(6)(7) Stock-Based Compensation

Under our equity incentive plan, employees and directors may be granted stock options, restricted stock, restricted stock units and performance awards. Effective February 17, 2015, 28, 2020, our shareholders approved an amendment to the 2015 Equity Incentive Plan of Insteel Industries, Inc. (the “2015“2015 Plan”), which authorizes up to 900,000an additional 750,000 shares of our common stock for future grants under the plan. The 2015 Plan, whichplan and expires on February 17, 2025, replaced the 2005 Equity Incentive Plan of Insteel Industries, Inc., which expired on February 15, 2015. 2025. As of December 28, 2019, January 2, 2021, there were 143,000738,000 shares of our common stock available for future grants under the 2015 Plan, which is our only active equity incentive plan.plan.

Stock option awards. Under our equity incentive plan, employees and directors may be granted options to purchase shares of common stock at the fair market value on the date of the grant. Options granted under these plans generally vest over three years and expire ten years from the date of the grant. Compensation expense associated with stock options was $60,000$76,000 and $55,000$60,000 for the three-monththree-month periods ended January 2, 2021 and December 28, 2019, and December 29, 2018, respectively. As of December 28, 2019, January 2, 2021, there was $222,000$292,000 of unrecognized compensation cost related to unvested options which is expected to be recognized over a weighted average period of 1.531.57 years.

The following table summarizes stock option activity:

Stock option exercises include “net exercises” for which the optionee received shares of common stock equal to the intrinsic value of the options (fair market value of common stock on the date of exercise less exercise price) reduced by any applicable withholding taxes.

Restricted stock units. Restricted stock units (“RSUs”) granted under our equity incentive plans are valued based upon the fair market value on the date of the grant and provide for a dividend equivalent payment which is included in compensation expense. The vesting period for RSUs is generally one year from the date of the grant for RSUs granted to directors and three years from the date of the grant for RSUs granted to employees. RSUs do not have voting rights. Compensation expense associated with RSUs was $126,000$148,000 and $119,000$126,000 for the three-monththree-month periods ended January 2, 2021 and December 28, 2019, and December 29, 2018, respectively.

As of December 28, 2019, January 2, 2021, there was $356,000$441,000 of unrecognized compensation cost related to unvested RSUs which is expected to be recognized over a weighted average period of 1.771.90 years.

The following table summarizes RSU activity:

(7)(8) Income Taxes

Effective income tax rate. Our effective income tax rate was 23.2% for the three-month period ended January 2, 2021 compared with 22.7% for the three-monththree-month period ended December 28, 2019 compared with 23.5% for the three-month period ended December 29, 2018. 2019. The effective income tax rates for both periods were based upon the estimated rate applicable for the entire fiscal year adjusted to reflect any significant items related specifically to interim periods.

Deferred income taxes. As of December 28, 2019, January 2, 2021 and October 3, 2020, we recorded a deferred tax liability (net of valuation allowance) of $7.1$6.5 million and $6.6 million, respectively, in other liabilities on our consolidated balance sheet. We have $3.5$2.9 million of state net operating loss carryforwards (“NOLs”) that begin to expire in 2022,2031, but principally expire between 20222031 and 2032. We have also recorded gross deferred tax assets of $8,000 for various state tax credits that expire this year.2036.

The realization of our deferred tax assets is entirely dependent upon our ability to generate future taxable income in applicable jurisdictions. GAAP requires that we periodically assess the need to establish a reserve against our deferred tax assets to the extent we no longer believe it is more likely than not that they will be fully realized. As of December 28, 2019 January 2, 2021 and September 28, 2019, October 3, 2020, we recorded a valuation allowance of $265,000$162,000 and $257,000,$207,000, respectively, pertaining to various state NOLs and tax credits that were not expected to be utilized. The valuation allowance is subject to periodic review and adjustment based on changes in facts and circumstances and would be reduced should we utilize the state NOLs and tax credits against which an allowance had previously been provided or determine that such utilization was more likely than not.

Uncertainty in income taxes. We establish contingency reserves for material, known tax exposures based on our assessment of the estimated liability that would be incurred in connection with the settlement of such matters. As of December 28, 2019, January 2, 2021, we had $122,000no material, known tax exposures that required the establishment of unrecognizedcontingency reserves for uncertain tax benefits that would reduce our income tax rate in future periods, if recognized, which were classified as a reduction in income taxes receivable in other current assets.positions.

We file U.S. federal, state and local income tax returns in various jurisdictions. Federal and various state tax returns filed subsequent to 20142015 remain subject to examination.

(8)(9) Employee Benefit Plans

Supplemental employee retirement benefit plan. We have Supplemental Retirement SecurityBenefit Agreements (each, a “SERP”“SRBA”) with certain of our employees (each, a “Participant”). Under the SERPs,SRBAs, if the Participant remains in continuous service with us for a period of at least 30 years, we will pay the Participant a supplemental retirement benefit for the 15-year period following the Participant’s retirement equal to 50% of the Participant’s highest average annual base salary for five consecutive years in the 10-year period preceding the Participant’s retirement. If the Participant retires prior to the later of age 65 or the completion of 30 years of continuous service with us, but has completed at least 10 years of continuous service, the amount of the Participant’s supplemental retirement benefit will be reduced by 1/360th for each month short of 30 years that the Participant was employed by us.

Net periodic pension cost for the SERPsSRBAs includes the following components:

(9)(10) Long-Term Debt

Revolving Credit Facility. We have a $100.0 million revolving credit facility (the “Credit Facility”) that is used to supplement our operating cash flow and fund our working capital, capital expenditure, general corporate and growth requirements. In May 2019, we entered into a new credit agreement, which amended and restated in its entirety the previous agreement pertaining to the revolving credit facility that had been in effect since June 2010. The new credit agreement, among other changes, extended the maturity date of the Credit Facility from May 13, 2020 to May 15, 2024 and provided for an incrementalaccordion feature whereby its size may be increased by up to $50.0 million, subject to our lender’s approval. Advances under the Credit Facility are limited to the lesser of the revolving loan commitment amount (currently $100.0$100.0 million) or a borrowing base amount that is calculated based upon a percentage of eligible receivables and inventories. As of December 28, 2019, noJanuary 2, 2021, 0 borrowings were outstanding on the Credit Facility, $71.7$81.8 million of borrowing capacity was available and outstanding letters of credit totaled $1.6$1.5 million.

Interest rates on the Credit Facility are based upon (1)(1) an index rate that is established at the highest of the prime rate, 0.50% plus the federal funds rate or the LIBOR rate plus the excess of the then-applicable margin for LIBOR loans over the then-applicable margin for index rate loans, or (2)(2) at our election, a LIBOR rate, plus in either case, an applicable interest rate margin. The applicable interest rate margins are adjusted on a quarterly basis based upon the amount of excess availability on the Credit Facility within the range of 0.25% to 0.50% for index rate loans and 1.25% to 1.50% for LIBOR loans. In addition, the applicable interest rate margins would be increased by 2.00% upon the occurrence of certain events of default provided for under the terms of the Credit Facility. Based on our excess availability as of December 28, 2019, January 2, 2021, the applicable interest rate margins on the Credit Facility were 0.25% for index rate loans and 1.25% for LIBOR loans.

Our ability to borrow available amounts under the Credit Facility will be restricted or eliminated in the event of certain covenant breaches, events of default or if we are unable to make certain representations and warranties provided for under the terms of the Credit Facility. We are required to maintain a fixed charge coverage ratio of not less than 1.0 at the end of each fiscal quarter for the twelve-monthtwelve-month period then ended when the amount of liquidity on the Credit Facility is less than $10.0 million. In addition, the terms of the Credit Facility restrict our ability to, among other things: engage in certain business combinations or divestitures; make investments in or loans to third parties, unless certain conditions are met with respect to such investments or loans; pay cash dividends or repurchase shares of our stock subject to certain minimum borrowing availability requirements; incur or assume indebtedness; issue securities; enter into certain transactions with our affiliates; or permit liens to encumber our property and assets. The terms of the Credit Facility also provide that an event of default will occur upon the occurrence of, among other things: defaults or breaches under the loan documents, subject in certain cases to cure periods; defaults or breaches by us or any of our subsidiaries under any agreement resulting in the acceleration of amounts above certain thresholds or payment defaults above certain thresholds; certain events of bankruptcy or insolvency; certain entries of judgment against us or any of our subsidiaries, which are not covered by insurance; or a change of control. As of December 28, 2019, January 2, 2021, we were in compliance with all of the financial and negative covenants under the Credit Facility and there have not been any events of default.

Amortization of capitalized financing costs associated with the Credit Facility was $16,000 for each of the three-monththree-month periods ended January 2, 2021 and December 28, 2019 and December 29, 2018.2019.

(112) Share Repurchases

On November 18,2008, our Board of Directors approved a share repurchase authorization to buy back up to $25.0 million of our outstanding common stock (the “Authorization”). Under the Authorization, repurchases may be made from time to time in the open market or in privately negotiated transactions subject to market conditions, applicable legal requirements and other factors. We are not obligated to acquire any common stock and the program may be commenced or suspended at any time at our discretion without prior notice. The Authorization continues in effect until terminated by the Board of Directors. As of December 28, 2019, January 2, 2021, there was $24.8 million remaining available for future share repurchases under this Authorization. There were no0 share repurchases during the three-monththree-month periods ended January 2, 2021 and December 28, 2019 and December 29, 2018.2019.

(1(123) Other Financial Data

Balance sheet information:information