I appreciate this explanation and I'd like to add a point of clarification to #9- #10.

For the five year olds... The less supply of money then the higher the price of money if demand remains constant. The price of money is the interest rate.

There is an inverse relationship between the price of bonds and the interest rate. If interest rates go up then the market value of the bond goes down. There is a duration mismatch between the long term asset (discounted $100 treasury bond) and their short terms cash obligation ($100) to SFB's customers.

The customers would be made whole if they were willing to wait until the $100 bond matures at its face value but their customer needed cash today. The customer's claims on money were not available since they'd been lent out to the US Treasury in order for the bank to receive a yield on their customer's deposits (#3).

This is a classic example of a bank run caused by a fractional reserve banking system.