CHICAGO - After being approached by a potential buyer, Chicago's Lake Shore Bancorp has hired a Wall Street investment bank to help determine its future.

Lake Shore, which at $1.2 billion of assets is one of the Windy City's biggest independent banks, said last week that it had retained Donaldson, Lufkin & Jenrette Inc. to advise it about its options.

The bank did not identify the suitor, but analysts said First Chicago Corp. and Harris Bankcorp were the most likely in-market buyers. Neither company would comment.

|An Indication of Interest'

Analysts pointed to the announcement as a further sign that merger activity in the Chicago market was picking up.

Lake Shore became the second Chicago-based bank company in two weeks to signal that it was in play. Boulevard Bancorp, which has $1.5 billion of assets, said Aug. 16 that it had retained an investment banking firm to help find a buyer.

Lake Shore said it "received an indication of interest in a possible business combination from another bank holding company."

Its shares, $25 at the time of the announcement, were at $26.75 in early afternoon trading on Tuesday, giving the bank a market value of $264 million, or 2.16 times its book value of $122 million.

Lake Shore said Donaldson Lufkin would explore options that include remaining independent or seeking a merger partner.

"We believe that there are good opportunities for the company, whichever way we may decide to go, following the completion of our study of options in September or early October," said James W. Aldrich, Lake Shore chairman and chief executive.

|An Excellent Track Record'

Unlike Boulevard, Lake Shore is a healthy institution that should draw a big premium, analysts said. It posted a 1.32% return on average assets for the first half of 1993, while its non-performing assets are less than 1% of total assets.

"Lake Shore is a conservatively run, attractive franchise with an excellent track record of middle-market lending," said Thomas Maier, who follows the bank for Kemper Securities.

Analysts cited a number of possible out-of-state regional bank companies as possible suitors, but said Harris and First Chicago topped the list.

"It would have to be someone with a presence in the market who could get some cost savings out of a deal" that could reach three times book value, Mr. Maier said.

With eight offices in downtown Chicago and its suburbs, Lake Shore represents a good opportunity for "anyone with deep pockets," noted Joan Goodman, an analyst at Pershing & Co.

Other possible suitors already established in the Chicago area that have expressed interest in expanding their market shares include: Banc One Corp., Columbus, Ohio; NBD Bancorp and Comerica Inc., both of Detroit; Old Kent Financial Corp., Kalamazoo, Mich.; and Firstar Corp., Milwaukee.

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