Shares of New York Community Bancorp (NYSE: NYCB) have lost roughly two-thirds of their value over the past year. Meanwhile, the average bank stock, using the SPDR S&P Bank ETF as an industry proxy, is up over 40% over that same timeframe. This is not a stock that will be a good fit for most investors. But that doesn't mean all investors will want to avoid it.

Here's a look at the buy, sell, and hold arguments for New York Community Bancorp stock today.

A little background on New York Community Bancorp

In late 2022 New York Community Bancorp bought Flagstar Bank as it sought to become a larger bank. Then a short-lived banking crisis hit in early 2023, but New York Community Bancorp was largely unscathed by the industry turmoil. However, management, still looking to grow its business, saw a potential opportunity in the crisis. It ended up buying parts of Signature Bank, one of the banks that failed during the bank runs.

That's when the trouble began. New York Community Bancorp wasn't prepared for the swift growth in its business. Larger banks are subject to greater regulatory scrutiny and New York Community Bancorp's internal controls weren't ready for the added requirements and added scrutiny. A sign of that fact arrived fairly quickly when the company announced that some large loans it made were in trouble. To shore up its balance sheet the company cut its dividend twice, with it now sitting at just $0.01 per share per quarter.

That, however, wasn't enough. New York Community Bancorp had to seek outside help. That arrived in the form of a $1 billion bailout from a private investor group. While that's a sign of the turnaround potential here, it still isn't a good sign concerning the hole the company dug for itself. This explains why New York Community Bancorp basically revamped its management team, too. Simply put, New York Community Bancorp is a troubled financial institution in an industry filled with competitors that are performing at a much higher level.

The case to sell New York Community Bancorp

For most investors, the sell decision (or the choice to not buy in the first place) should be simple. Why invest in a bank that is struggling when you can own better-positioned banks? Even if you like turnaround stories, there are better options out there (such as Toronto-Dominion Bank).

The big warning sign here is that New York Community Bancorp's problems were largely self-inflicted. Sure, there's a new management team in place, but it has to clean up the mess left behind by the previous crew. Only after that is taken care of can the bank start to think about growth again. If you are a risk-averse investor, this just isn't a particularly compelling story.

The case to hold New York Community Bancorp

The hold call is pretty tough. After the dividend cut, the yield is a tiny 0.4% or so. That compares to the broader banking sector's 2.5% yield. You aren't getting paid very well to wait for better days. And, according to the new management team, New York Community Bancorp won't be back in line with its peers profitability-wise until at least the end of 2026.

In other words, it looks like New York Community Bancorp could be dead money for a while. If you've got paper losses in the stock you might want to capture the loss to offset gains elsewhere in your portfolio. But if you don't mind sitting around waiting, or just can't stomach taking a loss, the bank does appear to be moving in the right direction. Just know that you could be stuck holding it for several years before you are back to breakeven.

The case for buying New York Community Bancorp stock

If you like a good turnaround story, though, there could be a reason to buy New York Community Bancorp. The $1 billion cash infusion will likely give the troubled financial institution the support it needs to climb out of the hole it is in. As noted, the process won't be quick or easy. However, at this juncture, it seems unlikely that New York Community Bancorp will fail anytime soon.

And if it does get back on track, well, there's material upside potential given the huge stock price decline shareholders have suffered through. In some ways, a huge amount of the risk here has been priced into the stock. There are much better bank stories you could invest in, but if you don't mind living on the edge (and waiting a long time), New York Community Bancorp could be the turnaround stock for you.

It just won't be worth it for most investors

There are investors who like to find cigar butts, which are basically companies that are beaten up but still have just a little puff of life left in them. That's what New York Community Bancorp is right now. That type of turnaround investing is high-risk and not the type of thing that most investors will want to sign up for. All in, there are better choices out there in the banking industry today, even for those investors who like turnaround stocks.

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Reuben Gregg Brewer has positions in Toronto-Dominion Bank. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

New York Community Bancorp Stock: Buy, Sell, or Hold? was originally published by The Motley Fool