market value
      of
      the Company’s
      common stock at the issue date. Pursuant to the RRP, the Company can award
      up to
      105,800 shares of restricted stock. These shares vest over a five-year period.
      Prior to July 1, 2006, the unamortized cost of shares not yet earned (vested)
      was reported as a reduction of shareholders’ equity. Upon adoption of FAS
      123(R), the unamortized cost of shares not yet earned was reclassified to
      additional paid-in capital. During the quarter ended March 31, 2007, no shares
      were granted. As of March 31, 2007, 21,450 shares could still be granted under
      the plan. Compensation expense for outstanding restricted stock awards totaled
      approximately $55,000 and $166,000 for the three and nine months ended March
      31,
      2007. Compensation expense of $120,000 and $157,000 was recorded for the three
      and nine months ended March 31, 2006. The death of the Company’s former chief
      financial officer resulted in the immediate vesting of his stock awards. The
      Company recognized $67,000 of compensation expense related to the vesting of
      these awards in the three-month period ended March 31, 2006.




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




***Forward-Looking
      Information***




This
      report includes forward-looking statements, including statements regarding
      our
      strategy, effectiveness of investment programs, evaluations of future interest
      rate trends and liquidity, expectations as to growth in assets, deposits and
      results of operations, future operations, market position, financial position,
      and prospects, plans and objectives of management. These forward-looking
      statements, which are based on certain assumptions and describe our future
      plans, strategies and expectations, can generally be identified by use of the
      words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or
      similar expressions. Our ability to predict results or the actual effect of
      future plans or strategies is inherently uncertain and actual results may differ
      materially from those predicted in such forward-looking statements. Factors
      that
      could have a material adverse effect on the operations and future prospects
      of
      the Company and the Bank include, but are not limited to, changes in: interest
      rates; the economic health of the local real estate market; general economic
      conditions; legislative/regulatory provisions; monetary and fiscal policies
      of
      the U.S. Government, including policies of the U.S. Treasury and the Federal
      Reserve Board; the quality or composition of the loan and securities portfolios;
      demand for loan products; deposit flows; competition; demand for financial
      services in the Bank’s market area; and accounting principles, policies, and
      guidelines. These risks and uncertainties should be considered in evaluating
      forward-looking statements, and undue reliance should not be placed on such
      statements.




8
 *Table
          of Contents*




***Comparison
      of Financial Condition at March 31, 2007 and June 30,
      200*** ***6***




The
      Company’s total assets increased $18.3 million, or 16.1%, to $132.6 million at
      March 31, 2007, from $114.3 million at June 30, 2006.




Cash
      and
      cash equivalents increased $15.9 million to $20.2 million at March 31, 2007
      from $4.3 million at June 30, 2006, primarily as a result of an increase of
      $15.4 million in federal funds sold. The Company is using this short-term
      investment to maintain its liquidity position given the current interest rate
      environment.




Interest-bearing
      deposits in other financial institutions increased $5.0 million at March 31,
      2007 due to the purchase of a $5.0 million certificate of deposit earning 5.15%
      at the Federal Home Loan Bank of Chicago.




Securities
      available for sale decreased $-5.0 million, or 23.3%, to $16.5 million at
      March 31, 2007 from $21.5 million at June 30, 2006. The decrease is
      the result of $7.3 million of securities maturing or being repaid during the
      period ended March 31, 2007. The decrease was offset by $2.0 million in
      purchases of securities available for sale.




Loans
      increased $1.6 million, or 2.1%, to $78.9 million at March 31, 2007, from $77.3
      million at June 30, 2006. The increase in loans was the result of
      management’s continued emphasis on growing the commercial and commercial real
      estate loan portfolios.




Total
      deposits increased $19.7 million, or 25.0%, to $98.6 million at March 31, 2007,
      from $78.9 million at June 30, 2006. The increase was due to a special
      certificate of deposit promotion offering above-market deposit rates at our
      two
      new branch locations.




Total
      stockholders’ equity decreased $500,000 at March 31, 2007 to $32.3 million
      from $32.8 million at June 30, 2006, due to year-to-date losses in the
      current fiscal year.




***Comparison
      of Results of Operation for the Three Months and Nine Months Ended
      March 31, 2007 and 200*** ***6***




*General* .
      Net
      loss for the three months ended March 31, 2007 was $222,000, or $0.09 per
      share, an increase in net loss of $162,000 from $59,686, or $0.02 per share,
      in
      the same period in 2006. For the nine months ended March 31, 2007, the net
      loss was $612,000, or $0.26 per share, an increase in net loss of $529,000
      from
      $83,000, or $0.03 per share, in the same period last year. The increase in
      net
      loss for the quarter and nine months ended March 31, 2007 is primarily the
      result of an increase in interest expense and increased overhead costs,
      primarily in the area of salaries and employee benefits, occupancy and
      equipment, and advertising in connection with the opening and continued
      promotion of our two new branch locations in August 2006.




*Net
      Interest Income* .
      Net
      interest income remained stable at $1.1 million for the three months ended
      March 31, 2007, from the same period in 2006. Net interest income increased
      $196,000 to $3.3 million for the nine months ended March 31, 2007, from
      $3.1 million in the same period in 2006. The net interest rate spread was 3.16%
      and 3.45% for the three and nine months ended March 31, 2007, respectively,
      as compared to 4.02% and 3.78% for the same period in 2006. The net interest
      margin decreased to 3.71% and 3.90% for the three and nine month periods ended
      March 31, 2007, from 4.51% and 4.23% for the same periods in 2006. As the
      Company is more liability sensitive, its liabilities reprice faster than its
      assets in a rising rate environment, as has been the case over the last three
      quarters. As a result, the Company’s interest rate spread and net interest
      margin narrowed.




9
 *Table
          of Contents*




*Interest
      Income* .
      Total
      interest income increased $366,000 to $1.8 million for the three months ended
      March 31, 2007 from $1.5 million for the three months ended March 31,
      2006. Total interest income increased $1.3 million to $5.4 million for the
      nine
      months ended March 31, 2007 from $4.1 million for the same period in 2006.
      For the three and nine months ended March 31, 2007, average
      interest-earning assets were $116.3 million and $114.1 million, respectively,
      compared to $98.8 million and $99.1 million for the same periods in 2006. The
      yield on interest-earning assets increased to 6.25% and 6.31% for the three
      and
      nine month periods ended March 31, 2006 from 5.88% and 5.54% for the
      comparable periods in 2006, as a result of an increase in loans and market
      interest rates earned on such loans.




*Interest
      Expense* .
      Total
      interest expense increased $402,000 and $1.1 million to $741,000 and $2.1
      million, respectively, for the three and nine months ended March 31, 2007
      from $339,000 and $971,000 for the same periods in 2006. **** The
      average cost of funds increased to 3.09% and 2.86% for the three and nine months
      ended March 31, 2007 from 1.75% and 1.66% for the same periods in 2006.
      This increase was due to the rising rate environment that we have experienced
      over the last three quarters and, to a lesser extent, the interest rates offered
      on our special certificate of deposit promotion at our two new branch
      locations.




*Provision
      for Loan Losses* .
      Provisions for loan losses are charged to operations at a level required to
      reflect probable incurred credit losses in the loan portfolio. In evaluating
      the
      level of the allowance for loan losses, management considers historical loss
      experience, the composition and amount of loans in the loan portfolio, adverse
      situations that may affect the borrower’s ability to repay, estimated value of
      any underlying collateral, peer group information, and prevailing economic
      conditions. Large groups of smaller balance homogenous loans, such as
      residential real estate, small commercial real estate, and home equity and
      consumer loans, are evaluated in the aggregate using historical loss factors
      and
      peer group data adjusted for current economic conditions. Large balance and/or
      more complex loans, such as multi-family and commercial real estate loans,
      are
      evaluated individually for impairment.




This
      evaluation is inherently subjective, as it requires estimates that are
      susceptible to revision as more information becomes available or as projected
      events change. Provisions for loan losses of $36,000 and $96,000 were made
      for
      the three and nine months ended March 31, 2007. The provisions were the
      result of continued growth of the loan portfolio and an increase in loans
      collateralized by commercial and commercial real estate relative to the loan
      portfolio. The allowance for loan losses as a percentage of gross loans
      outstanding increased to 0.62% at March 31, 2007, from 0.51% at
      March 31, 2006. The Bank had no nonperforming loans at March 31, 2007
      or March 31, 2006.




Management
      assesses the allowance for loan losses quarterly. While management uses
      available information to recognize losses on loans, future loan loss provisions
      may be necessary based on changes in economic conditions. In addition,
      regulatory agencies, as an integral part of their examination process,
      periodically review the allowance for loan losses and may require us to
      recognize additional provisions based on their judgment of information available
      to them at the time of their examination. The allowance for loan losses as
      of
      March 31, 2007 was maintained at a level that represented management’s best
      estimate of losses in the loan portfolio to the extent they were both probable
      and reasonably estimable.




*Noninterest
      Income* .
      Noninterest income increased $26,000 to $148,000 for the three month period
      ended March 31, 2007 from the same period in 2006. Noninterest income
      increased $47,000 to $470,000 for the nine month period ended March 31,
      2007, compared to the same period in 2006. The increase in the three month
      period was primarily the result of the absence of losses from the sales of
      securities, compared to a $44,000 loss on the sale of securities during the
      comparable quarter last year, and an increase in service charges on deposit
      accounts, offset by a decrease in mortgage banking fees. The increase in
      noninterest income for the nine month period ended




10
 *Table
          of Contents*




March 31,
      2007, was primarily the result of the absence of security losses as compared
      to
      the $45,000 loss for the same period last year, and increased service charges
      on
      deposit accounts resulting from the increased customer activity in our two
      new
      branch locations.




*Noninterest
      Expense* .
      Noninterest expense increased $186,000 and $990,000 to $1.5 million and $4.7
      million for the three and nine months ended March 31, 2007 from $1.3
      million and $3.7 million for the three and nine months ended March 31,
      2006. The increase was primarily the result of an increase in salaries and
      employee benefits, occupancy and equipment expenses, and
      advertising.




Salaries
      and employee benefits increased $16,000 and $340,000 for the three and nine
      months ended March 31, 2007, respectively, compared to the same periods in
      2006. This was primarily the result of increased stock-based compensation
      expense for the quarter and nine months ended March 31, 2007 and the result
      of
      increased personnel expenses from the two newly opened branches in Frankfort,
      Illinois and Schereville, Indiana.




Occupancy
      and equipment expense increased $83,000 and $209,000 for the three and nine
      months ended March 31, 2007 compared to the same periods in 2006, due
      primarily to increased rent and depreciation for the two new branch
      locations.




Advertising
      expense increased $28,000 and $159,000 for the three and nine months ended
      March 31, 2007 from the same periods in 2006. These increases were the
      result of the opening of our two new branch locations.




*Provision
      for Income Taxes* .
      The
      income tax benefit increased $39,000 for the three months ended March 31,
      2007 from the comparable period in 2006, which helped decrease the amount of
      the
      net loss for the quarterly and nine month periods. For the nine months ended
      March 31, 2007, the tax benefit was $327,000 as compared to the tax benefit
      of $103,000 recorded for the comparable nine month period in 2006. The changes
      in the income tax benefits are the result of the changes in pre-tax losses
      for
      the applicable periods. The valuation allowance for the deferred tax asset
      related to the charitable contributions made in 2005 increased $50,000 during
      the period ending March 31, 2007 due to continued losses in excess of budget
      projections.




***Liquidity
      and Capital Resources***




*Liquidity* .
      Liquidity management is measured and monitored on both a short- and long-term
      basis, allowing management to better understand and react to emerging balance
      sheet trends. After assessing actual and projected cash flow needs, management
      seeks to obtain funding at the most economical cost. Our primary sources of
      funds are deposits, principal and interest payments on loans, proceeds from
      maturities and calls of securities and FHLB advances, and funds provided from
      operations. While maturities and scheduled amortization of loans and securities
      are relatively predictable sources of funds, deposit flows and loan repayments
      are greatly influenced by general interest rates, economic conditions, and
      competition. We invest excess funds in short-term interest-earning assets,
      which
      enable us to meet lending requirements. We utilize FHLB advances as needed.
      At
      March 31, 2007 there were no FHLB advances outstanding. However, Fed Funds
      sold
      was used to maintain liquidity during the period.




The
      Company’s cash flows are comprised of three primary classifications: cash flows
      from operating activities, investing activities, and financing activities.
      Net
      cash from operating activities was $93,000 and $518,000 for three months ended
      March 31, 2007 and 2006, respectively. Net cash from investing activities
      consisted primarily of disbursements for loan originations and participation
      interests and the purchase of securities, offset by principal collections on
      loans, proceeds from the maturity and sale of securities and paydowns on
      mortgage-backed securities. Net cash from investing activities was




11
 *Table
          of Contents*




$(2.3)
      million and $(12.3) million for three months ended March 31, 2007, and
      2006, respectively. Net cash from financing activities in the current year
      consisted primarily of the activity in deposit accounts, federal funds
      purchased, and borrowings. The net cash from financing activities was $18.1
      million at March 31, 2007 and $352,000 at March 31, 2006.




From
      June 30, 2006 through March 31, 2007, the Company received proceeds of
      $7.3 million from sales, maturities, calls and paydowns of available for sale
      securities held in its portfolio. These proceeds were primarily reinvested
      in
      new loans.




At
      March 31, 2007, the Company had outstanding commitments to originate loans,
      unfunded lines of credit and participation loans of $15.2 million, and letters
      of credit outstanding of $147,000. In addition, as of March 31, 2007, the
      total amount of certificates of deposit that were scheduled to mature in the
      next 12 months equaled $49.1 million. The Company believes that it has adequate
      resources to fund all of its commitments and that it can adjust the rates paid
      on certificates of deposit to retain deposits in changing interest rate
      environments. If the Company requires funds beyond its internal funding
      capabilities, advances from the FHLB are available as an additional source
      of
      funds. As of March 31, 2007, the Bank had $6.5 million of available credit
      from the FHLB.




*Capital* .
      The
      Bank is required to maintain regulatory capital sufficient to meet Tier 1
      leverage, Tier 1 risk-based and total risk-based capital ratios of at least
      4.0%, 4.0% and 8.0%, respectively. At March 31, 2007, the Bank exceeded
      each of its capital requirements with ratios of 18.38%, 27.94% and 28.53%,
      respectively.




***Critical
      Accounting Policies and Estimates***




The
      accounting and reporting policies of the Company are in accordance with U.S.
      generally accepted accounting principles and conform to general practices within
      the banking industry. Accounting and reporting policies for the allowance for
      loan losses and income tax are deemed critical because they involve the use
      of
      estimates and require significant management judgments.




*Allowance
      for Loan Losses* .
      The
      allowance for loan losses is an amount that management believes will be adequate
      to absorb probable incurred losses in existing loans, taking into consideration
      such factors as past loss experience, changes in the nature and volume of the
      portfolio, overall portfolio quality, loan concentrations, specific problem
      loans, and current economic conditions that affect the borrower’s ability to
      pay. Determination of the allowance is inherently subjective due to the
      above-mentioned reasons. Loan losses are charged off against the allowance
      when
      management believes that the full collectability of the loan is unlikely.
      Recoveries of amounts previously charged off are credited to the allowance.
      Allowances established to provide for losses under commitments to extend credit,
      or recourse provisions under loan sales agreements or servicing agreements
      are
      classified with other liabilities.




A
      loan is
      considered impaired when it is probable that not all principal and interest
      amounts will be collected according to the loan contract. Residential mortgage,
      installment and other consumer loans are collectively evaluated for impairment.
      Individual commercial loans are evaluated for impairment. Impaired loans are
      recorded at the loan’s fair value by the establishment of a specific allowance
      where necessary. The fair value of collateral-dependent loans is determined
      by
      the fair value of the underlying collateral. The fair value of
      noncollateral-dependent loans is determined by discounting expected future
      interest and principal payments at the loan’s effective interest
      rate.




The
      Company maintains the allowance for loan losses at a level adequate to absorb
      management’s estimate of probable losses inherent in the loan portfolio.
      Management believes that it uses the best information available to determine
      the
      adequacy of the allowance for loan losses. However,




12
 *Table
          of Contents*




future
      adjustments to the allowance may be necessary and the results of operations
      could be significantly and adversely affected if circumstances differ
      substantially from the assumptions used in making the
      determinations.




*Income
      Taxes* .
      Accounting for income taxes is a critical accounting policy due to the
      subjective nature of certain estimates that are involved in the calculation.
      The
      Company uses an asset/liability method of accounting for income taxes in which
      deferred tax assets and liabilities are established for temporary differences
      between the financial reporting basis and the tax basis of the Company’s assets
      and liabilities. The Company must assess the realization of the deferred tax
      asset quarterly, and to the extent that management believes that recovery is
      not
      likely, a valuation allowance is established. This assessment is impacted by
      various factors, including taxable income and the composition of the investment
      securities portfolio. Material changes to these items can cause an adjustment
      to
      the valuation allowance. An adjustment to increase or decrease the valuation
      allowance is charged or credited, if necessary, to income tax
      expense.




**Item
      3.**  **Controls
      and Procedures** **.**




The
      Company maintains disclosure
      controls and procedures that are designed to ensure that information required
      to
      be disclosed in the Company’s reports that it files or submits under the
      Securities Exchange Act of 1934 is recorded, processed, summarized and reported
      within the time periods specified in the Securities and Exchange Commission’s
      rules and forms, and that such information is accumulated and communicated
      to
      the Company’s management, including its Chief Executive Officer and Chief
      Financial Officer, as appropriate to allow timely decisions regarding required
      disclosure. As of the end of the period covered by this report, the Company
      carried out an evaluation, with the participation of management, including
      its
      Chief Executive Officer and Chief Financial Officer, of the effectiveness of
      the
      design and operation of its disclosure controls and procedures pursuant to
      the
      Exchange Act Rule 13a-15. Based upon, and as of the date of that
      evaluation, the Chief Executive Officer and Chief Financial Officer concluded
      that our disclosure controls and procedures were not effective as
      of March 31, 2007, because of the material weakness disclosed below.





As
      previously disclosed in the Company’s Annual Report on Form 10-KSB for the
      fiscal year ended June 30, 2006, in connection with its audit of the Company’s
      consolidated financial statements for the year ended June 30, 2006, Crowe Chizek
      and Company LLC (“Crowe Chizek”), the Company’s independent registered public
      accounting firm, advised the Board of Directors, the Audit Committee and
      management of certain significant internal control deficiencies that they
      considered to be, in the aggregate, a material weakness. A material weakness
      is
      a significant deficiency, or combination of significant deficiencies, that
      results in more than a remote likelihood that a material misstatement of the
      annual or interim financial statements will not be prevented or detected.





In
      particular, in connection with the audit for the year ended June 30, 2006,
      Crowe
      Chizek identified several adjustments and corrections that had to be
      incorporated into the consolidated financial statements as a result of Crowe
      Chizek’s audit. These adjustments encompassed various areas, including deferred
      loan costs, income taxes, professional fees, and the employee stock ownership
      plan. According to Crowe Chizek, these adjustments and corrections indicated
      that management’s internal review process over financial reporting was not
      appropriately designed and implemented. Specifically, Crowe Chizek advised
      the
      Board of Directors, the Audit Committee and management that: (a) a formal
      procedure was not in place to ensure that entries were recorded in accordance
      with United States generally accepted accounting principles and that the posting
      of these entries was appropriately reviewed; and (b) when there were departures
      from United States generally accepted accounting principles, a formal procedure
      was not in place to ensure that an analysis of the potential differences was
      completed, conclusions as to materiality documented and remediation steps
      determined on a quarterly and annual basis.




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In
      order
      to remediate this material weakness identified by Crowe Chizek and to improve
      the effectiveness of the Company’s disclosure controls, management is continuing
      in the process of designing, implementing and continuing to enhance
      its disclosure controls and procedures, including its internal control over
      financial reporting, to correct the material weakness set forth above.
      Management will continue to monitor, evaluate and test the operating
      effectiveness of these controls.




Except
        as
        noted above, there were no changes in our internal control over financial
        reporting identified in connection with our evaluation of it that occurred
        during the three months ended March 31, 2007 that materially affected, or
        are
        reasonably likely to materially affect, our internal control over financial
        reporting.


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**PART II. -
      OTHER INFORMATION**




**Item
      1.**  **Legal
      Proceedings** **.**




Neither
      the Company nor the Bank is involved in any pending legal proceedings other
      than
      routine legal proceedings occurring in the ordinary course of business that,
      in
      the aggregate, are believed by management to be immaterial to the Company’s
      business, financial condition, results of operations and cash
      flows.




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




The
      following table provides information about purchases by the Company during
      the
      quarter ended March 31, 2007 of equity securities that are registered by the
      Company pursuant to Section 12 of the Securities Exchange Act of
      1934.




**Period**
            
            **(a)**
              **Total
                Number of Shares Purchased**
            
            **(b)**
              **Average
                Price paid per Share**
            
            **(c)**
              **Total
                Number of Shares Purchased as part of publicly announced Plans or
                Programs**
            
            **(d)**
              **Maximum
                Number of Shares that may be purchased under the
                Plans/**
              **Program
                (1)**01/01/07-01/31/07
            
            
            218
            
            $
            16.50
            
            
            218
            
            
            103,42002/01/07-02/28/07
            
            
            —
            
            
            —
            
            
            218
            
            
            103,42003/01/07-03/31/07
            
            
            25
            
            
            16.72
            
            
            243
            
            
            103,395Total
            
            
            243
            
            $
            16.45
            
            
            243
            
            
            103,395


______________


(1)
              In
                  September 2006, the Company’s Board of Directors approved the repurchase
                  of up to 5% of the Company’s then currently outstanding shares of common
                  stock, or 125,638 shares (the “Program”). Unless terminated earlier by the
                  Company’s Board of Directors, the Program will expire when the Company
                  has
                  repurchased all shares authorized for repurchase thereunder.




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




None




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




None




**Item
      5.**  **Other
      Information** **.**




None




**Item
      6.**  **Exhibits** **.**




(a)  The
      exhibits filed as part of this Form 10-QSB are listed in the Exhibit Index,
      which is incorporated herein by reference.




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**SIGNATURES**




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




Date: May 15, 2007
                      **ROYAL
                        FINANCIAL, INC.**
   By:
                      /s/Donald
                        A. Moll
 Name:  Donald
                        A. MollTitle:    President
                        and Chief Executive Officer
 Date:
                              May 15, 2007
                          By:
                          /s/Leonard
                            Szwajkowski
  Name: 
                            Leonard SzwajkowskiTitle:   
                            Senior Vice President and Chief Financial
                            Officer


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**EXHIBITINDEX**




31.1
            Certification
                of Chief Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.31.2
            Certification
                of Chief Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.32.1
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                18
                U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.