On March 14, shares of Zion’s Bacorp (NYSE: ZION) jumped 10.5%.

The bank wasn’t announcing earnings for another month… it wasn’t increasing its dividend… and there was no mention of a stock buyback.

#-ad_banner-#What happened then? Here’s the story…

On that day, the bank told investors it got the okay from the U.S. Federal Reserve to repay $1.4 billion of the monies it had received from the Troubled Assets Relief Program (TARP). (TARP is the official name for the bailout given to struggling financial institutions during the sub-prime mortgage crisis.)

The Fed‘s stamp of approval marked a turnaround for the Salt Lake City lender. It meant the Fed believed the bank could access enough capital to repay its bailout money and still withstand another credit crisis like that of 2008…

See, when banks exit TARP it isn’t just a one-time event. It has a long-term positive effect on earnings and share-price performance.

In return for taking TARP money, banks were required to give the U.S. Treasury preferred stock yielding 5%. By paying off TARP, Zions will save about $70 million annually in dividend payments when it redeems all $1.4 billion of preferred stock.

Zions isn’t the only bank stock that’s benefited from TARP repayments either. Across the board, shares of banks that recently exited TARP have had huge run-ups.

Regions Financial (NYSE: RF), completely exited TARP last month, and has advanced more than 40% so far this year. By comparison, the S&P 500 is ahead less than 6%.

Regions Financial still might have room to run… but banks that have yet to exit TARP provide a better starting point in the search for the next Regions Financial.

To find these potential turnaround plays, I looked at all the banks that had not completely repaid TARP yet.

As of March 31, 351 of the 707 banks stilled owed TARP money. The Treasury expects that “a number” of banks will repay the funds over the next 12 to 18 months.

Banks have ample incentive to do so too… banks that are still in the program by November 2013 face increased costs. Their preferred stock dividend payments will rise from 5% to 9%.

Since our focus is on income investing, I limited my search to those banks that have yet to repay TARP and also have common or preferred shares yielding 5% or more.

I found six names, as listed below:

The first is a common stock, First Bancorp (Nasdaq: FNLC). Like Zions, the bank repaid last August half of its $25 million TARP debt out of retained earnings. It has paid a steady and rising dividend every quarter for more than a decade, without missing a beat even during the recession of 2008 to 2009. The current rate of $0.78 per share annually carries a solid yield of 5.2% at today’s price.

The other names listed above are preferred shares. Popular’s (Nasdaq: BPOP) series B (OTC: BPOPP) and Zion’s series C (NYSE: ZB-PC) are both equity shares that throw off qualified dividends.

Neither can be called until at least a year from now. BPOPP pays a rich monthly dividend and can’t be called until May 2013, but the shares are considered a highly speculative “CCC+” by Standard & Poor’s, meaning the risk of default is reasonably high. Zion’s series C shares are considered slightly safer at “BB.”

The next two names on the list are trust preferred securities: PrivateBancorp Trust IV 10% (Nasdaq: PVTBP) and M&T Capital Trust IV, 8.50% (NYSE: MTB-PA). Their stated call dates aren’t until 2013, but under the Dodd-Frank legislation they could be called earlier if the company wishes to recapitalize and declare a “capital treatment event.”

Given that both securities are trading above their $25 call price, the early call possibility is a risk factor.

The final name on my list, Synovus 8.25% tMEDS (NYSE: SNV-PT), is a note that converts into Synovus (NYSE: SNV) shares on May 15, 2013. The issue is rated a speculative “B-” by Standard & Poor’s.

Risks to Consider: Let me warn you though, paying back TARP is by no means a miracle cure. It might improve liquidity, but some of these banks may still hold risky assets, have poor profitability, and weak capital ratios.

Action to Take –> That said, all of these securities could attract some positive attention when TARP repayments or restructuring improves their credit quality. Each of these stocks requires further analysis, but personally, I find First Bancorp’s common shares to be particularly interesting. With its long-term dividend track-record, it could be a good stock to keep your eye on as the November 2013 deadline approaches.