OK we are in my wheelhouse, ex Financial Controller and Financial Planner here. This is all about understanding the balance sheet of a bank.

First things first, your deposits are actually recorded as a liability to the bank. Why? Simple because they owe you that much money. Really you have loaned the bank your money.

A loan is an asset to a bank, but a liability to the person who took the loan.

I was about to type out a lot of info and realized that I'd be here all night so went looking for something that had good details. If you really want to understand it take a look here:

http://positivemoney.org/how-money-works/how-banks-create-money/

You will need to dig into the site a little bit as there are sections covering different topics including understanding the banks balance sheet, what money is (it's not just cash), and much more.

This one was written about the Bank of England, but in reality it covers any country with Central and Commercial Banks. At least every Country I know of.

To answer your question directly yes your bank is creating money out of thin air.

This is one reason that crypto scares the hell out of them. If the world goes onto a system without the ability to just create money at will the fat cats won't be able to create an asset with a few key strokes (your loan) and then collect interest on that asset they created. They would have to actually have real currency to lend out and means they become a Hard Money Lender not a Bank.