Yes, banks do "create" money. No, it is not out of thin air. It absolutely does come from deposits.
An example of how banks "create" money, is person A has $100. A deposits it. The bank lends that $100 to B. Now B has $100, but A also still thinks they have $100, even though they just have a number on a piece of paper.
They system goes from acting as if $100 exists, to acting as if $200 exists, but really there is only $100, and an IOU for $100.
That is what bank money "creation" is. It is not from thin air.
People get confused because "money", as in fiat currency, is also a Government IOU. But the above principle is true for gold, bitcoin, or any asset, and they wouldn't get mixed up the same way thinking banks create gold out of thin air.
It is a starkly different thing than how the Government creates money.