On one hand I feel like it would be a cliche if Siobhan were killed off since she just learned of Hood's secret and is angling to push him out of Banshee (which obviously can't happen since that would completely change the show). So, like, she
can't survive if the writers want to keep Hood on as sheriff. Unless she sees what a good job he does of fending off Chayton and Crew and has a sudden change of heart (which is doubtful given her big speech at the end of episode four).
On the other hand, bad guys are dropping like flies and the scales need to be balanced. Billy is also probably in a lot of danger of being killed off since he's the one who killed Chayton's brother plus he's new to the show so they won't have as much of a problem killing him off and replacing him with somebody else (possibly the former neo-nazi who is conveniently sitting in the back of the police station...).
It needs a big shake up - if Hood keeps up the fake sherif cover for another season, then Proctor or Carrie needs to go.
I think Hood will keep up the fake sheriff cover until they're ready to end the show. Maybe he gets ousted at the end of season 4/early season 5 (the final season), but I don't see it happening this year. There's still a lot of material to be mined from him posing as sheriff and a still-undercover-but-not-sheriff-Hood-led-Banshee is a mighty bizarre prospect.