Two early goals put the Royals on the back-foot before Mike Turvey pulled a goal back before half-time.
The Royals dominated the second period but conceded a third-goal late on after being caught on the counter-attack.
Catlin insists his team need to tighten up at the back.
The Portchester boss said: ‘We have to sort out our defending because we can't keep shipping three goals a game.
Portsmouth transfer news: Blues receive bids for former Luton and Millwall midfielder
Done deals: all the latest League One transfers including Ipswich Town, Oxford United, Bristol Rovers, Charlton Athletic and other Portsmouth rivals' business
Transfer gossip: Portsmouth eye raids for ex-Chelsea man and Charlton Athletic's former Wigan Athletic midfielder
Danny Cowley makes Portsmouth team selection admission following Cheltenham win - and gives honest assessment of current squad amid early-season promotion hopes
Former Portsmouth pair help Ipswich flex muscle as Norwich City man is slammed for conduct in Peterborough's Plymouth Argyle reverse
‘Once again we were guilty of giving away poor goals.
‘After winning in midweek I felt that we took some backward steps.
‘Some of the youngsters looked a bit tired.
‘It is a slow process but we are running out of games.
‘We got ourselves back into the game before half-time.
‘If we had scored an equaliser I think we would have gone on and won the game.
‘Their third goal killed the game dead.’
Fareham Town were left ruing missed chances in their 0-0 draw at Andover New Street.
The visitors also had Tom Settle sent off deep into stoppage time at the end of the game.
Scott Hamilton went closest to winning it for the Reds.
In the first half he hit the crossbar with a header and after the break saw another effort cleared off the goal line.
Reds manager Pete Stiles regarded it as two points dropped.
He said: ‘It is frustrating because it is a game we should have won.
‘We had 80 per cent of the possession but couldn’t put our chances away.’
Baffins Milton Rovers were frustrated by the weather as their home game against Shaftesbury was called off due to a waterlogged pitch.
Horndean slipped to a 4-3 defeat at in-form Lymington Town.
‘All their goals came because we failed to defend set-pieces,’ said Deans player Benny Reed.
In division one Liam Callaghan netted two goals and Callum Glen scored for United Services Portsmouth in their 3-3 home draw against Ringwood Town.
Petersfield Town forced a 0-0 draw at New Milton Town.