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And your security is probably also in the toilet, and this is affecting your loyalty.
You need to get to work making your subjects happy.
I'd be surprised if it ever gets to be very profitable unless they've changed Castles a bit. In plenty of versions they're basically a money-pit if you get them as a first Fief.
Because of that, I'd always recommend refusing/voting for the other guy over trying to get one as one's starting fief. The only exception would be if it was on the very edge of one's faction-lands and there were many juicy Towns nearby, ready to be taken. (To get a proximity bonus and better chances of being nominated as a possible Lord for those Towns.)
If it appears to truly be worth the hassle, post your returns/advice, there.
They're just pissed at you. Do fun and games (or whatever it's actually called) in the continuous section and makes sure you have your entertainment built up.
Also, put about 30K into the castle, that'll help get things building which will have a positive impact. A steward of the same faction would also help with the loyalty building.
And when you go to war, make sure to protect your villages (you can not later on as you'll other issues) because happy villages make happy castles and towns as they don't have food/production issues.
So my most recent castle is Llanoc Hen. They hated me. The production was zero. But I gave them a Battanian Steward (though she wasn't an engineer) and dropped 50K in there (i'm well into the game).
I've gotten the loyalty to 57, which isn't exceptional but is good enough. The Fairgrounds are now upto 3 and the Security at 100. They're doing Festivals. And with the 20 point boost because of my cash contribution, they're putting out 31/day. Not the best I've ever done (that was with an engineer it was huge though I don't remember exactly what), but good enough.
And that castle, like yours, started with an upset and pissed off population that wanted to have nothing to do with me.