SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

                                   (mark one)

        /X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
                FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2004

                                       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                                   20-1636029
  (State or other jurisdiction           (I.R.S. Employer Identification Number)
of incorporation or organization)

                            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 / /
No /X/

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

<TABLE>
<CAPTION>
====================================================================================================================
                          CLASS                                      OUTSTANDING AS OF FEBRUARY 11, 2005
----------------------------------------------------------     -----------------------------------------------------

<S>                                                                               <C>
Common Stock, $0.01 par value                                                     2,645,000
====================================================================================================================
</TABLE>

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

<PAGE>

                              ROYAL FINANCIAL, INC.

                                   FORM 10-QSB

                FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2004

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                              PAGE
                                                                                                             NUMBER
                                                                                                             ------

PART I - FINANCIAL INFORMATION FOR ROYAL SAVINGS BANK
   <S>      <C>                                                                                                <C>
   Item 1.  Financial Statements                                                                                1
            Condensed Statements of Financial Condition (As of December 31, 2004 and June 30, 2004)             1
            Condensed Statements of Income (Loss) and Comprehensive Income (Loss) (For the Three and            2
              Six Months Ended December 31, 2004 and 2003)
            Condensed Statements of Cash Flows (For the Six Months Ended December 31, 2004 and 2003)            3
   Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations               5
   Item 3.  Controls and Procedures                                                                             9

PART II - OTHER INFORMATION                                                                                     9
   Item 1.  Legal Proceedings                                                                                   9
   Item 2.  Changes in Securities                                                                               9
   Item 3.  Defaults Upon Senior Securities                                                                     9
   Item 4.  Submission of Matters to a Vote of Security Holders                                                 9
   Item 5.  Other Information                                                                                   9
   Item 6.  Exhibits and Reports on Form 8-K                                                                   10

SIGNATURES                                                                                                     10

EXHIBIT INDEX                                                                                                  10
</TABLE>

<PAGE>

                               ROYAL SAVINGS BANK
                   CONDENSED STATEMENTS OF FINANCIAL CONDITION
                       December 31, 2004 and June 30, 2004
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                                                  2004              JUNE 30, 2004
ASSETS
<S>                                                                         <C>                  <C>
Cash and due from financial institutions.............................       $     5,745,662      $       4,910,249
Federal funds sold...................................................            47,807,508              3,032,318
                                                                            ---------------      -----------------
   Cash and cash equivalents.........................................            53,553,170              7,942,567

Securities available for sale........................................            34,457,639             44,526,348
Loans receivable, net of allowance for loan losses of $236,020 at
   December 31, 2004 and at June 30, 2004............................            40,949,436             34,697,296
Federal Home Loan Bank stock, at cost................................               359,700                349,300
Premises and equipment, net .........................................             4,711,300              4,313,737
Accrued interest receivable and other assets.........................             1,035,898                709,559
                                                                            ---------------      -----------------

           Total assets..............................................       $   135,067,143      $      92,538,807
                                                                            ===============      =================

LIABILITIES AND MEMBERS' EQUITY
Liabilities
   Deposits..........................................................       $   119,901,153      $      77,167,768
   Advances from the Federal Home Loan Bank..........................             2,000,000              2,000,000
   Advances from borrowers for taxes and insurance...................               311,136                276,617
   Accrued interest payable and other liabilities....................                55,853                395,609
                                                                            ---------------      -----------------
           Total liabilities.........................................           122,268,142             79,839,994

Members' equity
   Retained earnings.................................................            12,844,642             12,912,324
   Accumulated other comprehensive loss..............................               (45,641)              (213,511)
                                                                            ---------------      -----------------
           Total members' equity.....................................            12,799,001             12,698,813
                                                                            ---------------      -----------------

           Total liabilities and members' equity.....................       $   135,067,143      $      92,538,807
                                                                            ===============      =================
</TABLE>















    See accompanying notes to these unaudited condensed financial statements.

                                       1
<PAGE>

                               ROYAL SAVINGS BANK
                      CONDENSED STATEMENTS OF INCOME (LOSS)
                         AND COMPREHENSIVE INCOME (LOSS)
              Three and Six Months Ended December 31, 2004 and 2003
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED               SIX MONTHS ENDED
                                                       -------------------------       --------------------------
                                                       DECEMBER 31   DECEMBER 31       DECEMBER 31    DECEMBER 31
                                                          2004          2003              2004           2003
                                                       -----------   -----------       -----------    -----------
Interest income
<S>                                                   <C>             <C>               <C>            <C>
   Loans.......................................       $    582,264   $      419,623     $  1,102,113   $     838,505
   Securities
           Taxable.............................            298,780          416,981          597,001         936,662
           Tax-exempt..........................              3,600           17,447            7,993          38,413
   Federal funds sold..........................            100,437            6,892          144,075          15,702
                                                      ------------   --------------     ------------   -------------
           Total interest income...............            985,081          860,943        1,851,182       1,829,282

Interest expense
   Deposits....................................            311,955          279,367          599,660         570,851
   Advances from Federal Home Loan Bank........             24,431           24,431           48,862          48,862
                                                      ------------   --------------     ------------   -------------
           Total interest expense..............            336,386          303,798          648,522         619,713

NET INTEREST INCOME............................            648,695          557,145        1,202,660       1,209,569

Provision for loan losses......................                 --               --               --           3,000
                                                      ------------   --------------     ------------   -------------

NET INTEREST INCOME AFTER PROVISION FOR LOAN
   LOSSES......................................            648,695          557,145        1,202,660       1,206,569

Noninterest income
   Service charges on deposit accounts.........             45,682           28,096           97,262          63,099
   Income on real estate owned, net............             11,505            7,300           18,905          19,500
   Gain on sales of securities, net............                 --               --          175,532         175,985
   Gain on sale of loans.......................             20,928            8,157           41,130          13,857
   Other income................................              8,891           18,201           16,979          60,926
                                                      ------------   --------------     ------------   -------------
           Total noninterest income............             87,006           61,754          349,808         333,367

Noninterest expense
   Salaries and employee benefits..............            352,924          339,377          742,323         593,986
   Occupancy and equipment.....................            181,301           61,115          345,178         112,755
   Data processing.............................             79,549          103,485          203,576         178,905
   Professional services.......................             29,587           36,276           65,437          54,947
   Director fees...............................             30,600           25,500           61,200          51,000
   Supplies....................................             21,437           22,408           47,425          34,645
   Advertising.................................             19,660           12,806           64,372          36,951
   Other ......................................             62,515           21,758          121,639          82,387
                                                      ------------   --------------     ------------   -------------
           Total noninterest expense...........            777,573          622,725        1,651,150       1,145,576
                                                      ------------   --------------     ------------   -------------

INCOME (LOSS) BEFORE INCOME TAX EXPENSE........            (41,872)          (3,826)         (98,682)        394,360

Income tax expense (benefit)...................            (13,000)          (5,300)         (31,000)        123,700
                                                      ------------   --------------     ------------   -------------
Net income (loss)..............................       $    (28,872)  $        1,474     $    (67,682)  $     270,660
                                                      ============   ==============     ============   =============
Comprehensive income (loss)....................       $    (63,853)  $      (86,768)    $    100,188   $    (223,658)
                                                      ============   ==============     ============   =============
</TABLE>




    See accompanying notes to these unaudited condensed financial statements.

                                       2
<PAGE>

                               ROYAL SAVINGS BANK
                       CONDENSED STATEMENTS OF CASH FLOWS
                   Six Months Ended December 31, 2004 and 2003
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                     2004                2003
                                                                              ------------------  -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                           <C>                 <C>
   Net Income (loss).....................................................     $       (67,682)    $     270,660
   Adjustments to reconcile net income (loss)  to net cash from
      operating activities:
        Depreciation.....................................................             138,208            32,778
        Provision for loan losses........................................                  --             3,000
        Gain on sale of securities available for sale....................            (175,532)         (175,985)
        Federal Home Loan Bank stock dividend............................             (10,400)          (16,100)
        Gain on sale of loans sold.......................................             (41,130)          (13,857)
        Change in accrued interest receivable and other assets...........            (326,339)         (313,384)
        Change in other accrued interest payable and liabilities.........               3,646          (145,580)
                                                                              ---------------     -------------
           Net cash from operating activities............................            (479,229)         (358,468)

CASH FLOWS FROM INVESTING ACTIVITIES
   Proceeds from sales, maturities, calls, and paydowns of available for
      sale securities....................................................          14,047,984        10,150,277
   Purchases of securities available for sale............................          (3,979,275)      (13,060,233)
   Change in loans receivable............................................          (3,444,065)       (2,440,889)
   Purchase of loan participations.......................................          (2,766,945)       (2,000,000)
   Purchase of premises and equipment....................................            (535,771)       (1,428,539)
                                                                              ---------------     -------------
           Net cash from investing activities............................           3,321,928        (8,779,384)

CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase in deposits..............................................          42,733,385         3,248,311
   Change in advances from borrowers for taxes and insurance.............              34,519             2,269
                                                                              ---------------     -------------
           Net cash from financing activities............................          42,767,904         3,250,580
                                                                              ---------------     -------------

Net change in cash and cash equivalents..................................          45,610,603        (5,887,272)

Cash and cash equivalents
   Beginning of the year.................................................           7,942,567         9,864,020
                                                                              ---------------     -------------

   End of period.........................................................     $    53,553,170     $   3,976,748
                                                                              ===============     =============
</TABLE>















    See accompanying notes to these unaudited condensed financial statements.

                                       3
<PAGE>

                               ROYAL SAVINGS BANK
                     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. As described in Note 4 below, the conversion was completed
on January 20, 2005. Prior to the completion of the conversion, Royal Financial,
Inc. had not engaged in any material operations and had no assets or income.
Accordingly, the financial statements of Royal Financial, Inc. have been omitted
because of their immateriality.

NOTE 2 - BASIS OF PRESENTATION

         The condensed financial statements presented in this quarterly report
include the accounts of the Bank. The condensed financial statements of the Bank
have been prepared in accordance with U.S. generally accepted accounting
principles (GAAP) for interim financial information and predominant practices
followed by the financial services industry, and are unaudited. Interim
statements are subject to possible adjustment in connection with the annual
audit of the Bank. In the opinion of the Bank's management, all adjustments,
consisting of normal recurring adjustments, that the Bank considers necessary to
fairly state the Bank's financial position and the results of operations and
cash flows have been recorded. The interim financial statements should be read
in conjunction with the audited financial statements and accompanying notes of
the Bank for the years ended June 30, 2004 and 2003, which are included in the
Registration Statement on Form SB-2, as amended, initially filed with the
Securities and Exchange Commission on September 21, 2004 and declared effective
on November 12, 2004 (File Number 333-119138). The results of the Bank's
operations for any interim period are not necessarily indicative of the results
of the Bank's operations for any other interim period or for a full fiscal year.

NOTE 3 - USE OF ESTIMATES

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

         At December 31, 2004, there were no material changes in the Bank's
significant accounting policies or critical accounting estimates from those
disclosed in the Registration Statement on Form SB-2, as amended, initially
filed with the Securities and Exchange Commission on September 21, 2004 and
declared effective on November 12, 2004, File Number 333-119138).

NOTE 4 - CONVERSION TO STOCK FORM

         On August 18, 2004, the Board of Directors of the Bank unanimously
adopted a plan of conversion providing for the conversion of the Bank from an
Illinois chartered mutual savings bank to an Illinois chartered stock savings
bank and the purchase of all of the common stock of the Bank by Royal Financial,
Inc. The plan has been approved by the Division of Banks and Real Estate for the
State of Illinois, and the Bank has received a nonobjection from the FDIC. The
members of the Bank approved the plan at a meeting held on December 21, 2004.

                                       4
<PAGE>

         In adopting the plan, the Board of Directors of the Bank determined
that the conversion was advisable and in the best interests of its members and
the Bank and that the conversion would not have any adverse impact on the
reserves and net worth of the Bank.

         The conversion was completed on January 20, 2005 when the Company
issued 2,595,000 shares of common stock to the public resulting in $25,950,000
of gross proceeds. Costs to complete the stock offering were deducted from the
gross proceeds of the offering. The Bank issued all of its outstanding capital
stock to the Company in exchange for one half of the net proceeds of the
offering, which amounted to $12.2 million. At December 31, 2004, $953,000 of the
conversion expenses were included in the accrued interest receivable and other
assets category of the Company's statement of financial condition. The Company
contributed 50,000 shares of common stock to the Royal Charitable Foundation in
February 2005.

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

FORWARD-LOOKING INFORMATION

         Statements contained in this report that are not historical facts may
constitute forward-looking statements (within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended), which involve significant risks
and uncertainties. The Bank intends such forward-looking statements to be
covered by the safe harbor provisions for forward-looking statements contained
in the Private Securities Litigation Reform Act of 1995, and is including this
statement for purposes of invoking these safe harbor provisions. Forward-looking
statements, which are based on certain assumptions and describe future plans,
strategies and expectations of the Bank, are generally identifiable by the use
of the words "believe," "expect," "intend," "anticipate," "estimate," "project,"
"plan," or similar expressions. The Bank's ability to predict results or the
actual effect of future plans or strategies is inherently uncertain and actual
results may differ from those predicted. The Bank undertakes no obligation to
update these forward-looking statements in the future. The Bank cautions readers
of this report that a number of important factors could cause the Bank's actual
results subsequent to December 31, 2004 to differ materially from those
expressed in forward-looking statements. Factors that could cause actual results
to differ from those predicted and could affect the future prospects of the Bank
include, but are not limited to, fluctuations in market rates of interest and
loan and deposit pricing, changes in the securities or financial market, a
deterioration of general economic conditions in our market areas, delays in
obtaining the necessary regulatory approvals, our ability to consummate proposed
transactions in a timely manner, legislative or regulatory changes, adverse
developments or changes in the composition of our loan or investment portfolios,
significant increases in competition, difficulties in identifying attractive
acquisition opportunities or strategic partners to complement our banking
approach and the products and services the Bank offers, the possible dilutive
effect of potential acquisitions or expansion, and our ability to raise new
capital as needed and the timing, amount and type of such capital raises. These
risks and uncertainties should be considered in evaluating forward-looking
statements.

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2004 AND JUNE 30, 2004

         The Bank's total assets increased $42.6 million, or 46.0%, to $135.1
million at December 31, 2004, from $92.5 million at June 30, 2004. The increase
reflected growth in cash and cash equivalents, funded by an increase in stock
subscription funds from customers deposited in the Bank in anticipation of their
purchasing the stock of Royal Financial, Inc.

         Cash and cash equivalents increased $45.7 million to $53.6 million at
December 31, 2004 from $7.9 million at June 30, 2004 due to stock subscription
funds relating to the anticipated conversion by the

                                       5
<PAGE>

Bank from a mutual to stock form of organization. Approximately $47.8 million
and $3.0 million were invested in daily Federal funds at December 31, 2004 and
June 30, 2004.

         Securities available for sale decreased $10.0 million, or 22.6%, to
$34.5 million at December 31, 2004 from $44.5 million at June 30, 2004. The
decrease relates to the sale of $9.4 million of corporate and municipal
securities, which resulted in a gain of $176,000, partially offset by purchases
of agency securities.

         Loans increased $6.2 million, or 18.0%, to $40.9 million at December
31, 2004, from $34.7 million at June 30, 2004. The increase in loans resulted
from the management's continued emphasis on commercial and commercial real
estate loan originations and participations purchased.

         Total deposits increased $42.7 million, or 55.4%, to $119.9 million at
December 31, 2004 from $77.2 million at June 30, 2004. The increase reflected
additional stock subscription deposits made in anticipation of participating in
the Bank's conversion to a stock form of ownership. During January 2005, the
Bank paid off a $2.0 million advance from the Federal Home Loan Bank, plus
accrued interest. Since the payoff occurred prior to the advance's due date, the
Bank also paid a $48,000 prepayment penalty.

         Equity increased $100,000, or .8%, to $12.8 million at December 31,
2004, from $12.7 million at June 30, 2004. The net loss of $68,000 was offset by
an increase in unrealized gains on securities available for sale, net of taxes,
of $168,000. The increase in unrealized gains on securities available for sale
is primarily due to the changing interest rate environment.

COMPARISON OF OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31,
2004 AND DECEMBER 31, 2003

         General. Net loss for the three months ended December 31, 2004 was
$29,000, a decrease in income of $30,000, from the same period in 2003. For the
six months ended December 31, 2004 net loss was $68,000, a decrease in income of
$338,000, from the same period last year. The net loss resulted from increased
overhead costs, primarily in the area of salaries and employee benefits and
occupancy and equipment, expenses incurred in preparation for our growth
strategy. This loss also was caused by the decision to retain excess funds in
cash and cash equivalents rather than invest in securities as management wanted
to maintain liquidity to fund expected loan growth.

         Net Interest Income. Net interest income increased by $92,000 to
$649,000 for the three months ended December 31, 2004, from $557,000 for the
same period in 2003. Net interest income decreased by $4,000 to $1.20 million
for the six months ended December 31, 2004, from the same period in 2003. The
net interest rate spread was 2.78% and 2.66% for the three and six months ended
December 31, 2004, as compared to 2.72% and 2.88% for the same period in 2003.
The net interest margin decreased to 2.70% and 2.64% for the three and six month
periods ended December 31, 2004, from 2.90% and 3.06% for the same periods in
2003, reflecting the downward repricing of assets more rapidly than deposits.

         Interest Income. Total interest income increased $124,000 to $985,000
for the three months ended December 31, 2004 from $861,000 for the three months
ended December 31, 2003. Total interest income increased $20,000 to $1.85
million for the six months ended December 31, 2004 from $1.83 million for the
same period in 2003. For the three and six months ended December 31, 2004,
average interest-bearing assets increased to $95.0 million and $90.7 million
from $81.1 million and $81.5 million for the same period in 2003. The increase
was the result of loan growth and increased investment in short-term funds to
fund future loan growth. Offsetting this increase in average interest-earning
assets was a decline in the yield on interest-earning assets to 4.12% and 4.07%
for the three and six month

                                       6
<PAGE>

periods ended December 31, 2004 from 4.64% and 4.70% for the comparable periods
in 2003 reflecting the continued low interest rate environment.

         Interest Expense. Total interest expense increased $32,000 and $29,000
to $336,000 and $649,000 for the three and six months ended December 31, 2004
from $304,000 and $620,000 for the same periods in 2003. The average cost of
deposits decreased from 1.84% and 1.73% for the three and six months ended
December 31, 2003 to 1.34% and 1.41% for the same periods in 2004, which
slightly offset the $31.5 million and $18.1 million increase in the average
balance of deposits between the two periods. There was no change in advances
from the Federal Home Loan Bank for the periods ended December 31, 2004 and
2003.

         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 types of loans and the
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 significant revision, as more information becomes available
or as projected events change. The allowance for loan losses as a percentage of
gross loans outstanding decreased to .57% at December 31, 2004, from .83% at
December 31, 2003. Although we did experience growth in the commercial loan
portfolio, the nonperforming loans as a percent of total loans decreased from
1.18% at December 31, 2003 to .26% at December 31, 2004 and the allowances for
loan losses as to performing loan coverage ratio increased to 174.59% at
December 31, 2004 as compared to 118.66% the prior year.

         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
December 31, 2004 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 $25,000 and $16,000,
to $87,000 and $350,000 for the three and six month periods ended December 31,
2004, compared to the same periods in 2003. The increases were primarily the
result of increased service fee income and an increase in the gains from the
volume of one- to four-family mortgage loans sold during the three and six month
periods ended December 31, 2004, compared to the same periods in 2003.

         Noninterest Expense. Noninterest expense increased $155,000 and
$500,000 to $778,000 and $1.65 million for the three and six months ended
December 31, 2004 from $623,000 and $1.15 million for the three and six months
ended December 31, 2003. The increases were primarily the result of an increase
in salaries and employee benefits, and occupancy-related expenses.

         Salaries and employee benefits increased $14,000 and $148,000 for the
three and six months ended December 31, 2004 compared to the same periods in
2003, primarily resulting from the hiring of

                                       7
<PAGE>

new commercial and commercial real estate loan and accounting personnel, a new
operations officer and staffing for the Lansing branch opened in 2004.

         Occupancy and equipment expense increased $120,000 and $232,000 for the
three and six months ended December 31, 2004 compared to the same periods in
2003, due to depreciation on the new bank building and furniture and equipment
used in the new building and the branch office in Lansing.

         Management expects increased expenses in the future as a result of the
establishment of the employee stock ownership plan and the potential stock
benefit plans, as well as increased costs associated with being a public company
such as periodic reporting, annual meeting materials, and professional fees.

         Provision for Income Taxes. The income tax benefit increased $7,700 for
the three months ended December 31, 2004 from the comparable period in 2003. For
the six months ended December 31, 2004, the tax benefit was $31,000 as opposed
to the tax expense of $123,700 recorded for the comparable six month period in
2003. The fluctuations in the three and six month periods ended December 31,
2004 from the comparable periods in 2003 was due to a decrease in income before
income taxes.

LIQUIDITY AND CAPITAL RESOURCES

         Liquidity. Liquidity management for the Bank 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
to the Bank. Our primary sources of funds are deposits, prepayments and
maturities of outstanding loans and mortgage-backed and related securities, and
other short-term investments, and funds provided from operations. While
scheduled payments from loans and mortgage-backed related securities and
maturing investment securities and short-term investments are relatively
predictable sources of funds, deposit flows and loan prepayments 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 Federal Home Loan Bank advances as needed.
At December 31, 2004 and at June 30, 2004, Federal Home Loan Bank advances
totaled $2.0 million.

         At December 31, 2004, the Bank had outstanding commitments to originate
$6.5 million in loans. In addition, as of December 31, 2004, the total amount of
certificates of deposit that were scheduled to mature in the following 12 months
was $27.1 million. The Bank believes that it has adequate resources to fund all
of its commitments and that it can adjust the rate on certificates of deposit to
retain deposits in changing interest rate environments. If the Bank requires
funds beyond its internal funding capabilities, advances from the Federal Home
Loan Bank are available as an additional source of funds. As of December 31,
2004, the Bank had $9.8 million of available credit from the Federal Home Loan
Bank.

         From June 30, 2004 through December 31, 2004, the Bank received
proceeds of $14.1 million from maturities, calls and paydowns of available for
sale securities. These proceeds were primarily reinvested in Federal funds and
loans receivable.

         Although the Bank will continue to sell substantially all newly
originated one- to four-family residential loans to third-party investors, it
anticipates lower liquidity than experienced in the past because these funds
will be used to invest in more commercial real estate loans and commercial
loans. However, to the extent increased commercial lending will decrease
liquidity, it will be partially offset by the proceeds of the offering and, to a
lesser extent, short-term investments.

         As of December 31, 2004, the Bank had received subscriptions for the
purchase of stock of approximately $37.6 million in connection with the
conversion. Upon closing the offering on January 20, 2005 and after deducting
$1.7 million of expenses, the Company retained $24.3 million of those
subscription funds as capital, returned $10.3 million to subscribers and
maintained $1.3 million in deposit accounts at the Bank.

                                       8
<PAGE>

         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 December 31, 2004, and June
30, 2004, the Bank exceeded each of its capital requirements with ratios at
December 31, 2004 of 12.00%, 22.94% and 23.36%, respectively, and with ratios at
June 30, 2004 of 13.85%, 27.57% and 28.07%, respectively. The completion of the
common stock offering by Royal Financial, Inc. will significantly increase the
capital of the Bank.

ITEM 3.  CONTROLS AND PROCEDURES

         Evaluation of Disclosure Controls and Procedures. Based on their
evaluation of the Bank's disclosure controls and procedures (as defined in Rule
13a-15(e) or 15d-15(e) of the regulations promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Bank's chief
executive officer and chief financial officer have concluded that as of the end
of the period covered by this Quarterly Report on Form 10-QSB such disclosure
controls and procedures are effective to ensure that the information required to
be disclosed by the Bank in reports that it files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the Security and Exchange Commission's rules and regulations and
are operating in an effective manner.

         No Change in Internal Control Over Financial Reporting. No change in
our internal control over financial reporting (as defined in Rules 13a-15(e) or
15(d)-15(f) of the regulations promulgated under the Exchange Act occurred
during the most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         The Bank is not 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 financial
condition and results of operations of the Bank.

ITEM 2.  CHANGES IN SECURITIES

         None

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None

ITEM 5.  OTHER INFORMATION

         None

                                       9
<PAGE>

ITEM 6.  EXHIBITS  AND REPORTS ON FORM 8-K

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

         (b) Current Report on Form 8-K dated January 20, 2005, filed with the
SEC on January 21, 2005.

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

Date:  February 11, 2005             ROYAL FINANCIAL, INC.


                                     By: /s/ Donald A. Moll
                                         ---------------------------------------
                                         Donald A. Moll
                                         President and Chief Executive Officer


Date:  February 11, 2005             By: /s/ Neil Brodzinski
                                         ---------------------------------------
                                         Neil Brodzinski
                                         Senior Vice President, Chief Financial
                                         Officer and Treasurer



                                  EXHIBIT INDEX
                                  -------------

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.

                                       10