So at the start of year 3, you get a cutscene with your grandfather’s ghost. You are given a score based on various aspects of being part of the town. You get points for how much you’ve earned, your skill levels, achievements you’ve gotten, your friendship level with people in town, etc. Depending on how well you did, it will determine how the exchange with your grandfather plays out.
We apparently did quite well.
He expresses pride in how well you’ve done with the farm and admits that you are probably better at it than he ever was. He wishes you well and says he can finally be at peace now that he knows his farm is taken care of. It is rather touching.