Shares of New York Community Bancorp (NYCB -3.40%) have been caught in a downward spiral since the bank's Jan. 31 earnings report as investor anxiety continues to grow. The stock traded down as much as 14.3% on Wednesday before recovering slightly but remained down 7% as of 1 p.m. ET.

The dominos continue to fall

Confidence is king in banking, and investor confidence in New York Community has never been lower. The bank went on an ambitious growth campaign in 2023, first acquiring Flagstar Bank to round out its commercial banking capabilities and then buying assets and liabilities of the failed Signature Bank from the Federal Deposit Insurance Corp.

Investors learned the consequences of those moves when the bank announced fourth-quarter results. New York Community reported a surprise loss and announced plans to slash its dividend and take other steps to build capital. Part of the push is related to regulatory requirements triggered by New York Community's larger size. However, in the days that have followed, other reasons for concern have surfaced.

On Wednesday, the bank was subject to a number of downgrades after several executive departures. Moody's Investment Service also chimed in, downgrading the bank's credit ratings into the junk category.

The bank is trying to counter the panic, noting that total deposits are up from year's end. That implies there has been no run on the bank -- the event that triggered a number of high-profile failures last year. New York Community Bank also said that total insured and collateralized deposits represent 72% of the total. Further, CEO Thomas R. Cangemi said Moody's downgrade "is not expected to have a material impact" on contractual arrangements.

The comments might have helped the stock rebound from its lows, but investors remain very concerned about what the future might hold for New York Community.

Is New York Community Bancorp a buy after its stock plunge?

Shares of New York Community have lost 62% of their value since Jan. 29. Should the bank survive this crisis, the stock will likely climb higher. The question for investors is whether it will survive.

On paper, the odds look good. While New York Community has been bruised and battered, depositors appear to be staying with the company. Some of the original moves, like the dividend cut, were designed to help improve the company's stability and allow it to fortify its balance sheet.

The bank appears to be considering other steps to build its capital. Bloomberg reported that New York Community has been reaching out to investors for capital to finance a large portfolio of residential mortgages and could sell a portfolio of about $1 billion worth of recreational vehicle and marine loans.

The problem is that when banks get in trouble, sometimes even the proper steps can raise levels of panic and make the eventual decline of the institution more likely. We don't know yet how serious the situation will get for New York Community because it is uncertain how customers will react from here.

Investors interested in buying this extreme dip and hoping for the best need to understand the risks and be prepared for future volatility. Buying New York Community here could produce a happy ending, but there are likely many twists and turns ahead before we get there.