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                             St. Paul Bancorp, Inc.
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                (Name of Registrant as Specified in Its Charter)

                                                    
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[LOGO OF ST.PAUL BANCORP INC.]


                                   May 3, 1999


Dear Fellow Employees:

As part of our ongoing effort to keep you informed, I wanted to let you know
that we recently mailed a letter to all of our shareholders. When you receive
your copy, you will see that it emphasizes our strategic plan and the positive
impact it is already having on St. Paul's performance. Our numerous achievements
in the first quarter are solid evidence that the plan is working and that we are
on track to achieve our goal of a 15% return on equity by the fourth quarter of
2000. Thanks to the efforts of all St. Paul employees, our plan is producing
results.

We all can be proud of the value that we have created for our shareholders over
the long term. Here is a comparison of St. Paul's total return to shareholders
(including reinvested dividends) over various time frames:

                             Total Return Comparison




                                                  SPBC     S&P500   Difference
                                                  ----     ------   ----------
                                                              
May 29, 1987 to December 31, 1998                 777%      485%      292%
May 29, 1987 to March 31, 1999                    604%      514%       90%
May 29, 1987 to April 30, 1999                    688%      538%      150%



I have said many times that we manage this company for the long-term benefit of
our shareholders. Bank stocks do fluctuate, which is why we have always
maintained our long-term focus and avoided overreactions to short-term price
movements. I think the numbers in the table above clearly demonstrate that our
focus on the long-term has resulted in superior returns for all of our
shareholders.

If you have already voted your shares with the proxy card you recently received
with the annual report and proxy statement, you may disregard the proxy card you
will receive with the shareholder letter. If you have not yet voted or wish to
change your earlier vote, please take a moment to do it - your vote is
important.

I'd like to thank every employee for the many contributions to our success. Keep
up the great work!

                                                              Sincerely,

                                                              /s/ Joe Scully
                                                              -----------------
                                                              Joe Scully