Final answer:
When a bank lends notes receivable, it records the loan and issues a cashier's check to the borrower. The borrower then deposits the loan in their bank account.
Step-by-step explanation:
When a bank lends notes receivable, such as in the case of Singleton Bank lending $9 million to Hank's Auto Supply, it records the loan by making an entry on the balance sheet to indicate that it has made a loan.
This loan is considered an asset for the bank because it will generate interest income. Instead of giving Hank $9 million in cash, the bank issues a cashier's check for the amount. Hank then deposits the loan in his regular checking account with First National. As a result, the deposits at First National rise by $9 million and its reserves increase by $9 million.