Place catfish in a 13- x 9- x 2- inch baking dish; add water and 1 teaspoon salt. Cover with foil; bake at 350° for 30 minutes or until fish is tender. Remove fish, reserving liquid. Let fish cool. Remove fish in large pieces from bone.
Line bottom of a large stock pot with half each of the bacon, sliced potatoes, onion, fish, and tomatoes. Sprinkle with 1/4 teaspoon salt and 1/8 teaspoon pepper. Repeat layers.
Pour reserved catfish liquid over layered ingredients. Sprinkle with sugar. Place banana peppers on top; add pepper juice. Cover; bring to a boil. Reduce heat; simmer 2 to 3 hours. Do not stir.